http://www.VoxEU.org Recent articles added to VoxEU.org en http://www.VoxEU.org/index.php?q=node/9437 Richard Dobbs, Susan Lund, 19 June 2013

Is financial globalisation in retreat? This column suggests it might be. There’s been a recent and significant retreat in European financial integration and a retrenchment of global banking (although capital inflows into emerging markets and FDI are only just below their recent peaks). What are we to make of this shift? A more compartmentalised global financial system could certainly reduce the likelihood of a financial crisis spreading from one country to the next. But there is now a danger that the pendulum could swing too far, Policymakers should therefore do more to remove limitations on FDI and investor purchases of foreign equities and bonds, balancing the trade-off between the need for stability and the need to provide financing for economic growth.

Full Article: Financial globalisation: Retreat or reset?]]> Wed, 19 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9437 http://www.VoxEU.org/index.php?q=node/9436 Matthias Efing, Harald Hau, 18 June 2013

In response to the civil lawsuit filed by the US Department of Justice in February 2013, Standard & Poor's affirms that its ratings were "objective, independent and uninfluenced by conflicts of interest". This column presents empirical evidence opposing this claim. The data suggests a systematic rating bias in favour of the agencies' largest issuer clients.

Full Article: Corrupted credit ratings: Standard & Poor’s lawsuit and the evidence]]> Tue, 18 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9436 http://www.VoxEU.org/index.php?q=node/9434 Andrew J Oswald, 18 June 2013

Unemployment is once again the bane of the US and Europe. This column highlights an intriguing association between home ownership and high unemployment using US state-level data. Given the heavy subsidisation of and rise in home ownership, this association merits more attention from economists.

Full Article: High home ownership as a driver of high unemployment]]> Tue, 18 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9434 http://www.VoxEU.org/index.php?q=node/9427 Päivi Karhunen, Svetlana Ledyaeva, John Whalley, 17 June 2013

Russian involvement in Cyprus was widely recognised during the acute phase of the most recent EZ crisis. This column argues that some of this is driven by corruption-linked money laundering. Using official Russian statistics, the authors estimate a standard model of FDI location to identify usual patterns related to nations with lax anti-money laundering measures such as Cyprus and the British Virgin Islands. Funds from such nations were biased towards locating investments in the most corrupt Russian regions compared to a group of genuine foreign investors.

Full Article: Russian Cyprus round-tripping: Corruption-linked money laundering]]> Mon, 17 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9427 http://www.VoxEU.org/index.php?q=node/9431 Jakob de Haan, Erik Dietzenbacher, V?n Hà Le, 16 June 2013

Do higher government wages reduce corruption? This column argues that they do, but only in relatively poor countries. When a country’s poor, higher government wages reduce bureaucrats’ incentive to extract illegal incomes. However, as income per capita rises, higher government wages gradually lose their effectiveness in combating corruption.

Full Article: Higher government wages may reduce corruption]]> Sun, 16 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9431 http://www.VoxEU.org/index.php?q=node/9428 Edda Zoli, 15 June 2013

What has driven Italian sovereign spreads movements? This column presents new research looking into increased volatility in sovereign debt since the summer of 2011. Shocks in investor risk appetite, news related to the Eurozone debt crisis, and consistently bad news in Italy, have been important drivers of Italian sovereign spreads. These findings mean that we need to reduce country-specific vulnerabilities as well as sorting out the Eurozone.

Full Article: From sovereign turmoil to private-sector woes: Italian sovereign spreads and their pass-through to bank lending conditions]]> Sat, 15 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9428 http://www.VoxEU.org/index.php?q=node/9424 Ayako Saiki, 15 June 2013

Abenomics is all the rage. Japan’s GDP grew at an annual rate of 3.5% in the first quarter, the stock market went up by almost 30% since December, and despite some uncertainties, sentiments, consumption, and exports are all picking up. However inflation is at -0.9% and survey-based inflation expectation has remained flat. Is inflation going to happen at all? This column argues the answer crucially hinges upon the implementation of structural reforms, especially in the labour market.

Full Article: Fixing Japan’s deflation requires labour-market reforms]]> Sat, 15 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9424 http://www.VoxEU.org/index.php?q=node/9420 Ari Hyytinen, Frode Steen, Otto Toivanen, 14 June 2013

If cartels are a clear and ever-present violation of market economics, what can authorities do to combat them? This column presents new research that helps economists understand cartels better. The better the information we have about the formation of cartels, the better governments around the world will catch them out.

Full Article: Anatomy of cartel contracts]]> Fri, 14 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9420 http://www.VoxEU.org/index.php?q=node/9421 Paul De Grauwe, Yuemei Ji, 14 June 2013

The monetary-fiscal policy connection is under scrutiny by the German Constitutional Court in the context of the ECB’s OMT bond-buying programme. This column argues that most analyses are deeply flawed by the misapplication of private-company default principles to the central bank. ECB bond-buying transforms public bonds into monetary base, and sovereign-default risk into inflation risk. The real question is: What is the non-inflationary limit to money-base expansion? This depends upon the economic situation and is much higher in the current liquidity-trap setting.

Full Article: Fiscal implications of the ECB’s bond-buying programme]]> Fri, 14 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9421 http://www.VoxEU.org/index.php?q=node/9422 Daniel Gros, 14 June 2013

The doom-loop between banks and the national governments played a dominant role in the Eurozone crisis for Ireland and Cyprus. A Eurozone banking union is usually viewed as the solution. This column argues that the doom-loop cannot be undone as long as banks hold oversized amounts of their government’s debt. A simple solution would be to apply the general rule that banks are prohibited from holding more than a quarter of their capital in government bonds of any single sovereign.

Full Article: EZ banking union with a sovereign virus]]> Fri, 14 Jun 2013 00:00:00 GMT http://www.VoxEU.org/index.php?q=node/9422