Recommended articles

FINTECH

FINANCE

Investing in Europe: Where’s the Return? (CFA Institute Enterprising Investor).
Data Storytelling: Separating Fiction From Facts (DOMO).

MACROECONOMICS

How money is created (Bundesbank).
Is monetary policy less effective when interest rates are persistently low? Is monetary policy less effective in boosting aggregate demand and output during periods of persistently low interest rates? This paper reviews the reasons why this might be the case and the corresponding empirical evidence. Transmission could be weaker for two main reasons: (i) headwinds, which would typically arise in the wake of balance sheet recessions, when interest rates are low; and (ii) inherent non-linearities, which would kick in when interest rates are persistently low and would dampen their impact on spending. Our review of the evidence suggests that headwinds during the recovery from balance-sheet recessions tend to reduce monetary policy effectiveness. At the same time, there is also evidence of inherent non-linearities. That said, disentangling the two types of effect is very hard, not least given the limited extant work on this issue. In addition, there appears to be an independent role for nominal rates in the transmission process, regardless of the level of real (inflation-adjusted) rates (BIS).

INTERNATIONAL TRADE

Theory and evidence for the last two decades of tariff reductions. Tariff barriers today are small on average, suggesting only limited welfare gains from their removal. This column argues, however, that the current generation of standard trade models have missed an important source of gains from trade by neglecting the more complex case of a world with production linkages and multiple sectors. Under monopolistic competition, the effects of firm entry may be so powerful, that optimal tariffs are not positive but negative. Even the removal of small positive tariffs could thus produce significant welfare gains (VOX).

SOCIAL

El Analista Económico-Financiero