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The local effects of artificial intelligence labour investments: Evidence from the municipal bond market | CEPR

1 month ago | cepr.org

The long-term effects of artificial intelligence are still unknown, as productivity benefits may be compromised by unintended costs. This column assesses the local effects of shocks to AI job postings on municipal capital markets. It finds that increases in postings are linked to declines in municipal bond yields, particularly for riskier and longer-term bonds. Furthermore, counties with higher AI labour investments experience improvements in local economic conditions and positive spillovers into local public finances. As AI adoption continues to grow, policymakers must consider how to ensure that its gains are widely shared.
Lost in translation: AI’s impact on translators and foreign language skills | CEPR

1 month ago | cepr.org

Advances in artificial intelligence are rapidly transforming the world of work. This column investigates the effects of machine translation on (1) employment and wages in the translation sector, and (2) the demand for foreign language skills across various jobs and industries. Using variation in the use of machine translation across local labour markets in the US after the launch of the Google Translate mobile app, the authors find that areas with higher adoption of Google Translate experienced a decline in translator employment. The authors also show that improvements in machine translation have reduced the demand for foreign language skills in general.
AI, automation, and the rise of female employment in Europe | CEPR

1 month ago | cepr.org

The diffusion of AI-enabled technologies is transforming labour markets. This column examines the link between the diffusion of these technologies and changes in the female employment share in 16 European countries from 2011 to 2019. Average female employment shares increased over the period in occupations more exposed to AI. Countries with high initial female labour force participation and higher initial educational attainments of women relative to men show a stronger positive association.
The perceived costs of business cycles and inflation | CEPR

2 months ago | cepr.org

How costly are business cycles and inflation? This column reports on a survey that asked consumers across 13 countries how much consumption they would be willing to sacrifice to eliminate business cycles. Contrary to the prediction of standard macroeconomic models that business cycle fluctuations are close to costless, consumers reported that they would give up around 5% of their consumption. This is of the same order of magnitude as what they would give up to bring inflation to their desired level.
Why the 2024 US election, and so many others, were so hard to predict | CEPR

Feb 2, 2025 | cepr.org

Despite claims in the past that demographic trends would lead to either the Republican or the Democratic party dominating politics, US presidential elections continue to be close contests. Using data covering 1952 to 2020, this column argues that forecasts based on accurate projections of demographic trends would have predicted elections less accurately than a coin toss. Parties changing their platforms in response to demographic shifts helps explain the near-even split of the electorate in so many US presidential elections.
The impact of artificial intelligence on macroeconomic productivity | CEPR

Jan 13, 2025 | cepr.org

Artificial intelligence has diffused rapidly in recent years, but its impact on aggregate productivity is not clear. This column uses data from original surveys to estimate the impact of AI on macroeconomic productivity in Japan. Using data on the use of AI in the workplace and its impact on work efficiency, it estimates a 0.5-0.6% boost to labour productivity at the macro level. The productivity impact is likely to grow over time, but with diminishing additional gains. Furthermore, higher adoption of AI among high-wage and highly educated workers may widen overall labour market inequality in the near term.
Bitcoin valuation: Transactional demand versus speculative bubble | CEPR

Dec 31, 2024 | cepr.org

The recent surge in the price of Bitcoin has reignited debates about a cryptocurrency bubble, many of them based on intuition. This column takes a formal approach to the beliefs underlying both sides of the debate by introducing a model that builds on the classical framework for rational bubbles. If the price of a cryptocurrency can be justified from transactional demand, it may be a sound investment. However, if future investment inflows are needed to explain the price, that indicates a bubble, with payoffs resembling a Ponzi scheme.
Leveraging AI to navigate ‘deglobalisation’ | CEPR

Dec 24, 2024 | cepr.org

Trade wars, industrial policy, and myriad other supply chain disruptions have fast become the ‘new normal’. Yet, given the highly opaque and complex nature of production processes, knowing how to navigate this rise of deglobalisation is a daunting task. This column introduces a tool that harnesses the power of frontier AI tools to recover input–output relationships across over 5,000 traded products. The findings highlight the usefulness for AI to help build data products that are suitable for understanding networks in global trade. By mapping production networks at a granular level, policymakers can better anticipate the impacts of trade policies and supply chain disruptions.
Industrial policies and innovation in the electrification of the global automobile industry | CEPR

Dec 13, 2024 | cepr.org

Industrial policy will play a key role in navigating the energy transformation, and the global automotive industry is already adapting. This column examines the impact of industrial policies on electric vehicle innovation. Using both country- and firm-level records, the authors compile a database of global industrial policies and patents for the automobile industry, highlighting the targeted policies that increased electric vehicle patent applications over a five-year period. At the same time, the data confirm the importance of path dependence in the direction of technology change in the automobile industry.
A hidden dragon: China’s spillovers on the financial markets of emerging economies | CEPR

Dec 9, 2024 | cepr.org

Global financial markets are becoming increasingly intertwined. This column analyses the potential spillovers of shocks originating in China on the financial markets of emerging economies, distinguishing between disturbances stemming from monetary policy and those related to China's macroeconomic developments. The findings reveal that macroeconomic disturbances in China have significant lasting effects on financial variables of emerging economies, suggesting that such shocks could influence economic cycles and financial stability in those markets. The findings also offer insights into the transmission of stimulus measures announced by the Chinese authorities to the rest of the world.