The Centre for Economic Policy Research (CEPR)

1 month 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.

2 months ago | 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.

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.

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.

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.