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Monetary and financial policies
Full text linkThe Washington Consensus helped forge a world view in which opening borders to capital flows was seen as an important way to increase economic efficiency. In the past decades, evidence accumulated of the shortcomings of a largely unmanaged financial system in which the volatility of capital flows was still seen as an exogenous feature of the world economy. This chapter sets the stage by discussing the characteristics of the global financial cycle (GFC) and the role of the United States Federal Reserve, to then discuss the influence of this cycle on the pass-through of domestic monetary policy to market rates for emerging markets (EMs) and advanced economies. It then sets out the implications of limited monetary policy pass-through for the validity of the trilemma in international finance. The chapter calls for the systematic use of macroprudential policy tools in advanced and EMs alike to complement credible monetary policy frameworks. It also emphasises the importance of the development of local currency bond markets. In some cases, capital controls may also be useful
Can competition increase profits in factor investing?
Full text linkThe increasing number of institutions exploiting factor-investing strategies raises concerns that competition may erode profits. We use a game-theoretic model to show that, while competition among investors exploiting a particular factor erodes profits because of the negative externality of their price impact on each other, competition to exploit other factors can increase profits from the first factor because of the positive externality from trading diversification (netting of trades across factors). We calibrate our model using the investment and profitability factors and find that competition to
exploit the profitability factor leads to a 68% increase in the capacity and a 143% increase in the profit from the investment factor.
Supplemental Material: The online appendix and data files are available at [https://doi.org/10.1287/mnsc.2022.02684](https://doi.org/10.1287/mnsc.2022.02684
The Value of Platform Endorsement
Full text linkMany digital platforms with large product assortments endorse a select group of items to facilitate user choice. However, while it seems intuitive that such endorsement may increase the sales of endorsed items, little is known about its effect on unendorsed items, and on the platform. Using data from a field experiment conducted by an online freelance platform, we examine the effect of exposure to platform endorsement on user search and purchase behavior. We find that exposure to platform endorsement increases user search and purchases not only for endorsed services, but also for unendorsed services. We link the increase in search and purchases to an increase in the perception of the quality of services offered on the platform. We further explore heterogeneity in the effect of platform endorsement and find that the effect of exposure to platform endorsement on purchase is more pronounced for users with a higher propensity to purchase. We discuss implications for platforms, merchants, and regulators
The UBS‐Credit Suisse Merger: Helvetia's Gift
Full text linkThe UBS- Credit Suisse (CS) merger in March 2023, one of the biggest banking union in history, was an emergency rescue deal engineered by Swiss authorities to avoid more market-shaking turmoil in global banking. The merger resulted in a significant increase in the combined stakeholder net wealth, totaling 22.8 billion US dollars. This increase was distributed around the merger announcement through abnormal returns to UBS stockholders (7.95%) and CS bondholders (34.74%), equivalent to approximately 5.1 billion and 18.8 billion US dollars, respectively. In contrast, CS stockholders experienced negative abnormal stockholder returns of -55% (-1.1 billion USD) while the UBS bonds' value was not impacted by the merger. We infer that UBS stockholders received a wealth transfer from CS stockholders and that this transfer is likely explained by unusual restrictions on the number of bidders for CS. The observed effects on bondholders' wealth align with previous research on coinsurance and the implications of 'too-big-to-fail' research findings. We conclude that the combined wealth effect, which cannot be attributed to the short-term abnormal returns on securities of the two banks, is externally driven. It appears to come at the expense of taxpayers: the merger-bailout has increased Switzerland's sovereign credit risk, resulting in an estimated 6 to 7 billion US dollars in additional debt costs for the country
Commentary on King, A. A. (2025). “Do sustainable companies have better financial performance? Revisiting a seminal study.”
Full text linkWe are writing this short commentary to clarify the matching process we implemented in Eccles, Ioannou and Serafeim (EIS 2014), which King (2025) analyzed in his recent publication in JOMSR
Text as Data in Economic Analysis
No full textThis article discusses how to apply computational linguistics techniques to analyze largely unstructured corporate-generated text for economic analysis. As a core example, we illustrate how textual analysis of earnings conference call transcripts can provide insights into how markets and individual firms respond to economic shocks, such as a nuclear disaster or a geopolitical event: insights that often elude traditional non-text data sources. This approach enables extracting actionable intelligence, supporting both policy-making and strategic corporate decision-making. We also explore applications using other sources of corporate-generated text, including patent documents and job postings. By incorporating computational linguistics techniques into the analysis of economic shocks, new opportunities arise for real-time economic data, offering a more nuanced understanding of market and firm responses in times of economic volatility
The Political Economy and Geopolitics of AI Regulation
No full textMichael G. Jacobides, Annabelle Gawer, Nikolaus Lang, and David Zuluaga Martínez argue that AI regulation reflects domestic political economy and geopolitics. They urge layered, sector-embedded governance that will allow AI to revitalize economies while checking corporate concentration, aligning suppliers with adopters, and keeping markets contestable
Girls’ Night In? Effects of the Kenyan COVID-19 Lockdown on Web Browsing
Full text linkWe present the first objective evidence on how COVID-19 lockdowns affected internet browser usage in Africa: We use detailed digital trace data on PC-based and mobile-based browsing patterns of 316 Kenyans who had access to a PC. Our data cover the period before and during Kenya’s first national COVID-19 curfew, which was declared on March 25, 2020. We find that total daily browser usage increased by 41 minutes, or 15 percent of average browsing time, after the curfew started. We find no significant differences in total browsing time during the curfew by gender or by residence in high-speed versus low-speed broadband access areas. However, we do find gender differences in the content of browsing. Women’s time on YouTube and Netflix exceeded men’s from the start of our sample period, and the gender gap in Netflix browsing increased by 36 minutes daily, which corresponds to almost twice the average daily Netflix time in the sample. Men’s browsing became less concentrated during the curfew, across both domains and topics– but women’s did not. The degree of overlap in browsing between men and women also increased: This was likely due to men visiting sites that were previously exclusively visited by women. Across the entire sample, browsing of Kenyan domains dropped significantly relative to that of non-Kenyan domains, which indicates greater reliance on international content during this period of economic and social upheaval
A simple statistical model and physical device to estimate a woman-specific probability of skilled birth assistance and associated benefit of maternity waiting home stay
Full text linkThis paper presents a simple mathematical model and an associated physical device to predict (i) the risk that a woman’s active labour will begin without a skilled birth attendant based on her parity and anticipated time to access skilled care; and (ii) the extent to which that risk may be reduced by moving to a maternity waiting home some time before her expected due date. This tool is designed to facilitate more systematic discussions and better-informed decisions about labour care access arrangements during antenatal consultations
Evidence on expectations of household finances
Full text linkWe use panel data on expected and realized changes in household finances to study the process of expectation formation. Households extrapolate from improvements in financial situation, but deteriorations are associated with an increased dispersion of forecasts, and higher probabilities of both negative and positive forecast errors. Individuals who expect earnings declines to revert too quickly save less and are more likely to be financially worse off again in the future. Learning from past errors reduces the likelihood that individuals are optimistic following a deterioration in their finances. The evidence shows how experiences, learning and life events matter for expectations formation