What the World Bank Can Do About Climate Change – Article
Pinelopi Koujianou Goldberg, Project Syndicate, 21.03.2023
As the World Bank undergoes a change in leadership and prepares to adapt its mission to address global warming, it should focus on what it does best. In addition to financial resources, its greatest strength lies in its ability to generate evidence-based solutions and bring them to policymakers’ attention.

A New China Strategy – Article (German)
Michael Hüther, Maximilien Goux, Martin Klein, Britta Kuhn, Ulrich Blum, Wirtschaftsdienst, March 2023
For some years now, China has been the world’s most important economy in terms of purchasing power parity. The dominance of the Chinese economy seems to pose challenges to the industrial and trade policies of the classic industrialised countries. China has been viewed more critically in the USA and Europe at least since US President Donald Trump took office. Both the Chinese social and economic model are the subject of controversial debates. In addition, China is gaining weight in relation to the current geostrategic challenges, as shown, for example, by the tensions between the USA and China in light of the discussion about the so-called Thucydides Trap. In this respect, it is understandable that a new China strategy is being debated.

Companies boost profits and drive inflation – Where are the central banks? – Article (German, Paywall)
Torsten Riecke, Handelsblatt, 22.03.2023
Monetary guardians underestimate the importance of corporate profits for the stubborn upward pressure on prices, economists say. A revaluation would have enormous consequences.

The future of energy-intensive industries – interim report from our industry project – Study (German)
Janek Steitz, Dezernat Zukunft, March 2023
Interim report: Energy costs of energy-intensive industries on the way to climate neutrality – an international comparison.

The Simplest Fix for Banking – Article
Jan Eeckhout, Project Syndicate, 23.03.2023
Following the latest banking crisis, monetary authorities should seriously consider how modern digital technologies could be used to avert such problems in the future. A central bank digital currency would both eliminate many barriers to financial transactions and end the risk of bank runs once and for all.

Industrial policy: taking complex interdependencies into account – Article (German)
Simon Junker and Claus Michelsen, Wirtschaftsdienst, March 2023
The discussion on whether and how a new industrial policy should be implemented is currently intense. The Federal Ministry of Economics and Technology is working on a strategy to cope with the transformative tasks of the coming decades while at the same time preserving the country’s industrial structure.

Another Predictable Bank Failure – Article
Joseph Stiglitz, Project Syndicate, 13.02.2023
The collapse of Silicon Valley Bank is emblematic of deep failures in the conduct of both regulatory and monetary policy. Will those who helped create this mess play a constructive role in minimizing the damage, and will all of us – bankers, investors, policymakers, and the public – finally learn the right lessons?

How companies face the shortage of skilled workers – Article (German)
Julia Freuding, Johanna Garnitz and Stefan Sauer, Makronom, 16.03.2023
Unsurprisingly, from a company’s point of view, a comprehensive package of political measures is needed in the fight against the shortage of skilled workers. But most companies have now also realised that they have to take action themselves to find suitable staff.

The 72-hour scramble to save the United States from a banking crisis – Article
Jeff Stein, Tony Romm and Gerrit De Vynck, Washington Post, 14.03.2023
It seemed like a simple question: Did the treasury secretary have any concerns about the economic risks posed by Silicon Valley Bank?

The burden of debt – Article (German)
Mark Schieritz, Die Zeit, 16.03.2023
The interest costs in the budget have increased tenfold, says Federal Finance Minister Christian Lindner. That sounds dizzying. How does he come up with it?

The Silicon Valley Bank fallout makes the case for digital currencies – Column
Martin Sandbu, Financial Times, 16.03.2023
If we think all deposits must be safe, what is the point of banks?

SVB and the Fed – Blog Post
Noah Smith, Noahpinion, 15.03.2023
Financial Dominance? Charting a course between inflation and bank failures.

When? 22.03.2023, 3pm (CET)
Where? Online, Register here.

One obvious way to tackle gender inequality in economics is simply to promote more women to leadership roles within the discipline. Yet deeper structural impediments show that this option is not as simple as it seems. What more needs to be done to create the conditions for achieving genuine inclusivity in the field – especially for women from the Global South and other traditionally marginalized communities?

How to increase women’s labour force participation? – Blog post
Katharina Wrohlich, Makronom, 10.03.2023
Increased working hours for women could alleviate the shortage of skilled workers – and also reduce existing inequalities between men and women. Policy instruments to achieve these goals have been known for years.

Guns, Ships and Chips: On Economic Inflexibility – Opinion Piece (Paywall)
Paul Krugman, New York Times, 07.03.2023
What do shipping containers and artillery shells have in common? This isn’t a trick question. The answer is that both have been in very short supply at some point over the past three years. And these shortages tell us something disturbing about modern economies: They aren’t nearly as flexible as many people, myself included, had thought.

Legal opinion on the constitutionality of the wealth tax – Report (German)
Alexander Thiele und Hans-Böckler-Stiftung, 07.03.2023
A wealth tax is compatible with the Basic Law. In view of the high inequality in the distribution of wealth and the considerable financial challenges facing the Federal Republic, its introduction is not only well justifiable, it would also contribute to the realisation of fundamental constitutional principles.

Tearing Down Big Tech’s Walls – Article
Margarethe Vestager, Project Syndicate, 09.03.2023
For decades, tech platforms were left mostly free to do as they wished, and the harm caused by this approach has become obvious. Fortunately, the European Union has been pushing back on behalf of democratic and humanistic values, and it is now finalizing its biggest legislative and regulatory contribution yet.

What’s Next for Globalization? – Article
Dani Rodrik, Project Syndicate, 09.03.2023
With hyper-globalization in decline, the world has an opportunity to right the wrongs of neoliberalism and build an international order based on a vision of shared prosperity. But to do so, we must prevent the national-security establishments of the world’s major powers from hijacking the narrative.

When will ‘inheritance for all’ come? – Interview (German)
Antje Lang-Lendorff with Stefan Bach, taz, 07.03.2023
For a fair start in life, economist Stefan Bach proposes a basic inheritance for all. Similar small-scale models already exist elsewhere.

The Debt-Inflation Channel of the German Hyperinflation – Study
Markus Brunnermeier et al. (2023) – March 2023
Unexpected inflation can redistribute wealth from creditors to debtors. In the presence of financing frictions, such redistribution can impact the allocation of real activity. We use the German inflation of 1919-1923 to study how a large inflationary shock is transmitted to the real economy via a debt-inflation channel. In line with inflation reducing real debt burdens and relaxing financial constraints, we document a tight negative and convex relation between firm bankruptcies and inflation in aggregate data. Using newly digitized firm-level data, we further document a significant decline in leverage and interest expenses during the inflation. We show that firms that have more nominal liabilities at the onset of the inflation become more valuable in the stock market, face lower interest payments, and increase their overall employment once the inflation starts. The results are consistent with substantial real effects of the inflation through a financial channel that operates even when prices and wages are fully flexible.

In late January, the European parliament voted to relax capital regulations for banks. Its new official stance departs significantly from the original Basel III agreement, boosting shareholder profits but reducing bank stability. Numerous exemptions result in a decrease of additional capital requirements to just 4% by 2030 (rising to 7% by 2033) instead of the expected 20%.

Opponents of tougher rules argue that implementing stricter capital regulations would leave them at a disadvantage in comparison to their bigger and more profitable counterparts in the United States. This competitiveness argument was also put forward by German Federal Finance Minister Christian Linder at the Deutsche Bank Digital New Year’s Reception, as cited in this article:

“The priority is to reconnect financial stability with consumer protection and competitiveness. Explicitly, the competitiveness of the banking and financial centre is also one of my political goals,” he said.

There is, however, evidence that the regulatory shift in Europe is (at least in part) a capitulation to the European banking industry’s lobbying activities. As new research by Finanzwende shows, Banking industry lobbyists outnumbered civil-society representatives 176 to 2 in meetings on Basel III regulation with the European Commission since the end of 2019. And as Thierry Philiopponnat, the chief economist of the European non-profit Finance Watch, is cited in a recent opinion piece by Rana Foroohar:

Moves to make Basel III transitional arrangements permanent ‘will not defend EU banks against US ones but only protect the vested interests of European megabanks, vis-à-vis their smaller European competitors.’

Thus, the conventional wisdom that America leads on innovation, Europe on regulation, seems to be challenged, as the US is toppling the EU from its regulatory throne.