DIW Roundup

Economic Determinants of Populism

The rise of populism challenges numerous Western democracies and their institutions. In this round-up, we examine economic and societal conditions that are driving forces behind populism. We focus on five domains that are closely interlinked with populist support: globalization, financial crises, migration, inequality, and social mobility. Each domain offers unique insights into how societal shifts, ...

The Political Economy of Emigration and Immigration

International migration emerges as an important driver of globalization since migrants play a salient role in diffusing international norms and practices across borders. Through a variety of channels migrants are capable of encouraging democratic behavior back in their countries of origin. On the other hand, immigration is commonly at the forefront of political debates in hosting economies of migrants, ...

On the Relation between Trade and Democratization

Whether trade can achieve societal change is a contested topic and difficult to investigate. This round-up aims at summarizing recent empirical research on this topic while focusing on democracy and democratization as an important part of societal change. No robust results for change arising from trade can be found, but there exists an inverse causality, i.e., democratization leading to more trade. ...

How Shocks Affect Stock Market Participation

While there is a broad consensus in the literature that stock ownership is associated with individual characteristics, such as wealth, income, risk preferences, and financial literacy, less is known about the dynamics of stock market participation (SMP). Major fluctuations in SMP are oftentimes related to political events, economic shocks, and technological disruptions. We discuss the literature that ...

The Impact of the War on the Economic Development of Ukraine

As of summer 2022, the war in Ukraine has lasted more than three months, caused the deaths of thousands of people, and ruined the lives of millions. It has impacted the world economy and affected Ukraine severely, ruining industries as well as causing massive migration, a decrease in household income, and an increase in the budget deficit and government debt. As the war continues, it will deepen the ...

The Impact of Price Display on Financial Decisions

Credit decisions play an important role for the economic wellbeing of households. However, the complexity of products and varying price information display makes it hard for consumers to navigate this field. Empirical evidence has important implications for consumer protection policies, as many people fail to make optimal choices for themselves and struggle to understand credit cost information. Presenting ...

Rent Control Effects through the Lens of Empirical Research

Rent control is a highly debated social policy that has been omnipresent since World War I. Since 2010s, it has been experiencing a true renaissance, for many cities and countries facing housing shortage are desperately looking for solutions of the chronic housing shortage and direct their attention to controlling housing rents and to other restrictive policies. Is rent control useful or does it create ...

Why Are We Eating so Much Meat?

There are various reasons why humans may want to reduce their consumption of meat and other animal products. In the following, we lay out important stylized facts about individual meat consumption, and then discuss the challenges and puzzles surrounding effective behavior change toward more sustainable, plant-based diets.

Stranded Assets and Resource Rents: Between Flaws, Dependency, and Economic Diversification

Asset stranding–the unanticipated depreciation of assets (e.g. resource re-serves, infrastructure, stocks) due to market shifts such as policy interventions or innovation–is at the core of current debates in energy and climate. This roundup presents prominent contributions to the discussion with a focus on fuel-exporting economies. We discuss strengths and limits of the concept as well as potential ...

Insolvency Regimes and Economic Outcomes

When in distress, a firm may need restructuring or liquidation; in either case, legal uncertainty compounds the difficulty. Sound and efficient insolvency regimes are important as these not just positively affect investment, innovation, and economic growth, but also the supply and cost of credit. The design of appropriate insolvency frameworks in Europe is, however, still controversial. The debate ...

The Impact of Mobile Money in Developing Countries

Mobile money is a success story in terms of facilitating account ownership and payments in developing and emerging countries. Today, telecommunication companies offer mobile money services across more than 90 countries. The most popular services are deposits and instant digital money transfers between users. Widespread mobile money adoption is boosting financial inclusion, reducing in transaction costs ...

Do Default Assignments Increase Savings of the Poor? Empirical Evidence

Although households in developing and emerging countries are relatively poor, there is potential to save. For example, one study estimates that up to 8.1% of a poor household’s budget in such countries is spent on so-called temptation goods, like alcohol, tobacco, and festivals (Banerjee and Duflo, 2007). At the same time, many households are aware of the fact that they do not save enough. They name ...

Stability Implications of Financial Interconnectedness under the Capital Markets Union

In the run-up to the European elections in May 2019, the European Commission is trying to advance the initiatives laid out in its action plan for a European Capital Markets Union (CMU). In order to diversify financing sources and to increase private risk sharing, the CMU aims at deepening the integration of European equity and debt markets. While there are benefits associated with more cross-border ...

Measuring the Effect of Foreign Exchange Intervention Policies on Exchange Rates

Central bank intervention in foreign exchange markets is a common tool to influence exchange rates. Although central bankers are convinced of their policy’s effectiveness, econometric estimates of precise effects differ across studies. The difficulties with estimations mostly result from a lack of adequate data. This article highlights different econometric approaches that aim to mitigate estimation ...

Innovative Business Models for Cleantechs

Environmental Regulations: Lessons from the Command-and-Control Approach

Policy makers have long favored command-and-control (CAC) methods to tackle environmental damage. The number of CAC policies devoted to environmental protection has increased steadily since the 1950s and have been a large part of the overall portfolio of environmental laws andregulation in the industrialized world. Schmitt and Schulze (2011) document that between 1970 and 2011 the two most prevalent ...

Linking Cap-and-Trade Systems

Linking cap-and-trade systems promises gains in cost effectiveness and signals a strong commitment to carbon policy. Linking is also seen as one possible way of converging from regional climate policy initiatives toward a global climate policy architecture. Two linked systems have been established recently, one in Europe and one in North America. However, linking also comes with challenges, such as ...

Regulatory Differences and International Financial Integration

The Capital Markets Union (CMU) – an initiative of the European Commission – aims to unify and deepen capital markets across EU Member States by removing existing barriers to cross-border investment and, in particular, harmonizing financial and business regulations. However, harmonizing institutional frameworks across the EU Member States that historically have different legal traditions is difficult ...

The Macroeconomic Effects of Exchange Rate Movements

The macroeconomic effects of exchange rate movements have been subject to an extensive debate in international economics. Traditionally, much of the discussion was focused on the relation between the effective exchange rate and the trade balance. However, the process of financial globalization has led to a sharp increase in foreign asset and liability positions across countries and also to a greater ...

What Determines the Costs of Fiscal Consolidations?

Recent studies have proposed several factors that determine how fiscal consolidations affect the economy. This Roundup focuses on several of these determinants. Namely, it discusses how the composition of the consolidation measure, the state of the business cycle, the level of private indebtedness and the amount of fiscal stress during which the measure is implemented influences the consequences of ...