Effective aid in conflict zones
Can foreign aid help countries emerge from civil war? This paper presents new research that suggests that injecting lots of money into conflict zones may in fact encourage corruption and violence. The aid community should focus on what it can do well: working closely with communities to target small-scale, modest improvements that can be implemented in conflict zones. If accompanied by a gradual improvement in the quality of governance, current aid recipients can aspire to a long-run improvement in both security and prosperity.
An equilibrium model of the African HIV/AIDS epidemic
How can we accurately model the African HIV/AIDS epidemic? This column presents new research that uses computational general equilibrium models to map the spread of HIV/AIDS. Emphasising the importance of understanding behavioural adjustments and equilibrium effects, this new way of modelling the epidemic may well prove a useful tool for further research.
Are Germans poorer than other Europeans? The principal Eurozone differences in wealth and income
The ECB’s recent survey on household finances and consumption threw up some unexpected results – counter-intuitively, the average German household has less wealth than the average Mediterranean household. In line with a recent VoxEU.org contribution from De Grauwe and Ji, this article analyses the principal differences in wealth and income between the main Eurozone countries.
The case for 4% inflation
Since the double-digit inflation of the 1970s, central banks have sought to reduce inflation and keep it low. This column argues that recent history teaches us that inflation has fallen too low. Raising inflation targets to 4% would have little cost, and it would make it easier for central banks to end future recessions.
The banking crisis as a giant carry trade gone wrong
A pernicious aspect of the Eurozone crisis is the ‘doom loop’ linking European banks and governments. This column argues that poor European policy choices in the wake of the 2008 Global Crisis worsened the problem. Rather than being forcefully recapitalised as in the US and UK, many Eurozone banks were left undercapitalised and free to gamble for redemption. In what may be the greatest carry trade ever, they borrowed cheap, first in short-term debt markets and then from the ECB, to invest in high-yield but risky sovereign debt. Substantial bank recapitalisations against sovereign-bond losses is the way forward.
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