Antonio Fatas

The US is taking actions to reshore manufacturing while largely abandoning decarbonisation. This column argues that, in response, the EU should capitalise on the potential weakening of the US role in global services and strengthen its own services sector, while remaining firmly committed to decarbonisation by supporting clean technology with strategic investments and a strong business case for clean industry.

Román Arjona & Emanuele Tarantino argue that the EU could capitalise on the potential weakening of the US role in global services and strengthen its own services sector, while remaining committed to decarbonisation by supporting clean tech.
cepr.org/voxeu/column...
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Reminder that high P/E ratios associated to higher volatility (forward 10 years) in stock returns - in addition to being associated to low forward returns.

Chart of the day - from a column by @katie0martin.ft.com on the death of the Trump trade. Chart by @raydouglas.bsky.social www.ft.com/content/cfdc...

Figure shows the average change in monthly payments upon internal refinancing: realised (red) vs passive counterfactual (blue). The passive counterfactual assumes borrowers roll over remaining debt at expiration without extra payments or contract adjustments. The surge in inflation following the COVID-19 pandemic prompted many central banks to raise interest rates sharply. This column combines data from a large German bank, a borrower survey, and a letter experiment to show that mortgage-holders’ actions substantially reduce the impact of higher rates on monthly payments when their fixed rate ends. Survey responses indicate high informedness and a strong propensity to prepare, while the letter increases awareness of available options and raises refinancing activity among borrowers close to expiration. Overall, financial strains on mortgagors appear limited despite much higher rates, and mortgagors’ anticipatory actions affect the transmission of monetary policy.

Mortgage-holders’ actions substantially reduce the impact of higher interest rates on monthly payments when their fixed rate ends. Financial strains on mortgagors appear limited despite much higher rates.
@fuster.bsky.social @gianiv.bsky.social et al.
cepr.org/voxeu/column...
#EconSky

The UK vote to leave the EU in 2016 led to an immediate rise in economic policy uncertainty. This column examines how Brexit-related policy uncertainty affected cross-border capital flows to the UK using firm-level evidence from Switzerland. Heightened uncertainty following the referendum led to a persistent decline in short-term debt flows to the UK, while equity investment remained largely unchanged. The adjustment was concentrated among US-controlled firms resident in Switzerland, reflecting their reliance on the UK as a platform for EU market access. The findings underscore the importance of monitoring the composition, not just the volume, of international capital flows.

Andreas Fischer & Pınar Yeşin use firm-level evidence from Switzerland to show Brexit-related policy uncertainty led to a persistent decline in short-term debt flows to the UK, while equity investment remained largely unchanged.
cepr.org/voxeu/column...
#EconSky

(1/6) In my recent piece with Maurice Obstfeld @piie.com, we describe features of today’s US tariff environment. There are three bits of good news and bad news, but it is clear that Section 122 doesn’t apply.

Most Important Good News:

The Court defended separation of powers.

Hackers Expose Age-Verification Software Powering Surveillance Web Three hacktivists tried to find a workaround to Discord’s age-verification software. Instead, they found its frontend exposed to the open internet.

Hacktivists tried to find a workaround to Discord’s age-verification software, Persona. Instead, they found its frontend exposed to the open internet, and that was just the beginning.

www.therage.co/persona-age-...

Really, where's the balance of payments problem? #EconSky
econbrowser.com/archives/202...

Chart of Tether’s equity ratio

For all the talk of cryptocurrencies going mainstream, this is the wobbly pillar on which the edifice rests: Tether’s stablecoin has a shrinking cash buffer and has parked more of its assets in bitcoin, gold and other illiquid investments. Via @liamproud.bsky.social
www.reuters.com/commentary/b...

By 6-3 decision, tariffs struck down.

This suggests high P/E ratios are more of an overvaluation as they are followed by low returns and high volatility (both would suggest low P/E valuations or high excess CAPE yields).

But equity premium should also depend on expected volatility. Here is the correlation between excess CAPE yield and 10 year forward volatility. Mostly negative. When CAPE yield is low (high P/E ratios), volatility is likely to be much higher in the 10 year that follows.

Do high P/E ratios signal a bubble? From Shiller: strong correlation between excess CAPE Yield (ex-ante equity premium) and ex post (10 year) excess returns (ex-post equity premium) except period where negative surprises on interest rates dominated returns (post-2009).

Authoritarians, strongmen and dictators: who is on Trump’s Board of Peace? Representatives of repressive regimes from around the world are flying to Washington for the inaugural meeting of the body

Authoritarians, strongmen and dictators: who is on Trump’s Board of Peace?

UK bank bosses plan to set up Visa and Mastercard alternative amid Trump fears Exclusive: First meeting to be held over domestic payments system aimed at reducing reliance on US networks

“If Mastercard and Visa were turned off, it would send us back to the 1950s,” before cards dominated the UK economy, and businesses wholly relied on cash, one executive familiar with the project told the Guardian.

“Of course, we need a sovereign payments system.”

Figure shows the effect of conflict on the democracy index. The onset of conflict is associated with a 3% drop in democracy. The decline continues for nearly a decade, even though the median conflict lasts only three years. Ten years after the onset of conflict, democracy in treated countries is about 13% lower than in control countries. Wars do not end when the fighting stops. This column uses data covering 115 conflicts and 145 countries over the past 75 years to show that wars cause large and persistent declines in democratic institutions. Yet this decline is not inevitable. It appears only in specific settings – first-time conflicts, internal wars, and conflicts that governments win – precisely where executives face the strongest incentives to expand their authority. The evidence points to a political mechanism: war does not require autocracy, but it creates opportunities for leaders to weaken constraints, suppress opposition, and entrench power in ways that would be difficult to justify in peacetime.

Using data from 115 conflicts & 145 countries over the past 75 years, Efraim Benmelech & Joao Monteiro show wars cause large and persistent declines in democratic institutions. This is true of first-time conflicts, internal wars, and conflicts that governments win.
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@voxeu.org now offers a newsletter with a list of all columns published last week. You can subscribe by going to the link below and selecting VoxEU - weekly digest. Best source for research insights about pressing economic policy questions.

cepr.us10.list-manage.com/subscribe?u=...

We just posted a large update to our paper on stablecoins’ impact on Treasury bill yields

www.bis.org/publ/work127...

India may be about to become one of the world’s most open economies New trade deals could make it a manufacturing powerhouse, reckons Arvind Subramanian

The trade deals with the EU and the US, along with other reforms recently implemented hold the potential to transform India into a paragon of openness and a manufacturing powerhouse, Arvind Subramanian argues in the Economist.

I was a White House ethics lawyer.

I used to advise people not to even accept a free cup of coffee from someone who had interests before them. And staff followed those rules.

I can’t even find the words to describe the scale of Trump’s corruption here.

Opinion | What Worries Me About Trump’s New Fed Pick

My take on Kevin Warsh: Markets have breathed a sigh of relief that Trump isn't trying to install Hassett as Fed chair. But Warsh is also a political animal; he just hides it better.
www.nytimes.com/2026/02/01/o...

Not only he praises Trump's policies in order to get a job but he pretends that reducing central bank balance sheet will move capital towards the economy (makes zero sense). And despite this, you still have many stating that he will be a good Fed Chair.

What you can expect from Warsh as Fed Chair
-More emphasis on what suits POTUS if it's a Republican
-Sudden concerns about inflation and fiscal deficits the moment it's not an R in the WH.

Don't expect the Fed to be a good-faith broker if govt is divided in the next crisis

Four takeaways from the new Census population estimates Immigration declined dramatically. Census estimates now align with other government estimates. The 2026 Current Population Survey population base will be adjusted downward.

Big immigration decline.

Agreement among different agencies' estimates.

Downward adjustments coming soon to the CPS.

And revisions to state populations: New York up, Florida down.

Key takeaways from today's new Census population estimates for 2025.

jedkolko.substack.com/p/four-takea...

The FOMC is now in great hands. It just has to vote the opposite way to its new chair on all the big calls, and it will have a 100% track record 🤣

A Bad Heir Day at the Fed No, Kevin Warsh isn’t qualified

A good description of Kevin Warsh

paulkrugman.substack.com/p/a-bad-heir...

Honest question: you praised Bessent when he was appointed. We learned something about the true character of anyone who accepts an appointment from Trump (after praising him to get the job). Federal Reserve not the same as Treasury, but still.

Consumer confidence collapses #EconSky
econbrowser.com/archives/202...

Judging from Brazil’s experience under the military regime, I’d say the opposition party needs to actively help mobilize civil society. A demobilized society won’t defeat the regime electorally, and mobilization needs help from organized opposition parties.

I’ve found @abenewman.bsky.social ‘s neoroyalist frame very useful for thinking about Trump’s actions. I’m not sure anything fits the model better than the Board of peace. Not about US national interest at all. Purely for Trump and his family/cronies.