Commentaries

Inflation rates in the euro area and US increased sharply in 2022, in part following large energy price shocks. This column analyses the pass-through from energy prices to core inflation since the 1970s for the US and Germany. It shows that this pass-through is not constant over time, but time-varying. Pass-through from energy to inflation during the 1970s was high in the US, but not in Germany. Both countries experienced high pass-through in 2022, but this has declined in the most recent quarters, consistent with a return to more normal inflation dynamics.

As the discussion on the next EU enlargement that might include Ukraine in the bloc proceeds, the support of European citizens to support Ukrainians remains solid but not as solid as in the recent past. Eupinions - a Bertelsman Stigtung project - has monitored how the EU sentiment has evolved towards Ukraine over 18 months.

We identify specific industrial products that are projected to be in high demand in the EU and can be realistically produced given North African countries’ existing capabilities. Specializing in these products, North African countries can diversify their export basket, which has been shown to correlate positively with economic development.

The US and the euro area have similar headline inflation rates, but very different drivers. In the US, inflation is mainly driven by housing costs. By contrast in the euro area energy now provides an important negative element, that is offset to a large extent by still increasing food prices

La Nota di aggiornamento del Documento di Economia e Finanza indica che la stabilizzazione del debito pubblico italiano richiede il raggiungimento di un surplus primario superiore al 3% del Pil nel giro dei prossimi 3-4 anni. Una manovra restrittiva di questo tipo non ha precedenti storici.

Ralph Ossa, a professor of Economics at the University of Zurich currently on leave, has been appointed as the WTO chief economist in the most challenging time for the organization. In the first World Trade Report since his appointment, Ralph Ossa and his colleagues challenge the prevalent narrative of an inevitable decline of globalization that we have experienced in the last three decades.

Our analysis indicates that the budgetary documents presented by the Italian government are based on excessively optimistic forecasts regarding GDP growth, the effectiveness of budgetary measures and the revenues connected to privatizations. As a result, the very small projected decline in the public debt/GDP ratio is not likely.

As the path to fiscal sustainability narrows, so does Italy’s political capital to credibly advocate a radical reform of EU fiscal rules. Italy's primary balance will need to improve by 0.9% of GDP each year in both 2025 and 2026: similarly sized improvements were recorded in only 3 of the 20 years before the pandemic (2 of which were at the height of the Eurozone crisis, in 2011 and 2012).

Rebuilding trust in the EU would entail the recognition that the winners of yesterday are not the winners of today or tomorrow. In a world of endemic uncertainty and repeated shocks, to avoid zero-sum games, an insurance-based solidarity is needed where support will depend on who suffers more from the shocks.

Federal Reserve monetary policy has been more expansionary than the one predicted by the rule until the second quarter of 2022, then this tendency was reversed. The evidence is very different for the case of the Euro area, where the observed policy rates are consistently below those predicted by the model and fluctuate outside the range compatible with the model-related uncertainty.

The ratification of the modified ESM treaty by the Greek parliament took place easily, and smoothly, without the usual political tensions. The text was submitted to the plenary on the 28th of June 2021 and a week later, on July 6th, it was adopted by a large majority. Only the Greek Communist Party and minor parties of the extreme left and right voted against it. It was practically a non-issue for the mainstream Greek political parties and Greek citizens. Why so?

L'Inflation Reduction Act (IRA), firmato dal Presidente degli Stati Uniti Joe Biden quasi un anno fa (agosto 2022), è il primo importante provvedimento per contrastare il cambiamento climatico che il parlamento degli Stati Uniti abbia mai approvato. La ragione principale di questo successo è che l’IRA non impone oneri all’industria USA ma garantisce molti sussidi.

Bite-back occurs when an innovation has unexpected and unintended effects. It is probably the case that in most cases such consequences are negative, but that is not invariably the case. Bite-back happens because a new technology is by definition an exploration into the unknown, and so it is impossible to predict precisely whether it will do more or less of just very different things from what it was meant to do.

A detailed analysis suggests that the handicap for European producers in the US market will be limited. This small negative effect is likely to be overwhelmed by the much-increased market, implying that the IRA leads to increased opportunities for exports of electric vehicles and renewable inputs to the US. Our calculations suggest that over time the US market for electric vehicles could increase by a factor of 4 and renewables installations should also increase by hundreds of percent. A commentary by Daniel Gros.

In this Working Document, we do not try to provide an overall evaluation of the IRA or its cost-effectiveness with regard to addressing climate change and US emissions. Rather, we investigate its impact on the US market and on EU export opportunities, concentrating on the material content of the IRA – not its intention.

As a possible reform of its dispute settlement procedures, the WTO membership should consider carving out trade actions taken under the national security exception (GATT Article XXI) as a case where trading partners have the right to bring non-violation claims but do not have the right to bring violation claims.

The proliferation of advanced generative AI models has unequivocally highlighted what was already foreseeable since the advent of the algorithmic era. The traditional notion of "consent" is no longer a viable proposition in the context of an algorithmic society. Given the increasing sophistication of emerging AI generative models, which legal basis could be a reasonable alternative?

The dynamics of nominal government bond yields at different maturities play a central role in shaping the response of the real economy to monetary and fiscal policy interventions. Yields can be decomposed into two unobservable components: the sequence of expected one-period rates and the term-premia.

A concise introduction into the workings of large language models is presented. We start with an introduction to the attention mechanism, the core of the transformer architecture, which is then followed by a discussion of the steps needed to engineer the base model, a generatively pretrained transfromers (GPT), to a working chatbot like ChatGPT.

“You can do some pretty impressive things with AI as a technological platform, but I am not necessarily an optimist because there are also some very negative paths that AI could take as a technology. We have a confluence of factors that make the negative use of this technology much more probable than positive use”, MIT economist Daron Acemoglu argues.

Il dibattito sulla riforma del Meccanismo Europeo di Stabilità (MES) - che l’Italia rimane l’unico Paese UE a non avere ratificato - è tornato al centro del dibattito politico italiano. All’interno della maggioranza di governo sembrano coesistere due linee di opposizione alla ratifica – una “ideologica” e una “strategica”. Entrambe sono fallaci.