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When central banks raise or lower policy rates, banks typically pass these changes through only incompletely to the interest rates they pay on customer deposits. As a result, customers tend to reduce their bank deposits following policy rate hikes and increase them following cuts. This column proposes a new framework that reconciles incomplete pass-through and deposit losses. The authors show how banks optimise not just current deposit profits but also the lifetime value of each client, and how this matters for the transmission of monetary policy.

Copyrights and have long been core to the economics of innovation and creativity, but publicity rights have rarely been analysed in economic terms. This column exploits differences in US state laws that determine whether a celebrity keeps control of their likeness after death to test how losing publicity rights affects postmortem popularity, commercial activity, and reliance on other intellectual property protections. The findings suggest that managing a celebrity brand now requires an integrated intellectual property strategy balancing copyright, trademark, and persona protection. Artificial intelligence, which can replicate voices, faces, and gestures – with or without permission – raises the stakes.

Since the European Commission’s 2028-34 Multiannual Financial Framework proposal in July, much has been written about its ambitions, the levels of funding involved, and its structure and priorities. This column argues that the proposal scores high on composition and flexibility, but poorly on size. The EU budget will likely fall prey of the logic of the ‘juste retour’ that is heightened by the identity politics prevailing in most EU countries. Keeping the public’s attention alive on the geopolitical and economic challenges will be key to reduce that risk.

Access to finance is an important driver of innovation in developed countries. This studies a 2006 reform in India that expanded credit access for many small Indian manufacturing firms, and finds a nuanced relationship between credit and innovation. Among firms that face few non-financial barriers, credit access fosters innovation, as in advanced economies. But for the average firm, additional barriers hinder their ability to translate credit into new and better products, diluting the effect of credit on innovation. Instead, these firms use credit to scale their existing operations and fully utilise current capacity.

The US has long been the world’s innovation powerhouse, based on a system that combines public funding with private initiative. Yet this model is under strain. Using newly digitised US patent data since 1950, this column shows that publicly funded but privately owned patents – just 2% of all US patents – account for around 20% of medium-term fluctuations in productivity and GDP growth. As funding cuts threaten the most productive funders of public R&D, the authors argue that America’s innovation edge rests on the visible hand of public support for basic research.

Since 2016, many governments have issued ‘green’ debt instruments to support the transition to a low-carbon economy. This column shows that a yield discount on green sovereign bonds, or ‘greenium’, exists but is very small, around two basis points in advanced economies and 13 basis points in emerging markets. Still, the greenium rises when climate transition risks are salient and for issuers more vulnerable to climate change. Going forward, governments and international institutions should strengthen the credibility of green-bond frameworks, integrate climate priorities into the budget process, while also recognising that sovereign green bonds are not a fiscal panacea.

Dismissals are costly and are often subject to stringent employment protection regulations. This column explores how France’s 2008 introduction of separation by mutual agreement affected separation patterns. Despite fast and wide adoption of such agreements, they only replace a small share of dismissals and substitute more for quits rather than dismissals. Highly conflictual dismissals remain unchanged. The reform failed to improve employer–employee relations during separations and added costs to the unemployment insurance scheme.

Over the last decade, the EU has pioneered a world-leading framework for digital governance, but the result has been an increasingly complex regulatory landscape and a digital governance system that undermines the workings of economic markets. This column argues that while the European Commission’s Digital Omnibus package responds to this complexity, it treats the symptoms rather than the structural cause of market failure. The authors propose an ‘Innovation in the Digital Economy Architecture’ (IDEA) framework that meets the simplification aims of the Digital Omnibus proposal, while giving digital consumers more control over their personal data, strengthening digital rights, creating transparent data markets that reward trust, and promoting competition and innovation.

Until 2018, the US-China trade data gap was in line with the discrepancies found in the bilateral trade data of China and its other partners, but in 2018 the gap began to narrow. This column argues that higher and broader US tariffs on Chinese imports resulted in increased tariff avoidance and an underestimation of US imports from China, which played a significant role in narrowing the US-China trade data gap. Changes in China’s VAT regime may have also played a role.

The design of pension rules must take into account, through an actuarial neutrality approach, the adjustments to pension levels that are necessary in the case of flexible retirement ages. This column argues that a change in the average retirement age has an impact not only on pension funding, but also on resources available for other public spending. All else equal, incorporating this externality would imply penalties for earlier retirement and bonuses for later retirement that are much higher than those designed to balance the pension system alone.

While many advanced economies shield their citizens from the most severe direct medical costs of illness, less is known about how households cope with income losses from a serious health event. This column shows that the financial consequences of a spouse’s illness or death can be severe, even in a comprehensive welfare state like Sweden. Defaults on unpaid debts, bills, and other financial commitments rise sharply after such shocks, with renters and low-wealth households hit the hardest. Both income and wealth access need to be considered to strengthen households’ financial resilience.

In recent years, calls for shorter working weeks have re-emerged in Europe and elsewhere. This column examines how Denmark’s 1919 shift to the eight-hour workday affected labour market outcomes such as hourly wages, weekly earnings, and employment. Weekly earnings fell in provincial towns but less so in Copenhagen, where union membership was higher and hourly wages rose partly to offset shorter hours. Employment increased everywhere, especially among unskilled and female workers. Decentralised wage bargaining appears to have allowed for partial wage compensation and employment expansion.

Studies examining the effects of free trade agreements on the activities of multinational enterprises have tended to focus on trade between home countries and their FTA partner countries. This column examines the effects of free trade agreements on local sales and exports to third countries by overseas affiliates of Japanese manufacturing multinationals. While the effects on local sales are ambiguous, regional trade agreements have positive effects on exports to other countries, suggesting that that Japanese multinationals have optimised their cross-border supply chain networks by utilising various forms of free trade agreements.

China uses a wide array of industrial policies, such as subsidies and regulations, to promote strategic economic sectors. This column estimates that the equivalent fiscal cost of industrial policy is about 4% of GDP per year, with support directed largely at the manufacturing sector. Different policy instruments have varying effects: subsidies tend to lead to inefficiently high production, while trade and regulatory barriers limit production to suboptimal levels. Overall, factor misallocation from industrial policies reduces domestic aggregate total factor productivity by about 1.2%. Scaling back industrial policy would lower fiscal costs and raise productivity.

The 2022 global inflation surge tested inflation-targeting frameworks under severe supply shocks. This column shows that, despite earlier and sharper tightening, inflation targeting central banks did not achieve systematically better outcomes than their non-targeting peers. Instead, credibility and timely action mattered more than institutional labels. As supply shocks driven by geopolitics, climate change, and the energy transition become more frequent, inflation targeting frameworks will need to adapt and evolve to remain effective in this new environment.

The digitisation of payment, trading, and settlement systems is reshaping the financial architecture. This column, the first in a two-part series, offers an overview of major trends across the world. It highlights the successful implementation of payment systems in India and Brazil. Other parts of the world, such as sub-Saharan Africa, have also made significant progress but require stronger governance and institutional capacity. Finally, the US and euro area offer two models for digital payments in advanced economies, with important questions centring around who issues new forms of digital money and how to balance privacy and stability concerns.

Generative AI is being adopted more rapidly than previous digital technologies and has the potential to deliver meaningful productivity gains in professional tasks, raising concerns over whether the benefits are equitably distributed across society. This column analyses Italian household survey data to show that while awareness of generative AI is high, usage is concentrated among younger, more educated and socially engaged individuals, potentially exacerbating inequalities. Targeted interventions such as digital literacy programmes, community-based training, and inclusive design could help bridge gaps, and peer networks and informal learning can also play an important role.

Determining the drivers of inflation in real time is a central challenge for central banks. This column introduces a new financial markets-based model to identify the types of shocks driving changes in inflation expectations in near real-time. After the initial fall in demand in 2020, supply and policy factors became key drivers of inflation expectations. As the economy reopened in 2021, supply bottlenecks kept inflation elevated, until stronger demand became the main driver from mid-2022 onward. Furthermore, it shows that pass-through to inflation varies by shock type: global value chain disruptions are especially persistent, widespread, and inflationary.