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102. Interest Rate Shock and Sustainability of Italy's Sovereign Debt
- Author:
- William R. Cline
- Publication Date:
- 02-2012
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Contagion from Greece, together with domestic political uncertainty in Italy, caused interest rates on Italian sovereign debt to spike in the second half of 2011. As shown in figure 1, the risk spread above German bunds for 10-year Italian government bonds rose from 200 basis points in early July 2011, to a range of 300 to 400 basis points after the July 21 Greek package with its new emphasis on private sector involvement. There was a second surge to the 400 to 500 basis point range in November through January, following the October 27 Greek package that insisted on a 50 percent reduction in private sector claims.
- Topic:
- Debt, Economics, and Financial Crisis
- Political Geography:
- Europe, Germany, and Italy
103. IFSWF Report on Compliance with the Santiago Principles: Admirable but Flawed Transparency
- Author:
- Edwin M. Truman and Sarah Bagnall
- Publication Date:
- 08-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On July 7, 2011 the International Forum of Sovereign Wealth Funds (IFSWF) released a report on IFSWF Members' Experience in the Application of the Santiago Principles. The report is a self-assessment of the voluntary compliance of 21 member sovereign wealth funds (SWFs) with the Generally Accepted Principles and Practices of SWFs, issued in October 2008. We commend the IFSWF for undertaking the surveys on which the report is based, for the later decision to publish the results, and for the detail included in the report. However, as with many self-assessments, the report has some flaws. The principal flaw is that the characterization of the extent of compliance with the Santiago Principles is exaggerated.
- Topic:
- Economics, International Trade and Finance, Markets, and Sovereign Wealth Funds
- Political Geography:
- Santiago
104. Europe on the Brink
- Author:
- Simon Johnson and Peter Boone
- Publication Date:
- 07-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Attempts to resolve the problems in Europe are failing, and the crisis is spreading from Greece, Ireland, and Portugal to larger nations. Europe's financial system relies on moral hazard, i.e., a “no defaults” policy, to attract the funding needed to roll over large amounts of short–term bank and sovereign debt. Now that politicians in creditor nations are calling for private sector burden sharing, investors are demanding higher interest rates to hold these debts. But higher rates may tip banks and nations toward bankruptcy. Europe's banks and financial system are highly integrated across countries. Rising expectations of default in some countries could lead to large-scale capital flight into “safe” countries. This shift will raise concerns regarding solvency and liquidity of many financial institutions. The payments system of the euro area is serving as an opaque bailout mechanism that is currently preventing the euro area from falling apart at this time. If the number of nations in trouble spreads beyond Greece, Ireland, and Portugal, this bailout system will be stressed because of the potential size of accumulated funding. The European Central Bank (ECB) could soon see a vocal debate between inflationist and hawkish (anti–inflation) members. Inflationists will call for large–scale interventions, including bond buybacks and emergency loans, while the hawks will attempt to close loopholes in the payments system that effectively permit each troubled nation to create money needed to finance capital flight and budget deficits. At this stage in the debate, we see little chance that Europe can avoid ending the “moral hazard” regime, in which case it needs to plan for widespread sovereign and bank debt restructurings.
- Topic:
- Debt, Economics, Regional Cooperation, and Financial Crisis
- Political Geography:
- Europe, Greece, and Ireland
105. Markets vs. Malthus: Food Security and the Global Economy
- Author:
- Cullen S. Hendrix
- Publication Date:
- 07-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In the past four years, rising world food prices and the global economic downturn increased the ranks of the world's food insecure1 from 848 million to 925 million by September 2010, reversing decades of slow yet steady progress in reducing hunger (WFP and FAO 2010). While the human costs have been considerable, the political consequences have been significant as well. Food prices sparked demonstrations and riots in 48 countries 2007–08. While prices receded in 2009, they reached historic highs in February 2011—and were once again implicated in political turmoil. High food and fuel prices were among the grievances motivating the demonstrations that led to the ouster of Tunisian President Zine El Abidine Ben Ali and Egyptian President Hosni Mubarak.
- Topic:
- Agriculture, Economics, International Trade and Finance, Poverty, and Food
- Political Geography:
- Ethiopia and Egypt
106. What Should the United States Do about Doha?
- Author:
- Jeffrey J. Schott
- Publication Date:
- 06-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The Doha Round of multilateral trade negotiations in the World Trade Organization (WTO) remains stalled despite the political impetus provided by the Seoul G-20 Summit in November 2010. The major trading nations have not revised their positions enough to propel new negotiations on agriculture, manufactures, and services. There is now little chance to complete an agreement this year and little indication that current efforts could succeed next year.
- Topic:
- Economics, International Cooperation, and International Trade and Finance
- Political Geography:
- United States
107. US Tax Discrimination Against Large Corporations Should Be Discarded
- Author:
- Gary Clyde Hufbauer and Martin Vieiro
- Publication Date:
- 10-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The United States holds contradictory views about large corporations. When Americans speak of breakthroughs in research and engineering, they are justly proud of large firms that pioneered railroads and steam engines in the 19th century, automobiles, electric power, and oil exploration in the 20th century, and computers, software, and biotechnology in the 21st century. Yet when talk turns to paying taxes, public opinion holds that large corporations should pay a higher statutory tax rate than other business firms, and enjoy fewer deductions in computing their taxable income. Despite common sense and the teachings of economics, tax discrimination is alive and well.
- Topic:
- Economics, Globalization, International Trade and Finance, Markets, and Financial Crisis
- Political Geography:
- United States and America
108. Sustainability of Greek Public Debt
- Author:
- William R. Cline
- Publication Date:
- 10-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On July 21, 2011, the heads of government of the euro area announced a new plan to address the Greek debt crisis. This policy brief presents a simulation exercise that examines whether the new arrangements are likely to provide a sustainable solution. The analysis focuses on four key measures: gross debt relative to GDP; net debt relative to GDP; net interest payments relative to GDP; and amortization of medium-and long-term debt coming due during the year in question, relative to GDP. The new Greek package shows prospective future progress on all four measures, and Greek debt looks much more sustainable after the package than before. Debt also appears considerably more manageable if the criterion is net debt or interest burden rather than gross debt ratio, although even for gross debt the ratio is down substantially by 2020. It also becomes clear that the major contribution of the private-sector involvement (PSI) part of the package is in the form of sharply cutting amortization due, although by avoiding large new borrowing at crisis-level interest rates it also alleviates the interest burden that would otherwise occur.
- Topic:
- Debt, Economics, Regional Cooperation, and Financial Crisis
- Political Geography:
- Europe and Greece
109. What Can and Cannot Be Done about Rating Agencies
- Author:
- Nicolas Véron
- Publication Date:
- 11-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Credit Rating Agencies (CRAs) are prominent participants in the assessment of credit risk by financial markets. They determine and publish credit ratings, which represent the CRA's opinions on issuers' relative probability of default. The market for credit ratings is currently dominated in most western countries by three players: n Standard Poor's (S) is a division of the McGraw- Hill Companies, a US-based media group whose ownership is dispersed (the largest shareholder is Capital Group, with 12 percent of shares); n Moody's Corporation is an autonomous US-based listed company with dispersed ownership (the largest shareholder is Berkshire Hathaway, with 12.5 percent of shares); n Fitch Ratings is a division of the Fitch Group which is jointly owned by Fimalac, a Paris-based listed investment vehicle (60 percent of shares), and the US-based Hearst Corporation (40 percent of shares).
- Topic:
- Debt, Economics, Globalization, International Trade and Finance, and Markets
- Political Geography:
- United States
110. The United States Should Establish Permanent Normal Trade Relations with Russia
- Author:
- Gary Clyde Hufbauer and Anders Åslund
- Publication Date:
- 11-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- After 18 years, Russia is finally on the verge of acceding to the World Trade Organization (WTO). No country has struggled for so long to become a member of this important organization. The last impediment was removed on November 9, when Russia and Georgia concluded an agreement on monitoring trade flows across their disputed border. The WTO Working Party, which oversaw the negotiations, then approved Russian accession on November 10, clearing the way for formal membership to be adopted at the WTO ministerial conference to be held December 15–17, 2011 (WTO 2011).
- Topic:
- Conflict Resolution, Economics, International Trade and Finance, Markets, and Bilateral Relations
- Political Geography:
- Russia, United States, and Georgia
111. G-20 Reforms of the International Monetary System: An Evaluation
- Author:
- Edwin M. Truman
- Publication Date:
- 11-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- With great French fanfare the G-20 committed itself in Seoul, Korea a year ago “to build a more stable and resilient international monetary system (IMS), including by further strengthening global financial safety nets.” As subsequently elaborated by French President Sarkozy and other French government officials, the agenda for IMS reform included five elements: surveillance of the global economy and financial system, the international lender-of-last-resort mechanisms (global financial safety nets), the management of global capital flows, reserve assets and reserve currencies, and IMS governance.
- Topic:
- Economics, Globalization, International Trade and Finance, Markets, and International Monetary Fund
- Political Geography:
- Korea
112. The Current Currency Situation
- Author:
- William R. Cline and John Williamson
- Publication Date:
- 11-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The currency markets have been extremely disturbed for the last three months. The period witnessed a major strengthening of the US dollar in September, then the European currency crisis, a recovery of the euro when the markets believed that the crisis was being controlled, and then a rebound of the dollar. In view of these developments, those who follow currency movements need a new guide as to how the current values of currencies compare to our estimates of fundamental equilibrium exchange rates (FEERs). That is the main object of this paper.
- Topic:
- Economics, Globalization, International Political Economy, and Monetary Policy
- Political Geography:
- United States and Europe
113. Debt Relief for Egypt?
- Author:
- John Williamson and Mohsin S. Khan
- Publication Date:
- 11-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The current government of Egypt has frequently stated that external financial assistance is necessary in the present economic situation and has expressed a strong preference for receiving it in part via debt relief. The question asked in this policy brief is whether there is a case for debt relief and if so what form this relief should take. This policy brief reviews a number of cases in which debt relief has been granted to draw out the lessons and implications for Egypt.
- Topic:
- Debt, Economics, Regime Change, and Popular Revolt
- Political Geography:
- Arabia, Arab Countries, North Africa, and Egypt
114. Lessons from the East European Financial Crisis, 2008-10
- Author:
- Anders Åslund
- Publication Date:
- 06-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In the fall of 2008, Central and Eastern Europe became a flashpoint in the global financial crisis. The ten new eastern members of the European Union were in a state of severe overheating in all regards. Inflation surged everywhere and to double digits in Bulgaria, Estonia, Latvia, and Lithuania. Wages and real estate prices skyrocketed, rendering these countries ever less competitive, which further undermined their current account balance. Output plunged and unemployment soared.
- Topic:
- Economics, Global Recession, and Financial Crisis
- Political Geography:
- Europe, Lithuania, Estonia, Bulgaria, and Latvia
115. Logistics Reform for Low-Value Shipments
- Author:
- Gary Clyde Hufbauer and Yee Wong
- Publication Date:
- 06-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Facilitating trade is essential for countries that aspire to compete in the global economy. Low transactions costs, speed, and predictability are all ingredients of a good logistics system. The payoff is large. According to a World Bank (2010) evaluation of nearly 155 countries, improving logistics for countries at the same level of per capita income can increase GDP by 1 percent and two-way merchandise trade by 2 percent.
- Topic:
- Economics, Emerging Markets, Globalization, and International Trade and Finance
116. Revitalizing the Export-Import Bank
- Author:
- Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong
- Publication Date:
- 05-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The United States has experienced persistent trade deficits for decades, and thoughtful observers have concluded that deficits cannot be sustained at levels much exceeding 4 percent of GDP annually. There are only two ways to decrease the trade deficit: reduce imports or increase exports. For global economic health, increased exports are a far better proposition.
- Topic:
- Economics, International Trade and Finance, and Monetary Policy
- Political Geography:
- United States
117. Estimates of Fundamental Equilibrium Exchange Rates, May 2011
- Author:
- William R. Cline and John Williamson
- Publication Date:
- 05-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This policy brief updates our estimates of fundamental equilibrium exchange rates (FEERs) to the latest available data, which for exchange rates are the average rates of April 2011, and for the IMF's balance of payments forecasts, those published in the April 2011 issue of World Economic Outlook (WEO; see IMF 2011a). It is the central study in what has now become a regular annual cycle, in which we draw out what we believe to be the implications of the IMF's forecasts for the pattern that exchange rates need to take if the world is to approach a reasonably satisfactory medium-run position. This past year we also published an interim policy brief (Cline and Williamson 2010b) in which we updated our calculations to the average exchange rates of October 2010, as well as commented on Brazilian Finance Minister Guido Mantega's description of international monetary events as constituting "currency wars." As in the previous year, however, the November 2010 policy brief updated our estimates only for intervening changes in market exchange rates. We did not make use of the IMF's revised autumn WEO forecasts to update our estimates of FEERs; on the contrary, we assumed the FEERs estimated in May 2010 were correct. In contrast, this policy brief presents totally new estimates of FEERs.
- Topic:
- Economics and Monetary Policy
- Political Geography:
- United States and China
118. The Outlook for International Monetary System Reform in 2011: A Preliminary Report Card
- Author:
- Edwin M. Truman
- Publication Date:
- 05-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Reform of the international monetary system was placed on the agenda of the Group of 20 (G-20) a year ago at the initiative of the incoming French leadership of the G-20. On November 4, 2011 in Cannes, France, the G-20 leaders will announce their conclusions and agreements after a year and half of intense dialogue and debate. This policy brief summarizes my preliminary rating of the expected results based on the evidence to date: a barely passing grade on substance but an A for effort. Neither final grade is locked in stone, however.
- Topic:
- Economics, International Cooperation, International Trade and Finance, International Monetary Fund, Monetary Policy, and Financial Crisis
- Political Geography:
- France
119. The Elephant in the "Green Room": China and the Doha Round
- Author:
- Arvind Subramanian, Aaditya Mattoo, and Francis Ng
- Publication Date:
- 05-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The puzzle about the Doha Round of multilateral trade negotiations in the World Trade Organization (WTO) is not why it is on life support now but how it has survived as a viable multilateral initiative for so long. From the very beginning, it was clear that the Round suffered from a lack of private-sector interest, the engine that had driven previous rounds of successful trade negotiations. At most, Doha promised to deliver some security of access for unilateral liberalization previously undertaken by countries and some modest incremental market opening (Martin and Mattoo 2009; Hufbauer, Schott, and Wong 2010). That the Round had much to be modest about was reflected in the failure of even antiglobalization protesters to show up for the more recent meetings of the Doha Round.
- Topic:
- Economics, Globalization, International Trade and Finance, and Markets
- Political Geography:
- China
120. Corporate Tax Reform for a New Century
- Author:
- Gary Clyde Hufbauer and Woan Foong Wong
- Publication Date:
- 04-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In his State of the Union address, President Barack Obama stressed four ingredients of American prosperity: faster innovation, better education, less deficit, and more jobs. As the president recognized in his address, the US free enterprise system drives the private sector to innovate, invest, and create jobs. This policy brief concentrates on how reforming the corporate tax system can strengthen the private sector, thereby spurring both innovation and job.
- Topic:
- Economics, Globalization, International Trade and Finance, Monetary Policy, and Financial Crisis
- Political Geography:
- United States
121. Getting Surplus Countries to Adjust
- Author:
- John Williamson
- Publication Date:
- 01-2011
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The world has witnessed two distinct attempts to build a multilateral mechanism to discipline surplus countries that declined to adjust their surpluses, and several proposals are currently on the table to do the same. On the two previous occasions the major surplus country of the day defeated attempts to create such a mechanism, and today China (not to mention Japan or Germany) exhibits no enthusiasm for the idea. Despite the importance of the issue, there has been remarkably little discussion of these proposals.
- Topic:
- Economics, International Trade and Finance, International Monetary Fund, and Monetary Policy
- Political Geography:
- Japan, China, and Germany
122. Confronting Asset Bubbles, Too Big to Fail, and Beggar-thy- Neighbor Exchange Rate Policies
- Author:
- Morris Goldstein
- Publication Date:
- 02-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- When pondering desirable reforms, I prefer to think about both the international financial system and the international monetary system because as this global crisis demonstrates so vividly, the root causes can come from both the financial and the monetary spheres and they can interact in a variety of ways. On the financial side, I want to emphasize two problems: pricking asset price bubbles before they get too large, and confronting “too big to fail.” On the monetary side, I want to concentrate on what can be done to discourage “beggar-thyneighbor” exchange rate policies.
- Topic:
- Economics, Monetary Policy, and Financial Crisis
123. The Sustainability of China's Recovery from the Global Recession
- Author:
- Nicholas R. Lardy
- Publication Date:
- 03-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- China's policy response to the global financial and economic crisis was early, large, and well-designed. Although Chinese financial institutions had little exposure to the toxic financial assets that brought down many large Western investment banks and other financial firms, China's leadership recognized that its dependence on exports meant that it was acutely vulnerable to a global recession. Thus they did not subscribe to the view sometimes described as “decoupling,” the idea that Asian countries could passively weather the financial storm that originated in the United States and other advanced industrial economies. They understood that absent a vigorous policy response China inevitably would suffer from the backwash of a sharp economic slowdown in its largest export markets—the United States and Europe.
- Topic:
- Economics and Financial Crisis
- Political Geography:
- United States, China, Europe, and Asia
124. Notes on Equilibrium Exchange Rates: January 2010
- Author:
- William R. Cline and John Williamson
- Publication Date:
- 01-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In June 2009 we issued our annual update of estimates of fundamental equilibrium exchange rates (FEERs) for 34 major economies (Cline and Williamson 2009). At that time the dollar had already begun correction from the substantial overvaluation that had arisen from the strong safe-haven effect associated with the global financial crisis of 2008–09. In this policy brief we report on changes in disequilibria in the exchange markets since the date those earlier calculations referred to, namely March 2009. We first present estimates of the extent of movement toward FEER-consistent bilateral dollar exchange rates from March to December 31, 2009, and then look at how effective exchange rates have altered in the same period. We also re-estimate the FEER-consistent dollar rate for one important currency, the Korean won.
- Topic:
- Economics, Foreign Exchange, International Political Economy, and Monetary Policy
- Political Geography:
- Korea
125. New PPP-Based Estimates of Renminbi Undervaluation and Policy Implications
- Author:
- Arvind Subramanian
- Publication Date:
- 04-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Is there reason to add to the proliferating set of estimates on the extent of renminbi undervaluation (see among others, Bergsten 2010; Cline and Williamson 2008 and 2010; Goldstein and Lardy 2008 and 2009; Frankel 2008; Reisen 2009; and Lee et al. 2008)? Yes, not least because these new estimates: (1) suggest that purchasing power parity (PPP)-based approaches to measuring renminbi undervaluation suggest that China's currency is undervalued by about 30 percent against the dollar and not the 12 percent recently reported (Bajaj 2010); and (2) are closer to and consistent with alternative approaches to estimating renminbi undervaluation.
- Topic:
- Economics, Foreign Exchange, International Political Economy, and Monetary Policy
- Political Geography:
- China
126. The Substitution Account as a First Step Toward Reform of the International Monetary System
- Author:
- Peter B. Kenen
- Publication Date:
- 03-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Today, the international monetary system is based largely on the US dollar, but reserve currency diversification has begun, thanks to the advent of the euro, and it is apt to continue. Eventually, the renminbi could acquire reserve currency status, and the resulting reserve currency diversification could be more disruptive than it has been to date. To forestall that possibility the quasi-currency issued by the International Monetary Fund (IMF), Special Drawing Rights (SDRs), could be made to play a larger role in the international monetary system, precluding potentially disruptive diversification and achieving more orderly growth in the stock of international reserves.
- Topic:
- Economics, International Political Economy, International Trade and Finance, and Monetary Policy
- Political Geography:
- United States
127. The Winter of Their Discontent: Pyongyang Attacks the Market
- Author:
- Stephan Haggard and Marcus Noland
- Publication Date:
- 01-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On November 30, 2009, North Korea announced a reform to replace all currency in circulation with new bills and coins. North Korean officials have made no bones about their motivations: The “reform” constitutes a direct attack on the emerging market economy and the independence from state control that it represents. In an interview following the conversion, an official of the North Korean central bank noted that the reform was aimed at curbing private trade and underlined that North Korea is “not moving toward a free market economy but will further strengthen the principle and order of socialist economic management.”
- Topic:
- Economics, Markets, and Monetary Policy
- Political Geography:
- North Korea
128. Revisiting the NAFTA Agenda on Climate Change
- Author:
- Jeffrey J. Schott and Meera Fickling
- Publication Date:
- 07-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- A year ago, we wrote a policy brief titled Setting the NAFTA Agenda on Climate Change, which explored issues of energy and environmental cooperation among the three North American countries in light of the climate legislation that had recently passed the US House of Representatives. Similar legislation did not pass the Senate, and Congressional leaders are now considering much more modest measures aimed at reducing greenhouse gas (GHG) emissions and reforming US energy policy.
- Topic:
- Climate Change, Economics, International Trade and Finance, and Treaties and Agreements
- Political Geography:
- United States and North America
129. Dealing with Volatile Capital Flows
- Author:
- Olivier Jeanne
- Publication Date:
- 07-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The set of tools and mechanisms with which emerging-market countries insure themselves against volatile capital flows is in a state of flux. Most emerging-market countries had accumulated an unprecedented level of international reserves before the global financial crisis that started in 2008. The crisis itself led to a large increase in International Monetary Fund (IMF) resources and the introduction of a new lending facility, the Flexible Credit Line (FCL). Meanwhile, some progress was made toward transforming the Chiang Mai Initiative into an Asian Monetary Fund, and the Greek debt crisis even prompted calls for the creation of a European Monetary Fund.
- Topic:
- Development, Economics, Emerging Markets, Markets, and Foreign Direct Investment
130. The Big U-Turn: Japan Threatens to Reverse Postal Reforms
- Author:
- Gary Clyde Hufbauer and Julia Muir
- Publication Date:
- 06-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On May 31, 2010 a majority of the Lower House of the National Diet of Japan approved legislation that would reverse a decade's worth of effort to fully privatize key subsidiaries of Japan Post Holdings Co. Ltd. Besides postal services, the state-run postal system offers banking and insurance services, through Japan Post Bank (JPB) and Japan Post Insurance (JPI), respectively. These are the financial engines of Japan Post and were the units slated for privatization. Both subsidiaries have long received favorable government treatment, tilting the playing field against private banks and insurance firms, whether foreign or domestic. The government of Japan is in clear violation of its commitments under the World Trade Organization (WTO), and if the Upper House approves the legislation, Japan will reverse the efforts made by the United States and the European Union, as well as domestic private banks and insurance firms, to establish a level playing field. What's more, Japan risks having a formal WTO dispute brought against it.
- Topic:
- Economics, Government, and Privatization
- Political Geography:
- United States, Japan, and Europe
131. Deepening China-Taiwan Relations through the Economic Cooperation Framework Agreement
- Author:
- Daniel H. Rosen
- Publication Date:
- 06-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On Sunday, June 13, 2010 representatives from China and Taiwan held a third round of talks in Beijing on an Economic Cooperation Framework Agreement (ECFA) that would liberalize important aspects of cross-Strait economic relations. Details of what was agreed and what remains under negotiation are still trickling out, and in any case the nature of this framework is that various elements will be agreed upon on an ongoing basis rather than at once. But it is clear from available details that ECFA will be an ambitious accord that fundamentally changes the game between Taiwan and China and hence affects the regional economy and even the transpacific tempo for the United States.
- Topic:
- Economics, International Cooperation, International Trade and Finance, Treaties and Agreements, and Bilateral Relations
- Political Geography:
- United States, China, and Taiwan
132. Estimates of Fundamental Equilibrium Exchange Rates, May 2010
- Author:
- William R. Cline and John Williamson
- Publication Date:
- 06-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This policy brief updates our estimates of fundamental equilibrium exchange rates (FEERs) to the latest issue of the World Economic Outlook (WEO) published by the International Monetary Fund in April 2010 (IMF 2010a). It is part of what has now become an annual cycle drawing out what we believe to be the implications of the IMF's forecasts for the pattern that exchange rates need to take if the world is to approach a reasonably satisfactory medium-run equilibrium position. This year we also published an interim report (Cline and Williamson 2010), partly drawing on the October 2009 WEO but essentially examining the implications of the pattern of market exchange rates as of January 1, 2010 for how misaligned currencies were at that time, assuming that the FEERs estimated in June 2009 were correct. In this publication we have estimated the FEERs anew on the basis of revisions in the methods employed and new data presented in the April 2010 WEO, after incorporating adjustments to the IMF forecast needed to take account of recent changes in exchange rates and especially the euro.
- Topic:
- International Relations, Economics, International Monetary Fund, and Monetary Policy
133. In Defense of Europe's Grand Bargain
- Author:
- Jacob Funk Kirkegaard
- Publication Date:
- 06-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Nothing is easier than pointing fingers at policymakers woring feverishly at 2 a.m. to contain a rapidly spreading financial crisis. Rarely has this been truer for the European Union than during the current crisis's amateurish policy management. Yet, what really matters is the final result, which is far more postive for Europe than the ugly sausage-making process.
- Topic:
- Economics, International Trade and Finance, and Financial Crisis
- Political Geography:
- Europe
134. Hobbling Exports and Destroying Jobs
- Author:
- Gary Clyde Hufbauer and Theodore H. Moran
- Publication Date:
- 06-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The US House of Representatives has just passed the American Jobs and Closing Tax Loopholes Act (HR 4213). This bill will hurt American workers, reduce American exports, and make American companies less competitive in the international marketplace. Since the US Senate has already passed companion legislation, the American Workers, State, and Business Relief Act (S 3336), these ill-considered bills could soon be reconciled in conference and become the law of the land. If so, American firms and workers will pay the price.
- Topic:
- Economics, International Trade and Finance, Markets, and Labor Issues
- Political Geography:
- United States and America
135. Higher Taxes on Multinationals Would Hurt US Workers and Exports
- Author:
- Gary Clyde Hufbauer and Theodore H. Moran
- Publication Date:
- 05-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- As presidential candidate, Barack Obama repeatedly advocated tax “reforms” aimed squarely at US-based multinational enterprises (MNEs). As president, he again declared—in the same State of the Union address that laid out an ambitious goal for export expansion—that “it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America."
- Topic:
- Economics, International Trade and Finance, Markets, and Monetary Policy
- Political Geography:
- United States
136. Protection by Stealth: Using the Tax Law to Discriminate against Foreign Insurance Companies
- Author:
- Gary Clyde Hufbauer
- Publication Date:
- 04-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- These are difficult times. Not only are 10 percent of Americans unemployed but the federal budget is out of whack thanks to the specter of rising entitlement outlays. A natural impulse in difficult times is to protect domestic products and domestic producers. The tone of political economy during the global recession of 2007–09 is no different from that in past recessions—but louder because the economic damage is more severe. Emblematic of this spirit is a proposal to discriminate against foreign-owned insurance companies, using the tax code.
- Topic:
- Economics, Labor Issues, and Financial Crisis
- Political Geography:
- United States
137. An Update on EU Financial Reforms
- Author:
- Nicolas Véron
- Publication Date:
- 12-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In the context of a transatlantic comparison, the first thing to be mentioned is the difference between the time sequence of financial reforms in the European Union and its equivalent in the United States. The financial crisis started simultaneously on both sides of the Atlantic, with the initial disruption of some financial market segments in August 2007 and the major panic episode of September through October 2008. But they are not at the same stage of policy reaction and especially regulatory reform now. At least four reasons can be identified for this difference.
- Topic:
- Economics, Global Recession, Monetary Policy, and Financial Crisis
- Political Geography:
- United States and Europe
138. Strengthening IMF Surveillance: A Comprehensive Proposal
- Author:
- Edwin M. Truman
- Publication Date:
- 12-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The central challenge facing the global economy and financial system today is the failure of countries to limit the negative effects of their policies on other countries and on global economic and financial stability. The most prominent manifestations of this challenge are the balance-of-payments adjustment process and the notorious asymmetry therein, spillovers from other countries' financial-sector policies such as those involved in the crisis of 2007–10, and the prospect of sustained unbalanced growth in the global economy with some countries overheating and others facing substantial excess capacity. Against this background, I propose an approach to strengthened IMF surveillance over the economic and financial policies of its member countries.
- Topic:
- Economics, Globalization, International Monetary Fund, Monetary Policy, and Financial Crisis
139. How Europe Can Muddle Through Its Crisis
- Author:
- Jacob Funk Kirkegaard
- Publication Date:
- 12-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- As Europe's financial market contagion spreads to systemically important eurozone members, the region is echoing with "end-game scenarios" (Johnson and Boone 2010) and demands for major new steps by European policymakers (Financial Times 2010). Among these would be a European "fiscal transfer union," a new common eurozone bond, action by the European Central Bank (ECB) to monetize sovereign debts, and finally a eurozone breakup itself.
- Topic:
- Debt, Economics, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe
140. Renminbi Undervaluation, China's Surplus, and the US Trade Deficit
- Author:
- William R. Cline
- Publication Date:
- 08-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On June 21, 2010, in the run-up to the G-20 meeting in Toronto, China announced that it would shift to a more flexible exchange rate policy. From mid-June to July 30 the yuan rose 0.8 percent against the dollar. In contrast, the currency had remained fixed (at about 6.83 yuan to the dollar) from September 2008 to early June 2010. Pressure not only from the United States and the European Union but also from Russia, Brazil, and India as well as the IMF seems likely to have played a role in China's decision, although concerns about domestic inflation may also have been a factor.
- Topic:
- Economics and Monetary Policy
- Political Geography:
- United States and China
141. Currency Wars?
- Author:
- William R. Cline and John Williamson
- Publication Date:
- 11-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- A widespread currency war is in prospect. The term was first introduced by Guido Mantega, the finance minster of Brazil. He envisaged the International Monetary Fund (IMF) developing an index that measures whether currencies are held artificially low to boost exports (popularly referred to as “currency manipulation”). If that IMF exercise did not lead to an easing of such exchange market intervention, he suggested that an undervalued exchange rate could eventually be considered a commercial subsidy.
- Topic:
- Economics, International Cooperation, International Trade and Finance, and Monetary Policy
- Political Geography:
- Brazil
142. Will It Be Brussels, Berlin, or Financial Markets that Check Moral Hazard in Europe's Bailout Union? Most Likely the Latter!
- Author:
- Jacob Funk Kirkegaard
- Publication Date:
- 10-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- So far so good for the European Union in preventing the Greek sovereign debt crisis from spiraling out of control in the short term. But with Greece in May 2010 requiring an unprecedented bailout from the European Union/IMF to avoid immediate default and 25 of the European Union's 27 member states currently subject to an “excessive deficit procedure” (European Commission 2010i), it remains evident that the European Union's existing fiscal surveillance framework patently failed both before and during the Great Recession and that Europe's leaders must head back to the drawing board for a required long term reform of the EU fiscal policy and surveillance framework.
- Topic:
- Debt, Economics, and Financial Crisis
- Political Geography:
- Europe and Greece
143. The Central Banker's Case for Doing More
- Author:
- Adam S. Posen
- Publication Date:
- 10-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In this policy brief I present my view on the role of monetary policy in our recovery and whether the major central banks in the United Kingdom and beyond should be doing more in the coming months. Of course, every central bank's policysetting committee has to make its own assessment of the right policy measures for its economy, based on its own forecastand the mandate legally set for it. Thus, I am not presuming to offer a “one size fits all” prescription for central bankers beyond the United Kingdom. I would like, however, to try to give some general assessment of the common challenges we face, and what I believe to be the appropriate monetary policy response, barring special circumstances. Not that there will be any doubt about it, but for the record, these are solely my own personal views.
- Topic:
- Economics, Globalization, Global Recession, Monetary Policy, and Financial Crisis
- Political Geography:
- United Kingdom
144. Not All Financial Regulation Is Global
- Author:
- Nicolas Véron and Stéphane Rottier
- Publication Date:
- 09-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- “All politics is local,” as the saying goes, but all economics is global, and regulation is one area where these two realities meet and conflict. This has been particularly true for financial regulation in the wake of the unprecedented financial crisis.
- Topic:
- Economics, Genocide, International Cooperation, International Trade and Finance, and Monetary Policy
- Political Geography:
- Europe
145. The Future of the Chiang Mai Initiative: An Asian Monetary Fund?
- Author:
- C. Randall Henning
- Publication Date:
- 02-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In September 1997, at the outset of the last global financial crisis, the Japanese Ministry of Finance proposed the creation of an Asian Monetary Fund. Although this particular proposal was scuttled, the idea of a common regional fund on which East Asian governments might draw in times of financial turmoil survives. The region's disaffection from the International Monetary Fund (IMF), stemming from the 1997–98 crisis, sustains this idea and a desire on the part of individual countries to self-insure with large holdings of foreign exchange reserves. East Asian governments and central banks have created a set of bilateral swap arrangements (BSAs) dubbed the Chiang Mai Initiative (CMI) and are negotiating among themselves to build these BSAs into a more comprehensive facility. Some Asian officials hope that such a facility could underpin exchange rate cooperation and monetary integration in the region, although such proposals remain for the moment long-term visions.
- Topic:
- Economics, International Cooperation, International Trade and Finance, Regional Cooperation, and Financial Crisis
- Political Geography:
- Japan, Israel, and Asia
146. Money for the Auto Industry: Consistent with WTO Rules?
- Author:
- Gary Clyde Hufbauer and Claire Brunel
- Publication Date:
- 02-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- As the financial crisis threatens to lead to a depression, the woes of the automobile industry are second only to the distress of the financial sector. Employment in the US auto industry dropped 9 percent between 2007 and 2008, with much more to follow in 2009. Overall, US auto sales dropped 18 percent between 2007 and 2008, and sales of SUVs plunged 44 percent on a year-over-year basis. Since some sort of financing is required for 90 percent of US car sales, the global credit freeze hit the auto industry with a second blow.
- Topic:
- Economics, International Political Economy, International Trade and Finance, Poverty, and Financial Crisis
- Political Geography:
- United States
147. A Green Recovery? Assessing US Economic Stimulus and the Prospects for International Coordination
- Author:
- Trevor Houser, Shashank Mohan, and Robert Heilmayr
- Publication Date:
- 02-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- As the 111th Congress begins and a new president takes office, the economic crisis dominates the US policy agenda. The financial system remains in a tenuous state despite massive bank recapitalization, and the economy, more than a year into the current recession, shows no signs of recovery. Given the scale of the challenge Washington faces and the amount of money required to combat it, there will likely be little room for other legislative priorities. As a result, policymakers are hoping to direct government spending over the next two years in a way that not only generates short-term economic growth and employment but also addresses long-term policy goals sidelined by the current crisis.
- Topic:
- International Relations, Climate Change, Economics, Environment, International Political Economy, and International Trade and Finance
- Political Geography:
- United States
148. Buy American: Bad for Jobs, Worse for Reputation
- Author:
- Gary Clyde Hufbauer and Jeffrey J. Schott
- Publication Date:
- 02-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On January 28, 2009, the US House of Representatives passed its economic stimulus plan, the American Recovery and Reinvestment Act of 2009. Out of the bill's 700 text pages, a small half-page section attracted enormous media attention: the section requiring that all public projects funded by the stimulus plan must use only iron and steel produced in the United States (box 1). Another provision, which drew less attention, extends the so-called Berry Amendment (an old Buy American provision) to uniforms purchased by the Department of Homeland Security.
- Topic:
- Economics, Globalization, Government, Industrial Policy, International Political Economy, International Trade and Finance, and International Affairs
- Political Geography:
- United States
149. Did Reagan Rule In Vain? A Closer Look at True Expenditure Levels in the United States and Europe
- Author:
- Jacob Funk Kirkegaard
- Publication Date:
- 01-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- It is generally believed that the United States is a country of low taxes and small government, at least when compared with countries in Europe (and until the financial crisis so greatly expanded the role of the federal government in the United States in late 2008). Fully accounting for the role, size, and effect of the government in an economy is a complex endeavor, however, and it is hardly accomplished by repeatedly restating differences in top marginal tax rates, overall tax burdens, or gross sizes of governments in GDP terms.
- Topic:
- Economics, Government, Political Economy, and Privatization
- Political Geography:
- United States and Europe
150. US Taxation of Multinational Corporations: What Makes Sense, What Doesn't
- Author:
- Gary Clyde Hufbauer and Jisun Kim
- Publication Date:
- 03-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- As the administration and Congress catch their breath from rescuing the economy, their thoughts are quickly turning to other issues—including the structure of the US tax system. Everyone agrees that the US tax system inflicts enormous complexity on the American public. But reform is never easy. Who pays the tax burden ranks among the most contentious issues that Congress has historically faced, and this time around will be no different.
- Topic:
- Economics, International Trade and Finance, and Financial Crisis
- Political Geography:
- United States
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