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  • Author: Gary Clyde Hufbauer, Julia Muir
  • Publication Date: 01-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Legislation to reform Japan Post is again gathering steam in Tokyo. The real question is whether the latest act in this long- running drama will represent true reform or in fact will camouflage an entrenchment of Japan Post's formidable monopoly powers. Antireform proposals being lined up for consideration in the Diet would indefinitely extend effective government control of Japan Post's financial arms (thereby reversing the Koizumi era reforms). On the other hand, reform forces in the Japanese government want new legislation to guarantee a level playing field in banking and insurance between Japan Post and private firms, whether domestic or foreign.
  • Topic: Economics, Government, International Trade and Finance, Natural Disasters
  • Political Geography: Japan, Israel
  • Author: Peter A. Petri
  • Publication Date: 06-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: The Trans-Pacific Partnership (TPP), currently at an advanced stage of negotiation, began as a small agreement but now has big implications. The TPP would strengthen ties between Asia and the Americas, create a new template for the conduct of international trade and investment, and potentially lead to a comprehensive free trade area (FTA) in the Asia-Pacific. It could generate large benefits—greater than those expected from the World Trade Organization's (WTO) global Doha Development Agenda. This Policy Brief reports on our ongoing quantitative assessment (with FanZhai) of the TPP and other Asia-Pacific integration efforts.
  • Topic: Economics, Emerging Markets, International Trade and Finance, Treaties and Agreements
  • Political Geography: America, Europe, Israel, Asia, Australia/Pacific
  • Author: Gary Clyde Hufbauer, Julia Muir
  • Publication Date: 05-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Our last policy brief on this long-running saga recounted political machinations, late in 2011, to reverse the Koizumi era reforms of Japan Post, a giant among state-owned enterprises (SOEs). As a brief background: Japan Post is a conglomerate of five companies: the parent, Japan Post Holdings; two subsidiaries concerned with operating post offices and delivering mail, namely Japan Post Network and Japan Post Services; and two giant financial arms, Japan Post Bank and Japan Post Insurance.
  • Topic: Economics, International Trade and Finance, Treaties and Agreements, Law
  • Political Geography: Japan, Israel
  • Author: William R. Cline
  • Publication Date: 04-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: For several years China has run persistent current account surpluses that have been widely seen as the most serious single source of global imbalances on the surplus side, and mirrored by persistent systemically large US current account deficits on the other side. In recent years, however, both imbalances have shown moderation (figure 1). China's surpluses have posed questions of international policy rules, because they have reflected in part an unwillingness to allow the exchange rate to appreciate sufficiently to act as an effective equilibrating mechanism. Exchange rate intervention resulted in a massive buildup of international reserves, which rose from $615 billion at the end of 2004 to $3.2 trillion at the end of 2011 (IMF 2012a).
  • Topic: Economics, Emerging Markets, Foreign Exchange, International Trade and Finance
  • Political Geography: United States, China, Israel
  • Author: J. Bradford Jensen
  • Publication Date: 11-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper argues that developing Asia is overlooking an opportunity for increased growth and development through trade in business services. Developing Asia would benefit from liberalizing services trade as it has benefited from liberalizing goods trade. This argument rests on these key findings: business services are important for growth, developing Asia is relatively under-endowed with business services, many business services are tradable, and developing Asia has relatively high barriers to services trade.
  • Topic: Economics, Emerging Markets, International Trade and Finance, Markets, Monetary Policy
  • Political Geography: Israel, Asia
  • Author: Donghyun Park, Kwanho Shin
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: There is a widespread perception that Korea's services sector lags behind its dynamic world-class manufacturing sector. This paper empirically analyzes the past performance of Korea's services sector in order to assess its prospects as an engine of growth. The analysis resoundingly confirms the conventional wisdom of an underperforming service sector. In light of Korea's high income and development level, the poor performance of modern services is of particular concern. The authors identify a number of factors underlying the poor performance and set forth policy recommendations for addressing them. Overall, Korea faces a challenging but navigable road ahead in developing a high value-added services sector.
  • Topic: Development, Economics, Emerging Markets, Industrial Policy, International Trade and Finance
  • Political Geography: Israel, Korea
  • Author: Jacob Funk Kirkegaard
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: In this paper Kirkegaard presents new micro-level data consisting of individual greenfield investment projects and mergers and acquisitions as a source for detailed analysis of services sector cross-border investment flows among the Asian Development Bank (ADB) regional membership in Asia. The new transactional foreign direct investment (FDI) data are methodologically distinct from traditional BPM5-compliant FDI data but found to yield generally comparable aggregates, when compared with the latest available International Monetary Fund (IMF) data from the Comprehensive Direct Investment Survey for the ADB regional membership. The services sectors are found to receive considerably larger amounts of foreign investment, when compared with the Asian region's manufacturing and raw materials sectors. OECD countries account for roughly three-quarters of total recorded inward services sector FDI of about $2 trillion, relatively evenly split between the United States, the EU-27, and regional OECD-level-income countries. The presence of sizable regional "upward flowing" services sector investments into OECD-level-income economies is verified. Kirkegaard draws preliminary policy conclusions based on the new transactional FDI data results concerning prospects for regional services sector liberalization, threshold income levels for inward services sector FDI, upward-flowing regional services FDI, and preferred modes of services sector investments.
  • Topic: Economics, Emerging Markets, International Trade and Finance, Foreign Direct Investment
  • Political Geography: United States, Israel, Asia
  • Author: Stephan Haggard, Marcus Noland
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper uses a survey of 300 North Korean refugees to examine the experience of women in North Korea's fitful economic transition. Like other socialist states, North Korea has maintained a de jure commitment to women's rights. However, the authors find that women have been disproportionately shed from state-affiliated employment and thrust into a market environment characterized by weak institutions and corruption. As a result, the state and its affiliated institutions are increasingly populated by males, and the market, particularly in its retail aspects, is dominated by women. Among the most recent cohort of refugees to leave North Korea, more than one-third of male respondents indicate that criminality and corruption is the best way to make money, and 95 percent of female traders report paying bribes to avoid the penal system. In short, the increasingly male-dominated state preys on the increasingly female-dominated market. These results paint a picture of a vulnerable group that has been disadvantaged in North Korea's transition. Energies are directed toward survival, mass civil disobedience is reactive, and as a group, this population appears to lack the tools or social capital to act collectively to improve their status.
  • Topic: Corruption, Economics, Gender Issues
  • Political Geography: Israel, North Korea
  • Author: Stephan Haggard, Marcus Noland
  • Publication Date: 05-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
  • Topic: Foreign Policy, Economics, International Trade and Finance, Bilateral Relations
  • Political Geography: China, Israel, North Korea
  • Author: Jennifer Lee, Stephan Haggard, Marcus Noland
  • Publication Date: 08-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Theory tells us that weak rule of law and institutions deter cross-border integration, deter investment relative to trade, and inhibit trade finance. Drawing on a survey of more than 300 Chinese enterprises that are doing or have done business in North Korea, the authors consider how informal institutions have addressed these problems in a setting in which rule of law and institutions are particularly weak. Given the apparent reliance on hedging strategies, the rapid growth in exchange witnessed in recent years may prove self-limiting, as the effectiveness of informal institutions erodes and the risk premium rises. Institutional improvement could have significant welfare implications, affecting the volume, composition, and financial terms of cross-border exchange.
  • Topic: Economics, International Trade and Finance, Foreign Direct Investment
  • Political Geography: Israel
  • Author: Theodore H. Moran
  • Publication Date: 04-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: What is the relationship between foreign manufacturing multinational corporations (MNCs) and the expansion of indigenous technological and managerial technological capabilities among Chinese firms? China has been remarkably successful in designing industrial policies, joint venture requirements, and technology transfer pressures to use FDI to create indigenous national champions in a handful of prominent sectors: high speed rail transport, information technology, auto assembly, and an emerging civil aviation sector. But what is striking in the aggregate data is how relatively thin the layer of horizontal and vertical spillovers from foreign manufacturing multinationals to indigenous Chinese firms has proven to be. Despite the large size of manufacturing FDI inflows, the impact of multinational corporate investment in China has been largely confined to building plants that incorporate capital, technology, and managerial expertise controlled by the foreigner. As the skill-intensity of exports increases, the percentage of the value of the final product that derives from imported components rises sharply. China has remained a low value-added assembler of more sophisticated inputs imported from abroad—a “workbench” economy. Where do the gains from FDI in China end up? While manufacturing MNCs may build plants in China, the largest impact from deployment of worldwide earnings is to bolster production, employment, R, and local purchases in their home markets. For the United States the most recent data show that US-headquartered MNCs have 70 percent of their operations, make 89 percent of their purchases, spend 87 percent of their R dollars, and locate more than half of their workforce within the US economy—this is where most of the earnings from FDI in China are delivered.
  • Topic: Economics, Industrial Policy, International Trade and Finance, Science and Technology
  • Political Geography: United States, China, Israel
  • Author: Arvind Subramanian, Aaditya Mattoo
  • Publication Date: 12-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Until recently, the World Trade Organization (WTO) has been an effective framework for cooperation because it has continually adapted to changing economic realities. The current Doha Agenda is an aberration because it does not reflect one of the biggest shifts in the international economic and trading system: the rise of China. Even though China will have a stake in maintaining trade openness, an initiative that builds on but redefines the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. First, a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the WTO process to previous successes. Second, new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broad non-discriminatory trading order.
  • Topic: Economics, Globalization, International Trade and Finance, Markets
  • Political Geography: China, Israel
  • Author: C. Randall Henning, Mohsin S. Khan
  • Publication Date: 10-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Currently, Asia's influence in global financial governance is not consistent with its weight in the world economy. This paper examines the role of Asia in the International Monetary Fund (IMF) and the Group of Twenty (G-20). It looks in particular at how the relationship between East Asian countries and the IMF has evolved since the Asian financial crisis of 1997–98 and outlines how Asian regional arrangements for crisis financing and economic surveillance could constructively interact with the IMF in the future. It also considers ways to enhance the effectiveness of Asian countries in the G-20 process.
  • Topic: Development, Economics, Emerging Markets, Globalization, International Trade and Finance, Monetary Policy
  • Political Geography: Israel, Asia
  • Author: Edwin M. Truman
  • Publication Date: 09-2010
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper addresses the agenda for the Group of Twenty (G-20) leaders' meeting in Seoul, Korea in November 2010. This is an opportunity and challenge for Asian leaders in particular. Their test will be, first, to demonstrate that they can responsibly advance economic recovery. They must also deliver on institutional reform, in particular of the International Monetary Fund (IMF). I advocate a substantial expansion of the IMF's role as lender of last resort that is integrated with the surveillance role of the IMF in the form of comprehensive prequalification for IMF assistance and policy advice and a substantial increase in the IMF's financial resources. I also propose an approach to meaningful reform of the distribution of IMF quotas along with limiting European seats on the IMF executive board.
  • Topic: Economics, Emerging Markets, Global Recession, Financial Crisis, Governance
  • Political Geography: China, Israel, Asia, Korea
  • 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, Financial Crisis
  • Political Geography: Japan, Israel, Asia
  • Author: C. Fred Bergsten
  • Publication Date: 03-2007
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: East Asia is clearly, if gradually and unevenly, moving toward regional economic integration. Market forces are leading the process, as firms construct production chains across the area that exploit the comparative advantage of its individual countries. Governments are now moving to build on those forces, and consolidate them, through a series of formal agreements to intensify their economic relationships and start creating an East Asian Community.
  • Topic: Development, Economics
  • Political Geography: United States, China, Israel, East Asia, Asia
  • Author: John Williamson
  • Publication Date: 08-2005
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: China recently announced that it is adopting a basket of currencies as the peg for its exchange rate instead of the US dollar. This announcement raises questions of how such a system works, whether other East Asian countries would be advised to follow China in adopting a basket numeraire, and whether it would be advantageous to these countries if they were all to adopt the same basket. This brief answers these questions.
  • Topic: Economics, International Cooperation, International Trade and Finance
  • Political Geography: United States, Israel, East Asia, Asia
  • Author: Marcus Noland
  • Publication Date: 06-2005
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Arab political regimes are both unusually undemocratic and unusually stable. A series of nested statistical models are reported to parse competing explanations. The democratic deficit is comprehensible in terms of lack of modernization, British colonial history, neighborhood effects, reliance on taxes for government finance, and the Arab population share. Interpretation of the last variable is problematic: It could point to some antidemocratic aspect of Arab culture (though this appears not to be supported by survey evidence), or it could be a proxy for some unobservable such as investment in institutions of internal repression that may not be culturally determined and instead reflect elite preferences. Hypotheses that did not receive robust support include the presence of oil rents, the status of women, conflict with Israel or other neighbors, or Islam. The odds on liberalizing transitions occurring are low but rising. In this respect the distinction between the interpretation of the Arab ethnic share as an intrinsic cultural marker and as a proxy for some unobservable is important-if the former is correct, then one would expect the likelihood of regime change to rise only gradually over time, whereas if it is the latter, the probabilities may exhibit much greater temporal variability.
  • Topic: Economics, Government, Politics
  • Political Geography: United Kingdom, Middle East, Israel, Arabia
  • Author: Michael Mussa
  • Publication Date: 04-2005
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: After surging to the highest growth rate in a generation, world real GDP is set to slow from a rate of just over 5 percent for 2004 to about 4 percent for 2005 and a tad slower for 2006. The economic slowdowns in several important economies in the second half of last year, including much of continental Europe and Japan, already make it clear that year-over-year growth will slow for 2005. But the continued strong growth of domestic demand in other countries, most notably the United States and China, virtually assures that global growth this year will not fall below potential.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, Japan, China, Europe, Israel, East Asia
  • Author: Adam S. Posen
  • Publication Date: 09-2004
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Japan's recovery is strong. Real GDP growth will exceed 4 percent this year and likely be 3 percent or higher in 2005 and perhaps even 2006. The Japanese economy has been growing solidly for the last five quarters (average real 3.2 percent annualized rate), and the pace is sustainable, given Japan's underlying potential growth rate (which has risen to 2 to 2.5 percent per year) and the combination of catch-up growth closing the current output gap and some reforms that will raise the growth rate for quarters to come (though not permanently). Indicators of domestic demand beyond capital investment are increasingly positive, including housing starts bottoming out, inventories drawing down, and diminished deflation. Moreover, on the external side, while China was the main source of export growth in 2003, the composition of exports has become more balanced this year and is widening beyond that seen in other recoveries. Just as in the United States and other developed economies, a sharp slowdown in Chinese growth and a sustained further increase in energy prices represent the primary risks to the outlook.
  • Topic: Development, Economics
  • Political Geography: United States, Japan, China, Israel, East Asia, Asia
  • Author: Marcus Noland
  • Publication Date: 08-2004
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper attempts to determine whether conditions amenable to successful selective interventions to capture cross-industry externalities are likely to be fulfilled in practice. Three criteria are proposed for good candidates for industrial promotion: that they have strong interindustry links to the rest of the economy, that they lead the rest of the economy in a causal sense, and that they be characterized by a high s hare of industry-specific innovations in output growth. According to these criteria, likely candidates for successful intervention are identified in the Korean data. It is found that, with one exception, none of the sectors promoted by the heavy and chemical industry (HCI) policy fulfills all three criteria.
  • Topic: Development, Economics
  • Political Geography: Israel, East Asia, Korea
  • Author: Kimberly Ann Elliott
  • Publication Date: 04-2003
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Almost a decade ago, as the last nuclear crisis with North Korea was reaching a peak, I concluded the following about the potential utility of economic sanctions: The debate over US policy toward North Korea boils down to one deceptively simple question: what does Kim Il-sung want? No one can be sure of the answer and different interpretations have quite different policy implications. If the Great Leader views a nuclear weapons option as important to the survival of his regime, economic sanctions are unlikely to force him to give it up. But if he views the threat of developing nuclear weapons as a bargaining chip, some combination of carrots and sticks may induce him to trade it away.
  • Topic: Diplomacy, Economics, International Trade and Finance
  • Political Geography: Israel, East Asia, North Korea
  • Author: Adam S. Posen, Kenneth N. Kuttner
  • Publication Date: 12-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Observers have relied increasingly on simple reaction functions, such as the Taylor rule, to assess the conduct of monetary policy. Applying this approach to deflationary or near-zero inflation environments is problematic, however, and this paper examines two shortcomings of particular relevance to the Japanese case of the last decade. One is the unusually high degree of uncertainty associated with potential output in an environment of prolonged stagnation and deflation. Consequently, reaction function-based assessments of Japanese monetary policy are so sensitive to the chosen gauge of potential output as to be unreliable. The second shortcoming is the neglect of policy expectations, which become critically important as nominal interest rates approach zero. Using long-term bond yields, we identify five episodes since 1996 characterized by abrupt declines in Japanese inflation expectations. Policies undertaken by the Bank of Japan during this period did little to stabilize expectations, and the August 2000 interest rate increase appears to have intensified deflationary concerns.
  • Topic: Climate Change, Economics, International Trade and Finance
  • Political Geography: Japan, Israel, East Asia, Asia
  • Author: C. Fred Bergsten
  • Publication Date: 06-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The United States and Japan are the two largest national economies in the world. Since the early 1990s, they have been moving in opposite directions. The United States enjoyed an expansion of record duration from the end of the Gulf War in 1991 until early 2001, growing much faster than any other G-7 country and much faster than it had at any time since the Second World War. Japan's economy, by contrast, has been virtually stagnant since its financial bubble burst in the early 1990s and has clearly experienced its worst performance since its recovery from the ravages of the Pacific War.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, Japan, Israel, East Asia
  • Author: Michael Mussa
  • Publication Date: 09-2002
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: The global economic recovery is continuing but at a somewhat slower pace than was anticipated six months ago. Specifically, using the country weights from the IMF's World Economic Outlook, the forecast for real GDP growth in the world economy during 2002 (i.e., on a fourth-quarter-to-fourth-quarter basis) is cut by about half a percentage point to 3 percent—a pace that is slightly below my estimate of the potential growth rate for world GDP. This downward revision reflects primarily slower growth than earlier expected during the first half of 2002 in most industrial countries and the expectation that growth will remain somewhat more sluggish than earlier expected at least through year-end. For 2003, the forecast for global economic growth is also cut by about half a percentage point—to 4 percent—reflecting both general factors suggesting slightly weaker performance in many industrial and developing countries and the particular economic risks arising from possible military action against Iraq and from potential credit events affecting key developing countries. Despite these downward revisions, however, there is little doubt that the world economy will see significant improvement this year from the 1 percent growth recorded in 2001, and it is still reasonable to expect further improvement to a growth rate modestly above global potential during 2003.
  • Topic: Economics
  • Political Geography: United States, Iraq, Europe, Israel, Asia, South America, Latin America, North America
  • Author: Adam S. Posen
  • Publication Date: 05-2002
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: After more than a decade of economic stagnation and minimal structural change, Japan stands on the brink of outright financial crisis—the only debate is whether the Japanese government can dodge its imminent economic threats for another six months at most, or ride the wave of global expansion to throw still more money at these problems with decreasing effectiveness until the public debt becomes unsustainable (which should be no later than 2005). Either way, volatility in Japanese asset markets will be extremely high for the next 36 months, with significant declines on average in asset prices and the yen.
  • Topic: Economics, Government, International Trade and Finance
  • Political Geography: Japan, Israel, East Asia
  • Author: Adam S. Posen, Kenneth N. Kuttner
  • Publication Date: 04-2002
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The efficacy of fiscal policy in Japan in the last decade has been a subject of considerable dispute, and the coincidence of mounting deficits and continued stagnation has led some to conclude that fiscal policy was ineffective. This paper finds ample support for the opposite conclusion: exogenous fiscal policy shocks (as derived from a structural vector-autoregression model) had pronounced real effects in Japan. Expansionary fiscal policy was expansionary, and contractionary policy contractionary, consistent with the implications of conventional macroeconomic theory. A historical decomposition shows that Japan's burgeoning public debt stems almost entirely from the recession-caused slowdown in revenue growth, and that fiscal policy was at times procyclical rather than consistently expansionary. Direct examination of the long-run relationship between private saving, taxes, and spending confirms that any Ricardian effects of future public liabilities on saving were insufficient to offset the direct first-order effects of taxes and public expenditures. The passivity of Japanese savers therefore seems to have contributed to the efficacy of fiscal policy; otherwise, some combination of increased saving, capital outflow, and higher interest rates would have diminished its impact.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: Japan, Israel, East Asia
  • Author: Adam S. Posen
  • Publication Date: 08-2001
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: In the postwar era, US-Japan economic relations have been characterized by substantial tensions, yet this has not damaged the underlying security relationship or critically harmed the multilateral economic framework. In fact, these two economies have become more integrated over time even as these tensions played out. These tensions, however, have required an enormous expenditure of political capital and officials' time on both sides of the Pacific and have led to foregone opportunities for institution building and policy coordination. They have deepened since Japan “caught up” with the United States around 1980, and Japanese and US firms began increasingly to compete for profits and market share in the same sectors. Moreover, as both the US and Japanese economies continue to mature – both in terms of the age of their populations and their industrial mix – they will likely face even greater tensions between them over allocating the management and costs of industrial adjustment.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: United States, Japan, Israel, East Asia
  • Author: Adam S. Posen
  • Publication Date: 05-2001
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The Toyota Commemorative Museum of Industry and Technology gives its visitors much to ponder. Established at the site in Nagoya where in 1911 Sakichi Toyoda founded his automatic loom factory (the basis of the family fortune, which later funded his son Kiichiro's development of automobile production), the museum was opened on June 11, 1994, the 100th anniversary of Toyoda's birth. It is a popular stop on field trips for Japanese schoolchildren, who are required to study in the 3rd grade the automobile industry. The messages, which Toyota wishes to instill in its young visitors, are the importance of “making things” and of “creativity and research.” And confronting all museum visitors upon entry, having central place in the vast and largely empty first room of the exhibits, is Sakichi Toyoda's one-of-a-kind vertical circular loom.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: Japan, Israel, East Asia
  • Author: Edward M. Graham, Erika Wada
  • Publication Date: 04-2001
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: By almost all accounts, foreign direct investment (FDI) in China has been one of the major success stories of the past 10 years. Starting from a base of less than $19 billion in 1990, the stock of FDI in China rose to over $300 billion at the end of 1999. Ranked by the stock of inward FDI, China thus has become the leader among all developing nations and second among the APEC nations (only the United States holds a larger stock of inward FDI). China's FDI consists largely of greenfield investment, while inward FDI in the United States by contrast has been generated more by takeover of existing enterprises than by new establishment, a point developed later in this paper. The majority of FDI in China has originated from elsewhere in developing Asia (i.e., not including Japan). Hong Kong, now a largely self-governing “special autonomous region” of China itself, has been the largest source of record. The dominance of Hong Kong, however, is somewhat illusory in that much FDI nominally from Hong Kong in reality is from elsewhere. Some of what is listed as Hong Kong-source FDI in China is, in fact, investment by domestic Chinese that is “round-tripped” through Hong Kong. Other FDI in China listed as Hong Kong in origin is in reality from various western nations and Taiwan that is placed into China via Hong Kong intermediaries. Alas, no published records exist to indicate exactly how much FDI in China that is nominally from Hong Kong is in fact attributable to other nations.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: United States, Japan, China, Israel, East Asia, Asia, Hong Kong
  • Author: C. Fred Bergsten
  • Publication Date: 03-2000
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The initial postwar challenge from East Asia was economic. Japan crashed back into global markets in the 1960s, became the largest surplus and creditor country in the 1980s, and was viewed by many as the world's dominant economy by 1990. The newly industrialized countries (Korea, Taiwan, Hong Kong, Singapore) followed suit on a smaller but still substantial scale shortly thereafter. China only re-entered world commerce in the 1980s but has now become the second largest economy (in purchasing power terms), the second largest recipient of foreign direct investment inflows, and the second largest holder of monetary reserves. Indonesia and most of Southeast Asia grew at 7 percent for two or more decades. The oil crises of the 1970s and the financial crises of the late 1990s injected temporary setbacks but East Asia has clearly become a third major pole of the world economy, along with North America and Western Europe.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: Japan, China, Europe, Israel, Taiwan, East Asia, Asia, North America, Korea, Singapore, Hong Kong
  • Author: Marcus Noland, Sherman Robinson, Tao Wang
  • Publication Date: 07-1999
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: For North Korea, product market integration would generate large welfare gains, sufficient to end the famine. Additional gains could be had through military demobilization. For the South, the impact of product market integration would be trivial, but the impact of factor market integration would be considerable, affecting the composition of output, distribution of income, and rate of growth.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: Israel, East Asia, Korea