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  • Author: Peter Petri, Meenal Banga
  • Publication Date: 01-2020
  • Content Type: Working Paper
  • Institution: Economic Research Institute for ASEAN and East Asia (ERIA)
  • Abstract: The unprecedented rise in global interdependence since World War II, especially since the 1970s, has been very productive. World gross domestic product (GDP) growth increased from around 2% per year in the 1970s to 4% per year before the global financial crisis. Globalisation helped to lift a billion people from extreme poverty and improved the lives of billions more. The United States also gained an estimated 11%–19% of its annual GDP. Yet many Americans are concerned about the fairness of these gains. We review evidence of increasing wage inequality and stubborn unemployment effects, even though, on balance, technological change has had a much greater impact on these outcomes than globalisation. Barriers against globalisation do not offer solutions to inequality – they reduce the size of the economic pie without necessarily improving its distribution. Policies should focus on redistributing gains from growth, increasing the productivity of all workers, and helping affected communities adapt socially and economically to rapid change.
  • Topic: Globalization, Financial Crisis, Inequality, Economic Growth
  • Political Geography: United States, North America
  • Author: Slobodan Pajovic
  • Publication Date: 07-2019
  • Content Type: Working Paper
  • Institution: Institute for Development and International Relations (IRMO)
  • Abstract: Since the beginning of 2019, Venezuela has been in the focus of international politics because of its political and institutional crisis, together with its economic and social collapse generated in 2013, transformed into a regional and international crisis. The exit of some estimated three to four million emigrants mostly to neighboring countries of human rights and democratic values, the authoritarian regime of socialist orientation, the current American strategy of strengthening its political and strategic influence in Latin America, the presence of significant non- regional emerging global factors, as well as the cyclical changes of political parties in power in this part of the world. Accordingly, this crisis tests the hemispheric and global leadership of has additionally deepened the contexts of theUS, the influences of emerging global powers the regional crisis including also the security aspect. In short, the crisis can be described as oscillating between the issues of defense like China, Russia, India or Turkey, recently, and the potential of Latin American regionalism and political consensus.
  • Topic: Imperialism, Migration, Regional Cooperation, Financial Crisis
  • Political Geography: United States, Latin America, Venezuela, North America
  • Author: Andreas Antoniades, Stephany Griffith-Jones
  • Publication Date: 01-2018
  • Content Type: Working Paper
  • Institution: Centre for Global Political Economy, University of Sussex
  • Abstract: This paper analyses the nature and characteristics of global debt dynamics in the post global financial crisis (GFC) period. First, we attempt to map the ways in which debt has been moving from sector to sector, and from one group of countries to another within the global economy. By capturing this inter-sectorial, inter-national, inter-regional movements of global debt we aspire to contribute to a more comprehensive understanding of global debt and its mode of operation. Second, we attempt to analyse what is wrong with global debt dynamics, i.e. we examine the broken link between what global debt was supposed to do and what it does. Here, we point to three interrelated dynamics: the accumulation of unproductive debt, growing inequalities of income and wealth, and the increase in privately-created, interest-bearing money.
  • Topic: Debt, Economics, Global Recession, Financial Crisis, Global Political Economy
  • Political Geography: United States, Global Focus, Global Markets
  • Author: Zheng Liansheng
  • Publication Date: 03-2015
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: The shadow banking system was defined in 2007 by Paul McCulley, the managing director of Pacific Investment Management Company, but it began to receive significant attention in the immediate aftermath of the GFC. Since the beginning of the financial crisis in 2008, the regulatory agencies of different countries, international organizations and think tanks have all carried out in-depth research into shadow banking and have released a series of results. Regulatory reforms have also addressed shadow banking, the most important of which is the US Dodd-Frank Act of 2010, which aims to restrain the expansion and risk taking of shadow banking in the United States. The United Kingdom and the European Union have also adopted reforms and built up a supervisory system to track the risks of the shadow banking system.
  • Topic: Financial Crisis
  • Political Geography: United States, China, United Kingdom, Europe
  • Author: Jose J. Villamil
  • Publication Date: 01-2014
  • Content Type: Working Paper
  • Institution: Center for Strategic and International Studies
  • Abstract: Puerto Rico's economic situation circa 1950 was vastly different than today's. In the 1940s through the first half of the 60s, the island experienced a sustained boom, with annual growth rates on the order of 7 percent; the island was hailed as a model for developing countries. It instituted major reforms in government, economic and social programs, and the health sector. Puerto Rico, in coordination with the U.S. federal government, hosted thousands of observers from around the world who came to Puerto Rico to learn about its successful development model.
  • Topic: Crime, Economics, Narcotics Trafficking, Financial Crisis
  • Political Geography: United States
  • Author: Edwin M. Truman
  • Publication Date: 08-2014
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper traces the evolution of the Federal Reserve and its engagement with the global economy over the last three decades of the 20th century: 1970 to 2000. The paper examines the Federal Reserve's role in international economic and financial policy and analysis covering four areas: the emergence and taming of the great inflation, developments in US external accounts, foreign exchange analysis and activities, and external financial crises. It concludes that during this period the US central bank emerged to become the closest the world has to a global central bank.
  • Topic: Economics, Foreign Exchange, Financial Crisis
  • Political Geography: United States
  • Author: Huiyun Feng, Kai He
  • Publication Date: 09-2014
  • Content Type: Working Paper
  • Institution: Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
  • Abstract: Since the 2008 global financial crisis, China‟s diplomacy has moved towards a more confident or even assertive direction in international politics. Economically, the Chinese Premier refused to re-value the Chinese currency as the United States requested and instead started to lecture about U.S. economic mismanagement during the 2008 financial meltdown (Pomfret, 2010). Diplomatically, China responded furiously to Obama‟s decision of arms sales to Taiwan and meeting the Dalai Lama in early 2010, threatening to place sanctions on American companies. Politically, China reluctantly cooperated with Western countries, especially the United States, to punish either North Korean or Iranian provocations to the international order. Many other examples, from the Copenhagen Conference to the diplomatic standoffs between China and its neighbours, have also been listed as indications of China‟s assertive behaviour since 2008 (Swaine, 2010, 2011; Swaine and Fravel 2011; Perlez 2012; Ross 2012; He and Feng 2012). In particular, the 2012 Scarborough Shoal crisis with the Philippines, the still on-going flare-ups with Japan on the Senkaku/Diaoyu disputes, and the recently intensified tension with Vietnam in the South China Sea seemingly have further intensified regional concerns over China‟s rise. It is worth noting that some scholars have started to question the validity of the discourse regarding China‟s assertiveness in diplomacy. For example, through critically examining the “assertiveness” meme in the U.S. pundit and academic circles, Johnston questions: “How new and assertive is China‟s new assertiveness?” (Johnston, 2013). Although the extent and the nature of the assertiveness are still debatable, it is clear that China‟s foreign policy has shifted to a new direction, albeit temporarily. The goal of this paper is not to debate the temporal origins or intensity of China‟s assertiveness. Instead, it focuses on examining the perceptual roots of China‟s policy changes. As David Shambaugh (1991) points out, behaviour is principally a function of perception. In order to make sense of Chinese behaviour, we need to dig into the mindset of Chinese leaders. However, it is difficult to gauge what political leaders really perceive due to the political hierarchy and the complex nature of the decision-making process in any state system, especially China. In this research we examine Chinese leaders‟ perceptions and attitudes regarding Chinese foreign policy through the eyes of China‟s International Relations (IR) scholars. We use Chinese IR scholars as a “proxy measure” to make sense of Chinese leaders‟ perceptions because Chinese IR scholars serve as the mediator between the Chinese leadership and the general public (Shambaugh, 1991; Saunders, 2000). Based on an original opinion survey of Chinese IR scholars at the annual conference of the Chinese Community of Political Science and International Studies (CCPSIS) in Beijing in July 2013, we empirically test the perceptual roots of Chinese scholars‟ preference for an assertive diplomacy. In particular, we examine two competing arguments about China‟s assertiveness. Some scholars suggest a “power perception” argument in which China‟s assertiveness is rooted in Chinese leaders‟ changing perceptions regarding its power status versus the United States. In other words, as the 1 United States and other Western countries were troubled by their economic downturn, Chinese leaders became overly confident with China‟s rise and thereby started to say “no” to the United States as well as show its “teeth” to its neighbours (Nye, 2010; Green, 2010). Others advocate a “policy reaction” argument, which attributes China‟s assertiveness to a nationalist reaction to unfriendly international forces, especially from the West, which threatened to block China‟s rise. Continuous economic growth also instigated the rise of nationalism in Chinese society, which in turn pushed the Chinese government to react to Western criticisms and “plots” with more fury and toughness (Carr, 2010; Small, 2010; Swaine, 2011; Ross, 2012). In other words, China‟s assertiveness in diplomacy grew from an intentional reaction to the strategic pressure from the United States and the outside world. There are three parts in the paper. First, we briefly introduce our original survey conducted in the summer of 2013. Second, we develop two hypotheses based on the current debate about China‟s assertive diplomacy and test them by using the structural equation modeling (SEM) technique. We suggest that both the “power perception” and “policy reaction” arguments make sense in explaining China‟s assertiveness in diplomacy. However, our findings suggest that a more pessimistic perception regarding Chinese power is more likely to be associated with a preference for an assertive foreign policy. In other words, it is not a confident or an overly confident China but a lack of confidence instead, which is more likely to trigger an assertive foreign policy in China. In the conclusion section we discuss the implications of our findings for China‟s future international relations
  • Topic: Diplomacy, Imperialism, International Cooperation, Financial Crisis
  • Political Geography: United States, China, Iran, Middle East, Asia, North Korea
  • Author: Malcolm D. Knight
  • Publication Date: 09-2014
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: The global financial crisis that began in 2007 and deepened in 2008 exposed major weaknesses in financial and macroeconomic policy coordination, and profound flaws in financial risk management and regulation in a number of advanced countries. The severity of the crisis led global leaders to recognize that they must find a way to reform the global regulatory architecture to ensure that the financial system can absorb shocks while continuing to function efficiently.
  • Topic: International Trade and Finance, Markets, International Monetary Fund, Financial Crisis, Reform
  • Political Geography: United States, United Kingdom, Europe
  • Author: Brink Lindsey
  • Publication Date: 10-2013
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: For over a century, the trend line for the long-term growth of the U.S. economy has held remarkably steady. Notwithstanding huge changes over time in economic, social, and political conditions, growth in real gross domestic product (GDP) per capita has fluctuated fairly closely around an average annual rate of approximately 2 percent. Looking ahead, however, there are strong reasons for doubting that this historic norm can be maintained.
  • Topic: Economics, Globalization, International Trade and Finance, Markets, Financial Crisis, Governance
  • Political Geography: United States
  • Author: Hugh Jorgensen, Mike Callaghan, Stephen Pickford, Richard Gray, Steven Bardy, Graham Hodges, Ross Buckley
  • Publication Date: 07-2013
  • Content Type: Working Paper
  • Institution: Lowy Institute for International Policy
  • Abstract: This issue of the Monitor canvases the role of the G20 in strengthening financial regulation. It contains articles by Hugh Jorgensen (Lowy Institute), Stephen Pickford (Chatham House), Richard Gray (Westpac), myself, Steven Bardy (Australian Securities and Investment Commission), Ross Buckley (University of New South Wales) and Graham Hodges (ANZ). It also includes a summary of the discussion at a regional 'Think 20' seminar recently held at the Lowy Institute.
  • Topic: Economics, International Organization, International Trade and Finance, Financial Crisis, Reform
  • Political Geography: United States, Europe
  • Author: Pierre Siklos, Martin T. Bohl, Arne C. Klein
  • Publication Date: 12-2013
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: Existing models of market herding suffer from several drawbacks. Measures that assume herd behaviour is constant over time or independent of the economy are not only economically unreasonable, but describe the data poorly. First, if returns are stationary, then a two-regime model is required to describe the data. Second, existing models of time-varying herding cannot be estimated from daily or weekly data, and are unable to accommodate factors that explain changes in this behaviour. To overcome these deficiencies, this paper proposes a Markov switching herding model. By means of time-varying transition probabilities, the model is able to link variations in herding behaviour to proxies for sentiment or the macroeconomic environment. The evidence for the US stock market reveals that during periods of high volatility, investors disproportionately rely on fundamentals rather than on market consensus.
  • Topic: Economics, Globalization, International Trade and Finance, Markets, Financial Crisis
  • Political Geography: United States, Canada
  • Author: Michael Tanner
  • Publication Date: 02-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Opponents of allowing younger workers to privately invest a portion of their Social Security taxes through personal accounts have long pointed to the supposed riskiness of private investment. The volatility of private capital markets over the past several years, and especially recent declines in the stock market, have seemed to bolster their argument.
  • Topic: Economics, International Trade and Finance, Markets, Financial Crisis
  • Political Geography: United States
  • Author: Patric H. Hendershott, Kevin Villani
  • Publication Date: 03-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The current narrative regarding the 2008 systemic financial system collapse is that numerous seemingly unrelated events occurred in unregulated or underregulated markets, requiring widespread bailouts of actors across the financial spectrum, from mortgage borrowers to investors in money market funds. The Financial Crisis Inquiry Commission, created by the U.S. Congress to investigate the causes of the crisis, promotes this politically convenient narrative, and the 2010 Dodd-Frank Act operationalizes it by completing the progressive extension of federal protection and regulation of banking and finance that began in the 1930s so that it now covers virtually all financial activities, including hedge funds and proprietary trading. The Dodd-Frank Act further charges the newly created Financial Stability Oversight Council, made up of politicians, bureaucrats, and university professors, with preventing a subsequent systemic crisis.
  • Topic: Economics, Government, Markets, Global Recession, Financial Crisis
  • Political Geography: United States
  • Author: David Kirby, Emily McClintock Ekins
  • Publication Date: 08-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Many people on the left still dismiss the tea party as the same old religious right, but the evidence says they are wrong. The tea party has strong libertarian roots and is a functionally libertarian influence on the Republican Party.
  • Topic: Democratization, Economics, Politics, Insurgency, Financial Crisis
  • Political Geography: United States
  • Author: Mark A. Calabria, Emily McClintock Ekins
  • Publication Date: 08-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: During the financial crisis of 2008, the financial markets would have been better served if the credit rating agency industry had been more competitive. We present evidence that suggests the Securities and Exchange Commission's designation of Nationally Recognized Statistical Rating Organizations (NRSROs) inadvertently created a de facto oligopoly, which primarily propped up three firms: Moody's, S, and Fitch. We also explain the rationale behind the NRSRO designation given to credit rating agencies (CRAs) and demonstrate that it was not intended to be an oligopolistic mechanism or to reduce investor due diligence, but rather was intended to protect consumers. Although CRAs were indirectly constrained by their reputation among investors, the lack of competition allowed for greater market complacency. Government regulatory use of credit ratings inflated the market demand for NRSRO ratings, despite the decreasing informational value of credit ratings. It is unlikely that this sort of regulatory framework could result in anything except misaligned incentives among economic actors and distorted market information that provides inaccurate signals to investors and other financial actors. Given the importance of our capital infrastructure and the power of credit rating agencies in our financial markets, and despite the good intentions of the uses of the NRSRO designation, it is not worth the cost and should be abolished. Regulators should work to eliminate regulatory reliance on credit ratings for financial safety and soundness. These regulatory reforms will, in turn, reduce CRA oligopolistic power and the artificial demand for their ratings.
  • Topic: Economics, Markets, Financial Crisis, Governance
  • Political Geography: United States
  • Author: Tad DeHaven
  • Publication Date: 07-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Rising federal spending and huge deficits are pushing the nation toward a financial and economic crisis. Policymakers should find and eliminate wasteful, damaging, and unneeded programs in the federal budget. One good way to save money would be to cut subsidies to businesses. Corporate welfare in the federal budget costs taxpayers almost $100 billion a year.
  • Topic: Economics, Markets, Monetary Policy, Financial Crisis
  • Political Geography: United States
  • Author: Laura E. Seay
  • Publication Date: 01-2012
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Although its provisions have yet to be implemented, section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is already having a profound effect on the Congolese mining sector. Nicknamed “Obama's Law” by the Congolese, section 1502 has created a de facto ban on Congolese mineral exports, put anywhere from tens of thousands up to 2 million Congolese miners out of work in the eastern Congo, and, despite ending most of the trade in Congolese conflict minerals, done little to improve the security situation or the daily lives of most Congolese. In this report, Laura Seay traces the development of section 1502 with respect to the pursuit of a conflict minerals-based strategy by U.S. advocates, examines the effects of the legislation, and recommends new courses of action to move forward in a way that both promotes accountability and transparency and allows Congolese artisanal miners to earn a living.
  • Topic: Security, Development, Economics, International Trade and Finance, Markets, Poverty, Natural Resources, Financial Crisis
  • Political Geography: Africa, United States, Democratic Republic of the Congo
  • Author: C. Randall Henning, Martin Kessler
  • Publication Date: 01-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: European debates over reform of the fiscal governance of the euro area frequently reference fiscal federalism in the United States. The “fiscal compact” agreed by the European Council during 2011 provided for the introduction of, among other things, constitutional rules or framework laws known as “debt brakes” in the member states of the euro area. In light of the compact and proposals for deeper fiscal union, we review US fiscal federalism from Alexander Hamilton to the present. We note that within the US system the states are “sovereign”: The federal government does not mandate balanced budgets nor, since the 1840s, does it bail out states in fiscal trouble. States adopted balanced budget rules of varying strength during the nineteenth century and these rules limit debt accumulation. Before introducing debt brakes for euro area member states, however, Europeans should consider three important caveats. First, debt brakes are likely to be more durable and effective when “owned” locally rather than mandated centrally. Second, maintaining a capacity for countercyclical macroeconomic stabilization is essential. Balanced budget rules have been viable in the US states because the federal government has a broad set of fiscal powers, including countercyclical fiscal action. Finally, because debt brakes threaten to collide with bank rescues, the euro area should unify bank regulation and create a common fiscal pool for restructuring the banking system.
  • Topic: Debt, Financial Crisis, Governance
  • Political Geography: United States, Europe
  • Publication Date: 04-2012
  • Content Type: Working Paper
  • Institution: Economist Intelligence Unit
  • Abstract: Three years after the global economy reached its lowest point in three-quarters of a century, the recovery remains incomplete and the outlook uncertain. On March 9th 2009, the capitalisation of Morgan Stanley\'s global stockmarket index fell to US$26trn, nearly 60% below its 2007 peak. Today, the value of the world\'s stockmarkets has yet to return to the pre-crisis level—nor has the confidence of most consumers and businesses. The excesses of the last ten years—the personal debt accumulated early in the last decade and the public debt added during the recession—have saddled many countries with weak economic foundations and little or no resilience to shocks. This has left the US economy, in particular, struggling for a third straight year to lock in faster growth. It has left debt-ravaged Europe in recession and China manoeuvring unsteadily to deflate a bubble. On the brighter side, the global economy will grow again this year and the imbalances that built up over the past decade will continue to unwind. But global growth will be slower this year than last, and a host of risks—from elevated oil prices to war in the Middle East, to the collapse of Europe\'s single currency—will weigh on confidence and reduce spending and investment.
  • Topic: Economics, Globalization, Markets, Global Recession, Financial Crisis
  • Political Geography: United States, China, Europe, Middle East
  • Author: Arie Krampf
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: The Kolleg-Forschergruppe (KFG)
  • Abstract: During the 1990s, a consensus consolidated among policy makers and economists worldwide regarding the desirability of very low inflation targeting. So far, this process has been explained on the basis of a domestic- functional thesis, according to which commitment to very low inflation provides local economic gains with no costs. In this paper, I present an alternative explanation, according to which the global norm of very low inflation targeting was consolidated as a political solution to the problem of exchange rate misalignment and volatility. I argue that policy makers in Germany and the US believed that convergence of monetary policies and inflation rates, in addition to liberalization of financial markets, will stabilize exchange rates without the need for direct coordination. The paper employs the theory of liberal intergovernmentalism as a benchmark to explain the choice of the European and the G-5/7 countries to establish a low-inflation rule-based international monetary regime. The paper concludes that the regime of very low inflation targeting was consolidated as a politically viable solution to a political problem rather than as an economic best practice. Furthermore, it concludes that the norm of very low inflation targeting was a “corer solution” that neglected the problem of exchange rate stability.
  • Topic: Economics, Markets, Political Economy, Monetary Policy, Financial Crisis
  • Political Geography: United States, Europe
  • Author: Irwin M. Stelzer
  • Publication Date: 07-2012
  • Content Type: Working Paper
  • Institution: Hudson Institute
  • Abstract: Slow, slower, and may be even stop. That's a quick summary of how Federal Reserve Board chairman Ben Bernanke sees the US economy. The economy grew at an annual rate of 2.5% last year, 1.9% in the first quarter of this year, "and available indicators point to a still-smaller gain in the second quarter" he advised congress last week. Household spending is slowing down because "confidence remains relatively low" (at its lowest level since December); numerous factors (a supply overhang, unavailability of credit) "impede growth" in the housing sector; manufacturing production has slowed; business investment has "decelerated"; there is "further weakness ahead" for investment demand; and "reduction in the unemployment rate seems likely to be frustratingly slow."
  • Topic: Economics, International Trade and Finance, Financial Crisis
  • Political Geography: United States
  • Author: Tim Kane
  • Publication Date: 07-2012
  • Content Type: Working Paper
  • Institution: Hudson Institute
  • Abstract: Three of the last six U.S. presidents have inherited a recessionary economy: Ronald Reagan, George W. Bush, and Barack Obama. Let's define "inheriting a recession" as meaning that on the date a president is sworn into office, the economy is technically still in recession or enters one within a few months. Most economists would agree that presidents have little short-term control over the economy, but that their fiscal policies can be implemented quickly and affect macroeconomic performance after the first year. Reagan, inaugurated in January 1981, actually endured a double-dip recession-one that had been raging since early 1980 and a second that hit in July 1981-but the economy experienced a strong and sustained recovery that began in November 1982 during his second year in the White House. Bush was inaugurated in January 2001, and the economy entered recession just weeks later. Obama entered office in January 2009, like Reagan, after the United States had been in recession for a full year.
  • Topic: Economics, International Trade and Finance, Monetary Policy, Financial Crisis, Governance
  • Political Geography: United States
  • Author: Patric H. Hendershott, Kevin Villani
  • Publication Date: 06-2011
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The United States' market-government hybrid mortgage system is unique in the world. No other nation has such heavy government intervention in housing finance. This hybrid system nurtured the excessively risky loans, financed with too much leverage, that fueled the U.S. housing bubble of the last decade and resulted in the systemic collapse of the global financial system.
  • Topic: Debt, Economics, Financial Crisis
  • Political Geography: United States
  • Author: David Reiss
  • Publication Date: 04-2011
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The federal government recently placed Fannie Mae and Freddie Mac, the government-chartered, privately owned mortgage finance companies, in conservatorship. These two massive companies are profit driven, but as government-sponsored enterprises (GSEs) they also have a government-mandated mission to provide liquidity and stability to the U.S. mortgage market and to achieve certain affordable housing goals. How the two companies should exit their conservatorship has implications that reach throughout the global financial markets and are of key importance to the future of American housing finance policy.
  • Topic: Economics, Markets, Privatization, Financial Crisis, Governance
  • Political Geography: United States
  • Author: Michael Tanner
  • Publication Date: 03-2011
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The U.S. government is about to exceed its statutory debt limit of $14.3 trillion. But that actually underestimates the size of the fiscal time bomb that this country is facing. If one considers the unfunded liabilities of programs such as Medicare and Social Security, the true national debt could run as high as $119.5 trillion.
  • Topic: Debt, Economics, Human Welfare, Financial Crisis, Governance, Health Care Policy
  • Political Geography: United States
  • Author: Jared Lobdell
  • Publication Date: 11-2011
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: An October New York Times story remarked that “with just five weeks until its deadline, a secretive Congressional committee seeking ways to cut the federal deficit is far from a consensus, and party leaders may need to step in if they want to ensure agreement, say people involved in the panel's work.” We have this “supercommittee” of twelve members of Congress, ostensibly for the purpose of cutting a minimum $1.2 trillion from our deficit, chosen by four appointers, none agreeing with any other on exactly what ought to be done, representing mostly diametrically opposing wings of two parties with irreconcilable differences.
  • Topic: Debt, Economics, Global Recession, Monetary Policy, Financial Crisis
  • Political Geography: United States
  • Author: Michael Spence, Sandile Hlatshwayo
  • Publication Date: 03-2011
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: This paper examines the evolving structure of the American economy, specifically, the trends in employment, value added, and value added per employee from 1990 to 2008. These trends are closely connected with complementary trends in the size and structure of the global economy, particularly in the major emerging economies. Employing historical time series data from the Bureau of Labor Statistics and the Bureau of Economic Analysis, U.S. industries are separated into internationally tradable and nontradable components, allowing for employment and value-added trends at both the industry and the aggregate level to be examined. Value added grew across the economy, but almost all of the incremental employment increase of 27.3 million jobs was on the nontradable side. On the nontradable side, government and health care are the largest employers and provided the largest increments (an additional 10.4 million jobs) over the past two decades. There are obvious questions about whether those trends can continue; without fast job creation in the nontradable sector, the United States would already have faced a major employment challenge.
  • Topic: Economics, Markets, Labor Issues, Financial Crisis
  • Political Geography: United States, America
  • Author: Matthew J. Slaughter, Edward Alden, Andrew H. Card, Thomas A. Daschle
  • Publication Date: 09-2011
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: The growth of global trade and investment has brought significant benefits to the United States and to the rest of the world. Freer trade and investment, facilitated by rules the United States led in negotiating and implementing, have alleviated poverty, raised average standards of living, and discouraged conflict.
  • Topic: Economics, International Trade and Finance, Markets, Labor Issues, Financial Crisis
  • Political Geography: United States
  • Author: Morris Goldstein, Nicolas Véron
  • Publication Date: 01-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Although the United States and the European Union were both seriously impacted by the financial crisis of 2007, resulting policy debates and regulatory responses have differed considerably on the two sides of the Atlantic. In this paper the authors examine the debates on the problem posed by "too big to fail" financial institutions. They identify variations in historical experiences, financial system structures, and political institutions that help one understand the differences of approaches between the United States, EU member states, and the EU institutions in addressing this problem. The authors then turn to possible remedies and how they may be differentially implemented in America and Europe. They conclude on which policy developments are likely in the near future.
  • Topic: Economics, Financial Crisis
  • Political Geography: United States, America, Europe
  • Author: Leo Abruzzese
  • Publication Date: 04-2011
  • Content Type: Working Paper
  • Institution: Economist Intelligence Unit
  • Abstract: A serious deficit-reduction debate is underway. Despite wide policy differences, this is encouraging and long overdue. Agreement on some basic steps may happen soon. A serious, long-term deal won't happen until after the election. A credible plan will require revenue increases. These won't come quickly or easily, but they are unavoidable, The debt ceiling will be raised, amidst much drama. The US will not default on its debt. The US economy is still recovering...but higher energy and food prices are creating headwinds.
  • Topic: Debt, Economics, Global Recession, Financial Crisis
  • Political Geography: United States
  • Author: Robert M. Buckley, Alex F. Schwartz
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: The New School Graduate Program in International Affairs
  • Abstract: This paper provides a general overview of U.S. housing policy, with emphasis on state and local programs. Despite the focus on local programs we also discuss the broader national policy environment. This broader context is necessary because national policies play a crucial role in shaping the country's housing markets. We briefly trace out some of the key features of the housing market, highlighting tenure distributions, housing conditions and costs. Particular emphasis is given to the role of increasing housing costs and the housing opportunities of the poor. The paper also describes: (1) the nation's housing finance and tax systems, focusing on the different ways the government uses the tax code to subsidize homeowners and renters; and (2) state and local government programs, often implemented in the close collaboration of nonprofit organizations. A final section provides a brief overview of the strengths and weaknesses of U.S. housing policy and the evolving role of sub-national governments.
  • Topic: Economics, Markets, Global Recession, Financial Crisis
  • Political Geography: United States
  • Author: Dani Rodrik
  • Publication Date: 10-2011
  • Content Type: Working Paper
  • Institution: Weatherhead Center for International Affairs, Harvard University
  • Abstract: Novelists have a better track record than economists at foretelling the future. Consider then Gary Shteyngart's timely comic novel “Super Sad True Love Story” (Random House, 2010), which provides a rather graphic vision of what lies in store for the world economy. The novel takes place in the near future and is set against the backdrop of a United States that lies in economic and political ruin. The country's bankrupt economy is ruled with a firm hand by the IMF from its new Parthenon-shaped headquarters in Singapore. China and sovereign wealth funds have parceled America's most desirable real estate among themselves. Poor people are designated as LNWI (“low net worth individual s”) and are being pushed into ghettoes. Even skilled Americans are desperate to acquire residency status in foreign lands. (A degree in econometrics helps a lot, as it turns out). Ivy League colleges have adopted the names of their Asian partners and yuan-backed dollars are the only safe currency.
  • Topic: Debt, Economics, Emerging Markets, Sovereign Wealth Funds, Financial Crisis
  • Political Geography: United States, China, America, Singapore
  • Author: Anne Nelson
  • Publication Date: 12-2011
  • Content Type: Working Paper
  • Institution: National Endowment for Democracy
  • Abstract: The field of private sector funding of independent media abroad has continued to undergo a massive upheaval over the past two years. Two major factors have driven the change. The first is economic: The 2008 recession sharply reduced the portfolios of most traditional foundations and media philanthropies, many of them by 20-30 percent. They were still recovering when the aftershock of 2011 struck. These institutions, many of them based on the East Coast, had formerly led the way in funding international media development activities, with an emphasis on journalism training and support for freedom of expression. Now they are in a period of retrenchment, struggling to maintain existing commitments and with few resources to pursue new initiatives.
  • Topic: Development, Economics, Communications, Mass Media, Foreign Aid, Financial Crisis
  • Political Geography: United States
  • Publication Date: 07-2011
  • Content Type: Working Paper
  • Institution: Atlantic Council
  • Abstract: In 2008 and 2009 political and business leaders scrambled to stabilize the financial system and avert a slide into world-wide depression as a financial crisis of historic proportions spread across the globe. A series of bold emergency measures succeeded in defusing the crisis, and these same leaders began searching for ways to avoid a similar breakdown in the future. At the same time, the effort to restart economic growth and job creation began in earnest.
  • Topic: Economics, International Cooperation, International Trade and Finance, Financial Crisis
  • Political Geography: United States, Europe
  • Author: John Samples
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The U.S. Constitution vests all the “legislative powers” it grants in Congress. The Supreme Court allows Congress to delegate some authority to executive officials provided an “intelligible principle” guides such transfers. Congress quickly wrote and enacted the Emergency Economic Stabilization Act of 2008 in response to a financial crisis. The law authorized the secretary of the Treasury to spend up to $700 billion purchasing troubled mortgage assets or any financial instrument in order to attain 13 different goals. Most of these goals lacked any concrete meaning, and Congress did not establish any priorities among them. As a result, Congress lost control of the implementation of the law and unconstitutionally delegated its powers to the Treasury secretary. Congress also failed in the case of EESA to meet its constitutional obligations to deliberate, to check the other branches of government, or to be accountable to the American people. The implementation of EESA showed Congress to be largely irrelevant to policymaking by the Treasury secretary. These failures of Congress indicate that the current Supreme Court doctrine validating delegation of legislative powers should be revised to protect the rule of law and separation of powers.
  • Topic: Economics, Monetary Policy, Financial Crisis
  • Political Geography: United States, America
  • Author: Barack Obama
  • Publication Date: 01-2010
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: THE PRESIDENT: Madam Speaker, Vice President Biden, members of Congress, distinguished guests, and fellow Americans: Our Constitution declares that from time to time, the President shall give to Congress information about the state of our union. For 220 years, our leaders have fulfilled this duty. They've done so during periods of prosperity and tranquility. And they've done so in the midst of war and depression; at moments of great strife and great struggle.
  • Topic: Foreign Policy, Diplomacy, Government, War, Labor Issues, Financial Crisis
  • Political Geography: United States
  • Publication Date: 04-2010
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: Runs by prime-brokerage clients and derivatives counterparties were a central cause of the World Financial Crisis. Worried about potential losses, many hedge funds withdrew their assets from brokerage accounts at Bear Stearns and Lehman Brothers in the weeks before these banks failed. Although Morgan Stanley did not fail, it also suffered from the withdrawal of prime brokerage assets. These runs, together with runs by short-term creditors, precipitated Bear Stearns' and Lehman's demise. Even if these firms would have failed anyway, the runs made their failures much more sudden and chaotic, and made coherent policy responses much harder.
  • Topic: Economics, Markets, Financial Crisis
  • Political Geography: United States
  • Author: Adam S. Posen
  • Publication Date: 06-2010
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Japan's Great Recession was the result of a series of macroeconomic and financial policy mistakes. Thus, it was largely avoidable once the initial shock from the bubble bursting had passed. The aberration in Japan's recession was not the behaviour of growth, which is best seen as a series of recoveries aborted by policy errors. Rather, the surprise was the persistent steadiness of limited deflation, even after recovery took place. This is a more fundamental challenge to our basic macroeconomic understanding than is commonly recognized. The UK and US economies are at low risk of having recurrent recessions through macroeconomic policy mistakes—but deflation itself cannot be ruled out. The United Kingdom worryingly combines a couple of financial parallels to Japan with far less room for fiscal action to compensate for them than Japan had. Also, Japan did not face poor prospects for external demand and the need to reallocate productive resources across export sectors during its Great Recession. Many economies do now face this challenge simultaneously, which may limit the pace of, and their share in, the global recovery.
  • Topic: Economics, Markets, Monetary Policy, Financial Crisis
  • Political Geography: United States, Japan, United Kingdom
  • Author: Olivier Jeanne, Anton Korinek
  • Publication Date: 09-2010
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: We study a dynamic model in which the interaction between debt accumulation and asset prices magnifies credit booms and busts. We find that borrowers do not internalize these feedback effects and therefore suffer from excessively large booms and busts in both credit flows and asset prices. We show that a Pigouvian tax on borrowing may induce borrowers to internalize these externalities and increase welfare. We calibrate the model with reference to (1) the US small and medium-sized enterprise sector and (2) the household sector and find the optimal tax to be countercy - clical in both cases, dropping to zero in busts and rising to approximately half a percentage point of the amount of debt outstanding during booms.
  • Topic: Debt, Economics, Global Recession, Financial Crisis
  • Political Geography: United States
  • Author: Steven B. Kamin, Laurie Pounder DeMarco
  • Publication Date: 01-2010
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: The global financial crisis clearly started with problems in the U.S. subprime sector and spread across the world from there. But was the direct exposure of foreigners to the U.S. financial system a key driver of the crisis, or did other factors account for its rapid contagion across the world? To answer this question, we assessed whether countries that held large amounts of U.S. mortgage-backed securities (MBS) and were highly dependent on dollar funding experienced a greater degree of financial distress during the crisis. We found little evidence of such “direct contagion” from the United States to abroad. Although CDS spreads generally rose higher and bank stocks generally fell lower in countries with more exposure to U.S. MBS and greater dollar funding needs, these correlations were not robust, and they fail to explain the lion’s share of the deterioration in asset prices that took place during the crisis. Accordingly, channels of “indirect contagion” may have played a more important role in the global spread of the crisis: a generalized run on global financial institutions, given the opacity of their balance sheets; excessive dependence on short-term funding; vicious cycles of mark-to-market losses driving fire sales of MBS; the realization that financial firms around the world were pursuing similar (flawed) business models; and global swings in risk aversion. The U.S. subprime crisis, rather than being a fundamental driver of the global crisis, may have been merely a trigger for a global bank run and for disillusionment with a risky business model that already had spread around the world.
  • Topic: Financial Crisis, Global Financial Crisis, Housing
  • Political Geography: United States, North America
  • Author: Tobias Schulze-Cleven, Henry Farrell
  • Publication Date: 07-2010
  • Content Type: Working Paper
  • Institution: Berkeley Roundtable on the International Economy
  • Abstract: What keeps US labor market institutions from more effectively helping the nation cope with the current economic crisis and secure its future prosperity? What is the scope for politically feasible innovation in US labor market policy? These are crucial policy questions. As a result of the global financial crisis, the US unemployment rate climbed into double digits and has remained higher than in many European countries. The US is experiencing the highest level of unemployment for a generation and the highest rate of long-term unemployment for more than half a century. American families are suffering from financial hardship without any fault of their own, and many of the currently unemployed will find it hard to re-enter the workforce during the recovery. Nor is the government easily able to use current programs to help those seeking work. Even though policymakers have launched new initiatives during the past year, the US remains almost uniquely weak among advanced industrialized democracies in its lack of policy programs to support the populace in successfully engaging with the labor market.
  • Topic: Economics, Markets, Labor Issues, Financial Crisis
  • Political Geography: United States, Europe
  • Author: Daniel S. Hamilton, Joseph P. Quinlan
  • Publication Date: 01-2010
  • Content Type: Working Paper
  • Institution: Center for Transatlantic Relations
  • Abstract: Despite the recession, the United States and Europe remain each other's most important foreign commercial markets. No other commercial artery in the world is as integrated and fused as the transatlantic economy. We estimate that the transatlantic economy continues to generate close to $4.28 trillion in total commercial sales a year and employs up to 14 million workers in mutually “onshored” jobs on both sides of the Atlantic.
  • Topic: Economics, Globalization, International Trade and Finance, Global Recession, Financial Crisis
  • Political Geography: United States, Europe
  • Author: Drew Sullivan
  • Publication Date: 01-2010
  • Content Type: Working Paper
  • Institution: National Endowment for Democracy
  • Abstract: The face of media around the world is changing. Traditional media in the United States are shrinking as the industry confronts both an extended recession and the long-term erosion of its economic model. In the developing world, the newly independent media of a decade ago maintain their vitality while attempting to find financial sustainability. The Internet has globalized the evolving media marketplace, and at the interstices of the media and internet businesses, new and exciting media organizations are springing up worldwide to fill needs in such areas as investigative reporting.
  • Topic: Globalization, Markets, Third World, Mass Media, Financial Crisis, Tourism
  • Political Geography: United States
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Oxford Economics
  • Abstract: Following the worst recession since the 1930s, the US, UK and Eurozone economies have all now returned to positive growth. With the boost from policy stimulus and the inventory cycle peaking, however, this raises questions about the sustainability of the current rebound. The analysis presented here suggests that the recoveries in both the US and Europe will be relatively muted compared to recent historical experience. The US is likely to be the growth leader, reflecting the more dynamic nature of its economy and financial sector. A key uncertainty relates to how labour markets will perform during the recovery phase. To date, the rise in US unemployment been particularly severe when compared to the experience of Europe. In light of the sharp falls in European productivity, we expect employment gains in Europe to be more muted in the recovery phase than in the US. The performance of residential real estate markets also remains important. Home prices in the US are now close to fair value by most metrics, suggesting that the correction in prices is likely to be bottoming out. In Europe, only Spain and Ireland appear to be in the midst of substantial housing market corrections. Commercial real estate markets are also facing ongoing corrections in many countries. While conditions in the US and Eurozone may deteriorate further, commercial property values appear to be stabilising in the UK following earlier sharp declines. The ability of the banking sector to finance the economic recoveries in the US and Europe remains a key risk to the growth outlook. As the process of absorbing credit losses and rebuilding capital is likely to be protracted, the normalisation of lending standards is likely to take longer than following recent recessions. This is a particular concern for the Eurozone, where bank funding is more important for companies. Whether domestic demand in the US and Europe recovers will also depend on whether private sector deleveraging has further to run. The destruction of household net wealth in the US suggests that the personal savings rate has further to rise, whereas there no longer appears to be a pressing need for households in the UK and Eurozone to consolidate their balance sheets. In contrast, non-financial corporations in the US are in a stronger financial position than their European peers, having not increased debt levels as rapidly during the credit boom. Risks around public finances have received the most attention in recent weeks. In particular, the adjustments underway in Greece pose a risk of potential contagion from sovereign credit risk that could threaten growth on both sides of the Atlantic.
  • Topic: Economics, Markets, Financial Crisis
  • Political Geography: United States, United Kingdom, Europe
  • Author: Randal O'Toole
  • Publication Date: 10-2009
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Everyone agrees that the recent financial crisis started with the deflation of the housing bubble. But what caused the bubble? Answering this question is important both for identifying the best short-term policies and for fixing the credit crisis, as well as for developing long-term policies aimed at preventing another crisis in the future.
  • Topic: Economics, Markets, Financial Crisis
  • Political Geography: United States, California, Georgia
  • Author: Jagadeesh Gokhale, Peter Van Doren
  • Publication Date: 10-2009
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated banking but had imposed tighter financial standards, the housing boom and bust—and the subsequent financial crisis and recession—would have been averted. In this paper, we investigate those claims and dispute them. We are skeptical that economists can detect bubbles in real time through technical means with any degree of unanimity. Even if they could, we doubt the Fed would have altered its policy in the early 21st century, and we suspect that political leaders would have exerted considerable pressure to maintain that policy. Concerning regulation, we find that the banking reform of the late 1990s had little effect on the housing boom and bust, and that the many reform ideas currently proposed would have done little or nothing to avert the crisis.
  • Topic: Economics, Government, Markets, Financial Crisis
  • Political Geography: United States
  • Author: Tad DeHaven
  • Publication Date: 11-2009
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The U.S. Department of Housing and Urban Development has long been plagued by scandals, mismanagement, and policy failures. Most recently, HUD's subsidies and failed oversight of Fannie Mae and Freddie Mac helped to inflate the housing bubble, which ultimately burst and cascaded into a major financial crisis.
  • Topic: Development, Economics, Markets, Financial Crisis
  • Political Geography: United States
  • Publication Date: 07-2009
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: As its name suggests, the payoff on a credit default swap (CDS) depends on the default of a specific borrower, such as a corporation, or of a specific security, such as a bond. The value of these instruments is especially sensitive to the state of the overall economy. If the economy moves toward a recession, for example, the likelihood of defaults increases and the expected payoff on credit default swaps can rise quickly. The Depository Trust and Clearing Corporation (DTC C) estimates that in April 2009, the notional amount of credit default swaps outstanding was about $28 trillion. As a result of the overall size of the CDS market and the sensitivity of CDS payoffs to economic conditions, large exposures to credit default swaps can create substantial systemic risk.
  • Topic: Economics, Markets, Financial Crisis
  • Political Geography: United States
  • Author: Steven Dunaway
  • Publication Date: 09-2009
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: The seeds of the current economic and financial crisis were sown by economic policies of the major countries that fostered the growth of global imbalances during the 2000s. Consequently, an essential element in any assessment of prospects for world economic recovery and the pace of future growth has to factor in exactly how these imbalances are likely to unwind—or fail to be resolved—in the period immediately ahead.
  • Topic: Economics, Markets, Financial Crisis
  • Political Geography: United States
  • Author: Theodore H. Moran
  • Publication Date: 07-2009
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The 2008 election rekindled debate about whether US multinationals shift technology across borders and relocate production in ways that might harm workers and communities at home. President Obama now pledges to end tax breaks for corporations that ship jobs overseas. The preoccupation about the behavior of American multinationals takes three forms: (1) that US-based multinational corporations may follow a strategy that leads them to abandon the home economy, leaving the workers and communities to cope on their own with few appealing alternatives after the multinationals have left; (2) worse, that US-based multinational corporations may not just abandon home sites but drain off capital, substitute production abroad for exports, and “hollow out” the domestic economy in a zero-sum process that damages those left behind; and (3) worst, that US-based multinational corporations may deploy a rent-gathering apparatus that switches from sharing supranormal profits and externalities with US workers and communities to extracting rents from the United States. Each of these concerns contains a hypothetical outcome that can be compared with contemporary evidence from the United States and other home countries.
  • Topic: Economics, International Political Economy, International Trade and Finance, Markets, Financial Crisis
  • Political Geography: United States, America