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131. Restructuring sovereign debt: The need for a coordinated framework

Author:
Sean Hagan
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
When a sovereign's debt is unsustainable, all stakeholders—the sovereign, its official creditors, and most private creditors—share an interest in a restructuring that quickly restores sustainability. Notwithstanding this general alignment of interests, the current restructuring process is subject to delay and unpredictability. Concerns regarding intercreditor equity have been exacerbated by the "sequential" nature of the restructuring process, where official creditors are generally expected to commit to debt relief terms before private creditors. To speed up the restructuring process, this Policy Brief proposes that the restructuring of official claims and private claims proceed in a parallel yet coordinated manner. To address intercreditor equity concerns, a new contingency mechanism would be available to allow simultaneous decision making: Before one creditor group decides to accept an offer, these creditors would know what everyone else is being offered. Such a mechanism would not be mandatory—there may be circumstances where one group is prepared to move before the others. Such a "Coordinated Framework" will require greater information sharing, consistent with the types of transparency reforms that have been advanced by the International Monetary Fund.
Topic:
Emerging Markets, IMF, and Sovereign Debt
Political Geography:
Global Focus

132. Climate action: Implications for factor market reallocation

Author:
Robert Z. Lawrence
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper considers climate policies, not from the perspective of their environmental impacts, but rather their likely effects on labor and investments. While the aggregate impact of the green transition on jobs and investment may be modest, it will require significant reallocation of labor and capital within and across industries. Although the green transition brings new opportunities for employment and investment in renewable technologies, many workers and communities tied to the fossil fuel industry may not benefit from these advances due to skills mismatch and geographic constraints. Both the United States and the European Union acknowledge the importance of achieving “climate justice” and “leaving no one behind” in their decarbonization efforts. However, current policies and resources in the United States may fall short, with inadequate assistance reaching too many communities and a narrow focus on green jobs. In Europe, while the Just Transition Fund complements existing programs, effective implementation of place-based policies remains challenging due to the need for specific, localized responses.
Topic:
Climate Change, Environment, Labor Issues, European Union, and Energy
Political Geography:
North America and United States of America

133. Trade policy, industrial policy, and the economic security of the European Union

Author:
Chad P. Bown
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Out of fear about its economic security, the European Union is transitioning to a new form of international economic and policy engagement. This paper explores some of the major trade issues surrounding the bloc’s economic security, the role of trade and industrial policies in achieving its objectives, and some of the economic costs of doing so. It begins by explaining why economic security is suddenly playing such a prominent role and providing early evidence to motivate these government interventions. It then turns to a case study—new policies associated with China’s exports of electric vehicles and graphite—that highlights the difficult choices and practical challenges the European Union faces in tailoring policy to address concerns over economic security. The paper then introduces the domestic policy instruments that the European Union, its member states, and other governments are pursuing to address economic security, including stockpiling and inventory management, investment or production subsidies, tariffs, export controls, and regulations on foreign investment, as well as the scope for selective international cooperation over such policy instruments. The paper concludes with some caveats about abandoning interdependence and lessons from history.
Topic:
Security, Industrial Policy, European Union, Trade Policy, and Economic Security
Political Geography:
Europe

134. Lessons from China's fiscal policy during the COVID-19 pandemic

Author:
Tianlei Huang
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Expansionary fiscal policy helped China's economy grow in 2020, a year in which most economies contracted because of the COVID-19 pandemic. Amid a broader pivot to policy and regulatory tightening, fiscal support was withdrawn in 2021. In 2022, government budget turned expansionary to ensure economic stability ahead of the Communist Party Congress, but the execution fell short and fiscal policy ended up being weaker than planned. A recurrent problem during the pandemic, however, was that local governments did not fully spend their budgets. Aside from the sharp drop in local governments' land sale revenue in 2022, which dragged down their spending, it was also caused by local governments' failure to fully utilize their special bond quotas approved by the central government for capital investment. China's fiscal policy during the COVID-19 pandemic highlights four issues with implications for fiscal policy making. First, the government needs to avoid projecting unrealistically high land sale revenue in its budgets. Second, it needs to reconsider its problematic use of local-government special bond as a major fiscal stimulus instrument. Third, it needs to make sure its deficit, growth, and inflation targets are consistent. Last, Beijing needs to be more tolerant of higher fiscal deficits, at a minimum ensuring that overall fiscal spending grows at least as rapidly as nominal output.
Topic:
Budget, Economic Growth, Fiscal Policy, COVID-19, and Fiscal Deficit
Political Geography:
China and Asia

135. The effect of lawful crossing on unlawful crossing at the US southwest border

Author:
Michael A. Clemens
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
An increasing number of migrants attempt to cross the US Southwest border without obtaining a visa or any other prior authorization. 2.5 million migrants did so in 2023. In recent years, responding to this influx, US officials have expanded lawful channels for a limited number of these migrants to cross the border, but only at official ports of entry. These expanded lawful channels were intended to divert migrants away from crossing between ports of entry, by foot or across rivers, thereby reducing unlawful crossings. On the other hand, some have argued that expanding lawful entry would encourage more migrants to cross unlawfully. This study seeks to shed light on that debate by assessing the net effect of lawful channels on unlawful crossings. It considers almost 11 million migrants (men, women, and children) encountered at the border crossing the border without prior permission or authorization. Using statistical methods designed to distinguish causation from simple correlation, it finds that a policy of expanding lawful channels to cross the border by 10 percent in a given month causes a net reduction of about 3 percent in unlawful crossings several months later. Fluctuations in the constraints on lawful crossings can explain roughly 9 percent of the month-to-month variation in unlawful crossings. The data thus suggest that policies expanding access to lawful crossing can serve as a partial but substantial deterrent to unlawful crossing and that expanding access can serve as an important tool for more secure and regulated borders.
Topic:
Security, Migration, and Borders
Political Geography:
North America, Mexico, and United States of America

136. Tackling the UK's regional economic inequality: Binding constraints and avenues for policy intervention

Author:
Anna Stansbury, Dan Turner, and Ed Balls
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper analyzes binding constraints to productivity growth in the United Kingdom’s regions outside London and the greater South East. These analyses challenge a number of common arguments about the UK’s regional economic inequality problem. The authors find little evidence consistent with the hypotheses (i) that low shares of university graduates remain the primary constraint on growth for the UK’s regions; (ii) that there is a generalized issue with access to finance for firms outside the South East; or (iii) that low or falling regional migration rates are to blame for the persistence of the UK’s regional economic inequalities. Instead, they find evidence consistent with (i) a specific relative shortage of STEM degrees; (ii) binding transport infrastructure constraints within major non-London conurbations; (iii) a failure of public innovation policy to support clusters beyond the South East, in particular through the regional distribution of public support for research and development (R&D); and (iv) missed opportunities for higher internal mobility due to London’s overheating housing market. The authors also find some suggestive evidence consistent with constraints on access to early-stage equity financing for high growth-potential small and medium-sized enterprises in certain regions.
Topic:
Finance, Economic Growth, Economic Inequality, and Productivity
Political Geography:
United Kingdom and Europe

137. The El Niño Southern Oscillation and Geopolitical Risk

Author:
Cullen Hendrix
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper investigates whether the El Niño Southern Oscillation (ENSO)—the warming and cooling cycle in the central and eastern Pacific Ocean that affects both global atmospheric and ocean conditions—is a driver of geopolitical risk at the global scale. Using nonlinear cross-convergent mapping, a technique for characterizing causal relationships in dynamic systems, it finds ENSO is causally related to geopolitical risk at the global level, but that finding is not replicated at the country level for countries whose economies are most strongly influenced by ENSO cycles. Put differently, ENSO-related geopolitical risk is an emergent phenomenon evident only at the Earth system level. Then, using monthly observations of ENSO and geopolitical risk, the paper reports a curvilinear, contemporaneous relationship between ENSO and risk, with La Niña conditions associated with lessened geopolitical risk relative to El Niño and neutral climate conditions. The effects are statistically and substantively significant, and the relationship is demonstrated to be stronger in more recent decades (post-1990). The effect for geopolitical risk of transitioning from La Niña to neutral ENSO conditions is of similar magnitude to that of the outbreak of a major interstate war.
Topic:
Security, Agriculture, Climate Change, Politics, Geopolitics, Risk, Weather, and El Niño
Political Geography:
Global Focus

138. The Evolving Landscape of U.S. Economic Security: The Confluence of Trade, Technology, and National Security

Author:
Andrea Viski
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines the current evolution of U.S. economic security discourse to demonstrate the implications, challenges, and shortcomings of U.S. economic security tools and the catalyzing impact of technology. While component economic security considerations are broad and encompass issues from natural disaster planning to cybersecurity, this paper focuses specifically on the impact of trade and technology in the economic security context. It discusses the main influences and features of U.S. economic security policy as it relates to trade, technology, and the security of the supply chain. The paper includes sections on evolving notions of the dual-use concept; the need to manage and respond to technology flows with more effective strategies, and new foreign policy efforts and tools to strengthen economic security. The paper focuses on the trends forging the path for the United States to define economic security so closely with national security, and in exploring these trends, it delineates how the United States has implemented policies and adopted, reoriented, or created new policy tools designed to strengthen economic security. The paper also explores why the rapid evolution of emerging technologies has played such a defining role. Finally, the paper examines the effectiveness of the U.S. approach to economic security and its challenges and offers insights into how it can be strengthened in the future
Topic:
National Security, Science and Technology, Trade, and Economic Security
Political Geography:
North America and United States of America

139. Japanese Economic Security as “Derisking”

Author:
Kazuto Suzuki
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines the concept of “derisking” and how the Japanese Economic Security Promotion Act (ESPA) has responded to it within the framework of deterrence theory. It explores how ESPA allows deterrence by denial against economic coercion by other states and is itself a derisking measure. It contends that deterrence by denial, which means reducing dependency and improving resilience, could include stockpiling strategic materials, diversifying sources of supply, developing alternative materials, and developing alternative products. However, this paper argues that there is a need to strengthen the mechanism for collaborative deterrence by denial, such as the “Coordination Platform” presented at the G7 Hiroshima Summit. As for other forms of deterrence, such as institutional deterrence and deterrence by punishment, their effectiveness is insufficient, and they face many implementation problems. Therefore, this paper argues that the most optimal derisking strategy at this point is the combination of ESPA and the “Coordination Platform” to strengthen the capabilities of deterrence by denial.
Topic:
Risk, Deterrence, Economic Security, and Coercion
Political Geography:
Japan and Asia

140. Is Economic Security National Security? Defining South Korea’s Economic Security for Future Industries

Author:
June Park
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper explores how South Korea defines “economic security.” Amidst geopolitical turbulence, the framing of this concept by governments and policy circles around the globe is reflective of the changes in the global economy post-pandemic and the ongoing war in Ukraine, two critical junctures that have revealed the geo-economic impact of weaponized interdependence. While the Biden administration has laid out U.S. policy intent to combine national security with economic security, specifically on future industries of dual-use nature ranging from chips to EVs, batteries, and generative AI, countries that are on the receiving end of policy implementation are formulating their response to the shifting geoeconomics. This paper unravels South Korea’s framing of economic security and policy response by analyzing legislation on future industries that is critical to the country’s economic growth and standing and the concerted efforts by the state bureaucracy and industry in shaping the concept. The paper draws specifically upon semiconductors in addition to other future industries that are central to the South Korean economy and related legislation in the South Korean National Assembly. It argues that South Korea’s policy response and framing of its economic security has more to do with the protection of industries for the future amid geopolitical turbulence and the reshuffling of global supply chains than traditional security issues related to the U.S.-ROK alliance. Moreover, public anxiety on the pressures toward U.S.-driven trilateral cooperation reveals concerns on a possible backlash from China and the lagging potential of Japan in future industries.
Topic:
National Security, Geopolitics, Industry, and Economic Security
Political Geography:
Asia, South Korea, and United States of America