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59032. Economic Issues Raised by Treatment of Takings Under NAFTA Chapter 11
- Author:
- Edward M. Graham
- Publication Date:
- 11-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This working paper examines, from an economic perspective, the treatment of takings (property rights) under NAFTA Chapter 11. To be more precise, the paper examines the treatment of takings as environmental groups fear might be established as the result of investor dispute settlement under this chapter; as of the date of this writing, most of the cases that have the potential to be precedent-setting have not been finally decided, albeit one—the Metalclad case—has been decided in a way that is unsettling to environmentalists. The author attempts to determine whether requiring public compensation of private investors for diminishment of value resulting from government regulatory action has the potential of achieving anything close to an “optimal” outcome from a societal cost-benefit point of view (defined below). This determination makes use of tools of economic analysis and, in particular, Coase's theorem regarding achieving optimal outcomes where negative externalities are present. The overall conclusion is that, although Coase's theorem can be invoked to argue that such an outcome can be achieved either via a “polluter pays” approach or a “public pays” (or “public must compensate”) approach, as a matter of practical application, the first approach is preferable to the second for a number of reasons, including government “fiscal illusion” and “moral hazard.”
- Topic:
- Economics and International Organization
- Political Geography:
- United States, Latin America, and North America
59033. Assessing Globalization's Critics: "Talkers Are No Good Doers???"
- Author:
- Kimberly Ann Elliott, Debayani Kar, and J. David Richardson
- Publication Date:
- 09-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper is about the critics of the “doers” of globalization. It describes who they are, where they came from, what they want, how economists, policymakers, and others might understand them better, and where globalization might head from here. Many critics are themselves strongly internationalist and want to see globalization proceed, but under different rules. Some, particularly the protesters in the streets, focus mainly on what is wrong with the world. But some of them put forward broad alternative visions and others offer detailed recommendations for alleviating the problems they see arising from status quo globalization. Most of them have roots in long-standing transnational advocacy efforts to protect human rights and the environment and reduce poverty around the world. What brings them together today is their shared concern that the process by which globalization's rules are being written and implemented is undermining democracy and failing to spread the benefits broadly. This paper sketches the key issues and concerns that motivate the critics in a way that is broadly representative and intelligible to economists. It finds more resonance for the critics' agenda in economics than they commonly recognize. And it attempts to capture the concerns of Southern as well as Northern critics and to analyze the issues that divide as well as bring them together. Finally, it evaluates those issues and alternative proposals on which even globalization enthusiasts and the critics might come together cooperatively.
- Topic:
- Economics, Globalization, and International Trade and Finance
59034. Toward A Sustainable FTAA: Does Latin America Meet The Necessary Financial Preconditions?
- Author:
- Liliana Rojas-Suarez
- Publication Date:
- 07-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper focuses on identifying preconditions that will ensure the sustainability of a Free Trade Area of the Americas (FTAA). It argues that the macro, micro, and political conditions advanced in the literature to measure a country's ability to compete internationally, while necessary, are not sufficient to ensure the success and permanence of a free trade agreement. Instead, two additional financial conditions are needed. The first is that each partner in the free trade area needs to have sustainable public debts as determined by the achievement of credible and sustainable structural fiscal balances. The second is that exchange rate regimes across trading partners should be compatible in the sense that adverse shocks in one country do not generate a policy dilemma in other partners between abandoning their exchange rate system or the free trade area.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- South America, Latin America, Central America, and Caribbean
59035. Home Bias, Transactions Costs, And Prospects For The Euro: A More Detailed Analysis
- Author:
- Catherine L. Mann and Ellen E. Meade
- Publication Date:
- 07-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. Our empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- United States and Europe
59036. Six Practical Views of Central Bank Transparency
- Author:
- Adam S. Posen
- Publication Date:
- 05-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In the span of fifteen years, central bank transparency has gone from being highly controversial to motherhood and apple pie (one can insert analogous certitudes by country here). It is now an accepted broad goal to which all central banks pay at least lip service. Yet, like many other broad concepts in economic policy, such as “fiscal discipline” or “price stability,” what central bank transparency actually means remains rather open to debate. With the widespread adoption of inflation targeting, seen usually as an expression of increased central bank transparency, it is worthwhile to try to apply some clarity and rigor to this central banking concept du jour.
- Topic:
- Economics, Government, and International Trade and Finance
59037. The Future of North Korea
- Author:
- Marcus Noland
- Publication Date:
- 05-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The Korean peninsula has entered a period of considerable change and uncertainty. This paper attempts to sketch out how internal and external forces may shape outcomes in North Korea over the next several years. The range of plausible outcomes is huge, and the paper identifies four possible end states: successful reform and engagement, “muddling through,” elite conflict that could affect the nature of the state, if not the regime, and finally, mass mobilization that could threaten the regime itself. This analysis proceeds under a number of assumptions.
- Topic:
- Development, Government, and Industrial Policy
- Political Geography:
- Israel, East Asia, and North Korea
59038. Passive Savers and Fiscal Policy Effectiveness in Japan
- Author:
- Adam S. Posen and 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, and Political Economy
- Political Geography:
- Japan, Israel, and East Asia
59039. Moral Hazard and the U.S. Stock Market: Analyzing the “Greenspan Put”?
- Author:
- Marcus Miller, Paul Weller, and Lei Zhang
- Publication Date:
- 01-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- When the risk premium in the US stock market fell far below its historic level, Shiller (2000) attributed this to a bubble driven by psychological factors. As an alternative explanation, we point out that the observed risk premium may be reduced by one-sided intervention policy on the part of the Federal Reserve, which leads investors into the erroneous belief that they are insured against downside risk. By allowing for partial credibility and state dependent risk aversion, we show that this 'insurance'—referred to as the Greenspan put—is consistent with the observation that implied volatility rises as the market falls. Our bubble, like Shiller's, involves market psychology, but what we describe is not so much 'irrational exuberance' as exaggerated faith in the stabilizing power of Mr. Greenspan.
- Topic:
- Economics, Government, International Trade and Finance, and Political Economy
- Political Geography:
- United States
59040. Risk and Reward: U.S. - E.U. Regulatory Cooperation on Food Safety and the Environment
- Author:
- David L. Aaron and C. Boyden Gray
- Publication Date:
- 11-2002
- Content Type:
- Policy Brief
- Institution:
- Atlantic Council
- Abstract:
- In recent years, environmental protection and food safety have been among the most volatile issues in the U.S.-European relationship. While they are now overshadowed somewhat by the transatlantic debate over Iraq and other political and military matters, tensions over environment and food safety are just below the surface, and — if not addressed — w ill have enduring corrosive and divisive effects. Indeed, the current acrimony over these issues has contributed to concern about an erosion of shared transatlantic values and a deterioration in U.S.-European relations generally. Moreover, as recently demonstrated at the Johannesburg UN summit on sustainable development, the failure of the United States and Europe to work together on these issues does not just have bilateral consequences. It represents a significant lost opportunity to provide leadership in addressing environment and food safety on a global level. The United States and Europe have both been leaders in these areas — a fact that is overlooked far too often in the current debate. The impact of their current differences has been felt most concretely in the transatlantic trade arena, in a series of persistent disputes. But these differences represent far more than just another transatlantic trading issue. Unless they now find a way to reconcile their different perspectives and approaches, the United States and the European Union will miss real opportunities to work together in addressing global environmental and public health issues.
- Topic:
- Environment and Human Welfare
- Political Geography:
- United States and Europe