C. Fred Bergsten outlines policy suggestions for President Obama as the President prepares a speech on trade policy.
Morris Goldstein highlights four messages from the global crisis for improving global financial surveillance.
Daniel H. Rosen and Thilo Hanemann review China's outbound foreign direct investment profile, consider the major drivers and impediments, and present recommendations for policy issues arising from the growing volume and changing nature of Chinese outbound investment. Policy Brief 09-14. See also China's Rise: Challenges and Opportunities.
Peterson Perspectives: Interviews on Current Issues
Nicholas R. Lardy forecasts an economic rebound in China and says the government's procurement spending in its stimulus program continues a long-standing protectionist bias.
Audio | Transcript [pdf] | See also The Future of China's Exchange Rate Policy
Europe’s banking fragility calls for swift creation of a temporary supranational agency to steer triage of major banks on the continent, recapitalizations, and management of distressed assets in public ownership, recommend Adam S. Posen and Nicolas Véron. Policy Brief 09-13 | Op-ed Posen explains why the real banking crisis for the eurozone is still to come.
C. Randall Henning analyzes the politics and merits of the Obama administration's four-part package to strengthen the International Monetary Fund and urges Congress to quickly approve this legislation. Policy Brief 09-12. See related op-ed and interview.
John Williamson provides an overview of Special Drawing Rights (SDRs) and discusses recent proposals for this synthetic currency to play a greater role in the international monetary system. Policy Brief 09-11. C. Fred Bergsten supports creating a substitution account through which unwanted dollars held by foreign monetary authorities could be converted into SDRs at the IMF instead of other currencies through the foreign exchange markets.
Gary Clyde Hufbauer testifies before the Senate Finance Committee on the tax and trading aspects of a cap-and-trade system designed to reduce greenhouse gas emissions. Trevor Houser assesses the costs and benefits of abating greenhouse gas emissions through improved building efficiency. Policy Brief 09-8. Houser testifies on how well-designed climate policy [pdf] can prevent jobs and emissions from moving overseas. See also Policy Brief 09-3. See also a guide to climate-change laws and the new book Global Warming and the World Trading System.
Stephan Haggard and Marcus Noland consider the best approach to dealing with North Korea's nuclear and missile programs and discuss why economic sanctions against North Korea, while politically significant, need to be paired with a broader policy that includes a strongly-stated preference for a negotiated solution. See also "The (Non) Impact of UN Sanctions on North Korea," Korea after Kim Jong-il, and Economic Sanctions Reconsidered. Marcus Noland writes on the ramifications of the latest North Korean nuclear test.
Peterson
Perspectives: Interviews on Current Issues
Marcus
Noland, reporting on new surveys of North Korean refugees, says the
United States must engage the Pyongyang government despite myriad
frustrations and obstacles standing in the way.
Interview
| Event
News Release: MacArthur Foundation Awards Grant to Support Peterson Institute's Innovative Research on North Korea
William Cline and John Williamson, updating their estimates of fundamental equilibrium exchange rates, conclude that the dollar has again become seriously overvalued, principally though not exclusively, against the Chinese renminbi and some other Asian currencies. Policy Brief 09-10. Mohsin S. Khan considers the best exchange rate regime for the planned Gulf Cooperation Council monetary union. Working Paper 09-1.
Edwin M. Truman discusses some early lessons for developing countries from the global economic crisis, particularly that countries should expect and prepare for inevitable future crises. While Mexico has been hit hard by the global crisis, the country has made significant political and economic reforms over the past decade, says Barbara Kotschwar. India's cautious approach to globalization has spared it the worst effects of the global financial crisis, observes Arvind Subramanian. Anders Åslund reviews the causes of the Eastern European financial crisis and compares the present Latvian financial crisis with that of Russia in 1998 and urges the country not to devalue its exchange rate.
Serious financial crises go through seven distinct phases, and Edwin M. Truman estimates the current crisis is now between the containment and the mopping-up phases.
New Book: The Long-Term International Economic Position of the United States edited by C. Fred Bergsten
>> News Release
Peterson Perspectives: Interviews on Current Issues
Gary Clyde Hufbauer sees the Chrysler and GM bailouts as running counter to decades of American catechism for other countries and very likely to lead to lawsuits and retaliation by trading partners.
Audio | Transcript [pdf] | See also Money for the Auto Industry: Consistent with WTO Rules?
Gary Clyde Hufbauer and Jeffrey J. Schott observe that the United States has begun to give in to protectionist pressures. See also Policy Brief 09-2.
Adam S. Posen and Marc Hinterschweiger find that recent high growth in financial innovations did not yield high growth in real fixed capital formation, as was intended.
Peterson Perspectives Interviews Is the United States De-emphasizing its Bank Clean-Up Plan? with Michael Mussa | Transcript [pdf] Geithner in China: What Are the Prospects?
with Nicholas R. Lardy | Transcript [pdf] A Snag for the Panama FTA
with Gary Clyde Hufbauer | Transcript [pdf]
Barbara Kotschwar and Jeffrey J. Schott present three measures for improving and deepening US-Egypt economic relations.
Tariff and nontariff barrier liberalization accounts for almost all US merchandise trade growth since 1980 above and beyond growth that can be explained by expanding GDP in the United States and abroad, find Matthew Adler and Gary Clyde Hufbauer. Working Paper 09-2.
Gary Clyde Hufbauer considers the potential effects of the latest round of Alien Tort Statute litigation. Policy Brief 09-9.
Global Economic Prospects
The current deep global recession will be followed by a V-shaped vigorous recovery [pdf] starting by end 2009, forecasts an optimistic Michael Mussa. Simon Johnson forecasts an L-shaped global recovery, with a severe contraction in the global economy for 2009 and flat growth in 2010. View the event: Global Economic Prospects: L- or V-shaped Recovery?
US Banking Crisis
Adam S. Posen provides a guide to grading Treasury's stress tests and the Public-Private Investment Partnership (PPIP). William R. Cline concludes that the federal stress tests on banks have brought transparency and potential for improvement in the stability of the financial system in this website interview.
Simon Johnson testifies on the dangers to the financial system posed by large insolvent banks. Listen to related interview.
Adam S. Posen finds Treasury's newest plan to clean up US banks disappointingly similar to failed Japanese efforts to resolve Japan's decade-long banking crisis and offers seven lessons from Japan's "lost decade" [pdf].
Book: Banking on Basel: The Future of International Financial Regulation by Daniel K. Tarullo
>> Event: Book Release
Book: Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies by Nouriel Roubini and Brad Setser
Arvind Subramanian and Devesh Kapur argue for a direct cash transfer scheme to replace many of India's current inefficient anti-poverty programs.
RealTime Economic Issues Watch:
The Global Financial Crisis
Views updated daily on the current crisis in global financial markets, its impact on the real economy, and the public policy choices confronting the United States and other countries.
New Book: The Russia Balance Sheet by Anders Åslund and Andrew Kuchins
>> Event | Interview with Åslund
Anders Åslund sees Putin’s new course on Russia’s WTO accession as a sign that he and his allies have reasserted control over Russian policy.
The Russian gas giant Gazprom's struggles provide an opportunity for Russian and European energy-sector reform, according to Anders Åslund.
Morris Goldstein outlines how to reform financial regulation and who should do it. See also "A Ten Plank Program for Financial Regulatory Reform." [pdf]
Arvind Subramanian and John Williamson present reforms designed to make the international financial system less susceptible to major crises [pdf] .
The Obama administration should lower the federal marginal corporate tax rate to 25 percent or less and shift from a worldwide tax system to a territorial system, recommend Gary Clyde Hufbauer and Jisun Kim. Policy Brief 09-7.
Any common regional fund East Asian governments might create should complement, not break from, global financial institutions such as the International Monetary Fund, stresses C. Randall Henning. Policy Brief 09-5. Listen also to a Peterson Perspectives interview with C. Randall Henning.
Adam S. Posen's Restoring Japan's Economic Growth is a "must read" for how fiscal policy works in a liquidity trap (see chapter 2 [pdf]), says Nobel Laureate Paul Krugman. Posen warned in 2007 of the financial risks in Europe [pdf] now being realized, and of the limits on Germany's long-term sustainable growth. See also "The Four Horsemen of Subprime Stupidity." [pdf]
Most viewed pages for the past 7 days.
Speech
The Global Financial Crisis: Lessons Learned and Challenges for Developing Countries
Edwin M. Truman
Op-ed
India's Goldilocks Globalization
Arvind Subramanian
Event
India in a Globalized World
Speech Policy Responses to the Global Financial Crisis
Edwin M. Truman
Testimony
Climate Change Legislation: Tax Aspects
Gary Clyde Hufbauer
Speech
Globalization: The Concept, Causes, and Consequences
John Williamson
Policy Brief 09-14
China's Changing Outbound Foreign Direct Investment Profile: Drivers and Policy Implications
Daniel H. Rosen and Thilo Hanemann
News Release
The Long-Term International Economic Position of the United States
C. Fred Bergsten
Forum
Too Big to Fail Politically
Simon Johnson
Most recently posted material.
Op-ed
What To Do about North Korea: Will Sanctions Work?
Stephan Haggard and Marcus Noland—July 3, 2009
On June 12, 2009, in response to North Korea's second nuclear test, the United Nations Security Council (UNSC) imposed additional economic sanctions via UNSC Resolution 1874. This measure is politically significant, particularly in signaling the changing attitude of Beijing. However, it is highly unlikely that the sanctions by themselves will have any immediate effect on North Korea's nuclear program or on the increasing threat of proliferation. Sanctions need to be coupled with a nuanced policy that includes a strongly stated preference for a negotiated solution as well as defensive measures, of which the sanctions are only one part. Proliferation can be impeded. However, elimination of the North Korean nuclear weapons capability is likely to require a regime change in Pyongyang.
Op-ed
European Banking Needs a State-Led Triage Body
Adam S. Posen and Nicolas Véron—July 2, 2009
The Bank for International Settlements has just announced that national governments have done too little to clean up their banking problems, and it is right. The European Summit concluded that there can be no fiscal federalism to transfer funds between banking systems, were they to require recapitalization. That is reality. It seems difficult to craft a policy responding to the first while abiding by the second. Yet, all recent systemic banking crises in developed countries (including the US savings and loans, Sweden, and Japan in the 1990s) have only been solved when there was a government-led triage process, with state intervention to resolve the cases of insolvency.
Speech
Global Financial Surveillance and the Quest for Financial Stability
Morris Goldstein—July 2, 2009
Morris Goldstein highlights four messages from the global financial crisis for improving global financial surveillance and for promoting financial stability. First, the crisis has underscored the importance of two basic regulatory challenges where more needs to be done: controlling currency mismatches and discouraging excessive leverage. At the same time, the crisis should finally drive home the lessons that central banks and regulatory authorities must cooperate better to identify and prick asset price bubbles. Better, more disaggregated, indicators are also needed for measuring spillover effects between countries. Finally, despite the numerous difficulties in developing an effective early-warning system for pending crises, the greater challenge is to design a workable procedure for blowing the whistle in public when significant sources of systemic risk are identified.
Peterson Perspectives: Interviews on Current Issues
Russia's WTO Rebuff: A Challenge for Obama
Anders Åslund—July 1, 2009
Anders Åslund sees Vladimir Putin's reassertion of control in Russia, exemplified by its walking away from the WTO, as reducing US leverage just as President Obama travels to Moscow this month.
Op-ed
Russia Changes Course on WTO Accession
Anders Åslund—July 1, 2009
Russian Prime Minister Vladimir Putin recently announced that Russia, Belarus, and Kazakhstan have abandoned their separate talks to join the World Trade Organization (WTO). Instead, they will seek to enter the world trade body as a single customs union. In effect, this means that Russia seems to be casting aside its accession to the WTO—a major reversal of Russian strategy.
Article
Implications of the Crisis for Eastern Europe
Anders Åslund—June 30, 2009
The current global financial crisis is the worst the world has seen since the Great Depression in 1929–33. It has hit Central and Eastern Europe harder than any other region of the world. The region's forecasted drop in GDP this year is about 4 percent, and at least Latvia and Ukraine are likely to face double-digit declines.
Forum
No Way Out: Treasury and the Price of TARP Warrants
Simon Johnson—June 29, 2009
Buried in the late wire news on Friday, June 26—and therefore barely registering in the newspapers over the weekend—the Treasury announced the rules for pricing its option to buy shares in banks that participated in the Troubled Asset Relief Program (TARP).
Forum
Reading Paul A. Volcker
Edwin M. Truman—June 26, 2009
Paul Volcker is always a rewarding read. He is a balanced straight-thinker. With the Internet, the cost of reading Volcker is only the time it takes to read plus the necessary additional effort to think about what he has said. A recent example is Volcker on the economy, the international monetary system, and financial reform in Beijing on June 11. I found the following points interesting.
Op-ed
Obama Needs To Be Bold on Trade
C. Fred Bergsten—June 26, 2009
President Barack Obama has let it be known that he is preparing an important speech on trade policy. It cannot come soon enough. His administration has so far been unwilling even to submit the trivial free trade agreement with Panama to Congress, let alone mount any significant initiatives to restart the momentum of global trade expansion. China's new protectionist policy on government procurement, while legal under the porous rules of the World Trade Organization (WTO), sharply raises the threat to the global trading system that he must counter.
Forum
German-American Economic Divergences on the Occasion of Merkel's White House Visit
Adam S. Posen—June 26, 2009
German Chancellor Angela Merkel will meet with President Obama today, June 26, in Washington to deepen US-German cooperation on economic, security, and climate-change issues. An unfortunate quote of mine to a German paper from some months back has been trotted out in the press to exemplify informed American skepticism on the German governing coalition's economic views. I regret my phrasing—it is always wrong to speak about individuals instead of policies, and in this instance it ignores my sincere admiration of Chancellor Merkel's very strong and brave leadership on the foreign-policy front. But my substantive dispute with the German Christian Democrat and Social Democrat (CDU-SPD) governing coalition's economic views as she has expressed them, often in terms very critical of US and other countries' policies, bears explanation.
Peterson Perspectives: Interviews on Current Issues
Is China's Stimulus Program Protectionist?
Nicholas R. Lardy—June 25, 2009
Nicholas R. Lardy forecasts an economic rebound in China and says the government's procurement spending in its stimulus program continues a long-standing protectionist bias.
Op-ed
Fiscal Prudence, Now and Here
Arvind Subramanian—June 24, 2009
Should next month's budget, the first for the new government, start the process of fiscal consolidation or should this consolidation be deferred for some time? One perspective on this question is comparative. We could look at what, say, China and the United States are doing and draw upon their experience to shed light on India's situation.
Policy Brief 09-14
China's Changing Outbound Foreign Direct Investment Profile: Drivers and Policy Implications
Daniel H. Rosen and Thilo Hanemann—June 24, 2009
After decades of negligible outbound foreign direct investment (FDI), Chinese firms' have rapidly increased their foreign investment profiles, challenging international investment norms and affecting international relations. Daniel H. Rosen and Thilo Hanemann review the data behind China's growing outbound investment, consider the forces driving this growth, and analyze both foreign and domestic obstacles to China's outbound FDI. The country's outbound FDI will continue to grow rapidly in the coming years as a result of both economic necessity and an increasingly open government policy framework. This outbound investment is sure to clash with host countries' investment review processes, and host countries must clarify their policies in these areas and avoid protectionist responses to valid Chinese investment. China also faces a number of domestic impediments to increased investment abroad, from limited corporate vision to a lack of international experience. These disadvantages must be overcome if China's firms are to compete internationally.
Op-ed
Latvian and Russian Crises Are Worlds Apart
Anders Åslund—June 24, 2009
Nobel Laureate economist Paul Krugman has stated that "Latvia is just another Argentina" that has to devalue its currency to escape from its financial crisis. Similarly, the Russian financial crisis in 1998 points to devaluation as a suitable solution. But Latvia's situation is very different.
News Release
UK Chancellor Appoints Institute Deputy Director Adam Posen as External Member of the Bank of England's Monetary Policy Committee
June 22, 2009
Washington—The Peterson Institute for International Economics (PIIE) announced that Deputy Director Adam Posen has been appointed an External Member of the Bank of England's Monetary Policy Committee (MPC) for a three-year term beginning September 1. The MPC, akin to the Federal Reserve Board of Governors in the United States, is the Bank of England's interest-rate setting body. Dr. Posen, a US citizen, was selected for the position through an open competitive process for external appointments, ahead of 49 other applicants from the United Kingdom and around the world.
Forum
Too Big to Fail, Politically
Simon Johnson—June 22, 2009
What is the essence of the problem with our financial system—what brought us into deep crisis, what scared us most in September/October of last year, and what was the toughest problem in the early days of the Obama administration?
The issue was definitely not that banks and nonbanks could fail in general. We're good at handling some kinds of financial failure. The problem was: A relatively small number of troubled banks were so large that their failure could imperil both our financial system and the world economy. And, at least in the view of Treasury, these banks were so large that they couldn't be taken over in a normal FDIC-type receivership.
