Adam S. Posen and Arvind Subramanian call for a joint public commitment by the world’s monetary policymakers to the common goal of reducing inflation.
Adam S. Posen compares today's economic situation to that of the early 1980s under Reagan.
Gary Clyde Hufbauer and Jeffrey J. Schott dismiss anecdotal criticisms of NAFTA and offer proposals for improvement.
Liberalization of policies related to foreign direct investment accounted for 30 percent of US inward FDI stock growth and 18 percent of US outward FDI stock growth between 1982 and 2006, find Matthew Adler and Gary Clyde Hufbauer. Working Paper 08-7.
The exchange rate of the dollar could play a critical role in both the evolution of the housing and financial crises and the needed policy responses, testifies C. Fred Bergsten. Presidential candidates and Congress should take note that export-led growth—generated by globalization—and its creation of new jobs are cushioning the US slowdown and so far preventing a recession.
Edwin M. Truman dispels four myths about sovereign wealth funds and presents a blueprint for sovereign wealth fund best practices.
Peterson Perspectives: Interviews on Current Issues
Edwin M. Truman analyzes both the key concerns raised by sovereign wealth funds and the essential measures required to alleviate those concerns in a
website audio interview.
>> Transcript
News Release: Steven R. Weisman of the New York Times to Join Peterson Institute
William R. Cline and John Williamson present new estimates of fundamental equilibrium exchange rates for leading advanced and emerging-market economies in Policy Brief 08-7 using a model Cline has developed in Working Paper 08-6.
News Release: Key Asian Currencies Still Substantially Undervalued with Respect to Dollar
Morris Goldstein and Nicholas Lardy find the undervaluation of the renminbi has increased in the three years since China adopted its new currency regime.
Peterson Perspectives: Interviews on Current Issues
In a three-part interview, Morris Goldstein analyzes the origins of the subprime credit crisis, the policy responses so far, and suggests his own top ten regulatory reforms needed to respond to the subprime credit crisis. To avoid future financial crises, Goldstein presents a proposal to improve regulatory liquidity.
Sustaining high growth may be easier for China than India, writes Arvind Subramanian.
Hybrid financial institutions do not work, and those in the United States—such as Fannie Mae and Freddie Mac—should be nationalized, recommends Adam S. Posen.
Peterson Perspectives: Interviews on Current Issues
Michael Mussa argues that the Fund should take a stronger stand on violation of norms for exchange rates in this website
interview.
>> Transcript
Jeffrey J. Schott proposes a 5-step plan for Doha Round rehabilitation.
Anders Åslund speaks with former Ukrainian president Leonid Kuchma about his role in building a stable and prosperous Ukraine.
World Trade Organization membership can place Russia on the right economic track, argues Anders Åslund. Putin's unproductive two-term presidency leaves a huge backlog of reforms that can no longer be ignored.
Peterson Perspectives: Interviews on Current Issues
The decision by the House of Representatives to change the rules for Congressional action on trade agreements drives a gaping hole in US trade policy and poses the gravest threat to the global trading system in decades, says C. Fred Bergsten in a website
interview. See also Policy Brief 08-5.
Howard Rosen testifies before Congress that the United States needs a comprehensive strategy to address the economic disruptions to American workers and firms that are an inevitable part of globalization. See also event on Trade Adjustment Assistance. America must reform healthcare and education to better protect Americans against job loss, says Jacob Funk Kirkegaard.
As US skill levels fall, policymakers need to reform immigration policies to encourage the inflow of high-skilled workers from abroad, writes Jacob Kirkegaard.
America's Gains from Globalization
Gary Clyde Hufbauer answers critics who question US gains from globalization.
Paper | Summary
New Book: Challenges of Globalization: Imbalances and Growth
Anders Åslund and Marek Dabrowski
The United States should seek partnership with Beijing to provide joint global economic leadership instead of focusing on narrow bilateral problems, writes C. Fred Bergsten.
New Book: Economic Sanctions Reconsidered, 3rd edition, with CD-ROM
by Gary Clyde Hufbauer, Jeffrey J. Schott, Kimberly Ann Elliott, and Barbara Oegg
>> Release Event | In Brief | Selected Case Studies Online
Jeffrey J. Schott examines the history and future of the world trading system with recommendations for reform.
Peterson Perspectives: Interviews on Current Issues
William R. Cline explains the effect of climate change on agriculture on a country-by-country basis, where the impact will be greatest, and what we need to do to reduce the risks in this
website audio interview.
>> Transcript
Unabated global warming is estimated to reduce world agriculture potential 5 to 15 percent by the 2080s, with the greatest losses falling disproportionately on developing countries, writes William R. Cline. See also Global Warming and Agriculture. Cline agrees with the Stern Review: Aggressive action is necessary to abate global warming.
New Book: Leveling the Carbon Playing Field: International Competition and US Climate Policy Design
>> Event: Book Release | News Release
With global agricultural prices soaring, North Korea is set to experience yet another famine, write Stephan Haggard, Marcus Noland, and Erik Weeks.
Peterson Perspectives: Interviews on Current Issues
Marcus Noland reports on the results of a survey of 1,346 North Korean refugees in this website
interview.
>> Transcript
New Book: Accountability and Oversight of US Exchange Rate Policy by C. Randall Henning
>> News Release
Inflation now plagues many former communist countries with fixed exchange rates; those with floating exchange rates, balanced budgets, and inflation targeting are not, writes Anders Åslund. Inadequate fiscal and monetary policies are exacerbating inflation in India, writes Arvind Subramanian, but inflation targeting is an unnecessary and inappropriate solution to India's current crisis.
Improvements in South Korea's political and economic institutions over the past decade have outstripped the country’s "First World economy, Third World politics" image, say Marcus Noland and Erik Weeks. Working Paper 08-5.
Most viewed pages for the past 7 days.
Paper Global Economic Prospects 2008/2009: Hoping for a Global Slowdown and a US Recession
Michael Mussa
Testimony The Current Account Deficit and the US Economy
C. Fred Bergsten
Op-ed Four Myths about Sovereign Wealth Funds
Edwin M. Truman
Op-ed The Growth Future—India and China
Arvind Subramanian
Testimony The Dollar and the US Economy
C. Fred Bergsten
Op-ed China's Currency Needs to Rise Further
Morris Goldstein and Nicholas Lardy
Policy Brief 08-3
A Blueprint for Sovereign Wealth Fund Best Practices
Edwin M. Truman
Working Paper 08-7
Policy Liberalization and FDI Growth, 1982 to 2006
Matthew Adler and Gary Clyde Hufbauer
Policy Brief 08-7
New Estimates of Fundamental Equilibrium Exchange Rates
William R. Cline and John Williamson
Speech
Globalization: The Concept, Causes and Consequences
John Williamson
Most recently posted material.
Op-ed
Leonid Kuchma Built a Prosperous Ukraine
Anders Åslund—August 28, 2008
On August 9, Leonid Kuchma turned 70 years old. For 10 years, from 1994 until 2004, he was the president of Ukraine. He arrived as the savior of his nation, but the Orange Revolution ended his second term. His legacy is rich but multifaceted.
After Russia's attack on Georgia, Ukraine may be the next target. Moreover, the country is deeply divided politically. Against this backdrop, the merits of Kuchma become even more apparent.
Recently, I saw Kuchma again at the Yalta European Strategy, the annual conference that his son-in-law, Victor Pinchuk, organizes every year to promote Ukraine's integration with Europe.
Article
NAFTA's Bad Rap [pdf]
Gary Clyde Hufbauer and Jeffrey J. Schott—August 25, 2008
In January 2009, the North American Free Trade Agreement
will reach its fifteenth birthday. No cause for celebration, say
NAFTA critics, who argue that the trade pact must be fixed or
ditched. Most economists disagree and regard NAFTA as a
tremendous success, contributing to better jobs and higher
income in the three partner countries—though in Mexico's
case well below levels promised by politicians during the ratification
debate.
Op-ed
Volcker-Reagan Rerun [pdf]
Adam S. Posen—August 22, 2008
The most comparable historical analogy to the present macroeconomic situation is the Volcker-Reagan episode of the early 1980s. The next President will need to undertake significant new government spending that is unlikely to be paid for as we go, so as in the early 1980s, a tightening monetary policy in an inflationary environment will face an expansive fiscal policy. If other countries also engage in fiscal expansion to ease the politically salient pain from supply shocks to energy and food, the crowding-out effect on interest rates of increased government spending could be greater for the United States and everyone else.
In today's world of much larger global capital flows, it is unclear whether the strengthening of the dollar seen in the mid-1980s would repeat. If the interest rate differential of the United States versus other countries was smaller this time but the erosion of fiscal discipline were greater here than abroad, the dollar could really tumble. In the near-term this will be expansionary for the US and world economies, but come 2011, the world may face a significant downturn from a largely coincident rise in interest rates.
Op-ed
A Global Approach Is Needed to Beat Inflation
Adam S. Posen and Arvind Subramanian—August 21, 2008
The default view of many central bankers today is that there are few if any gains from monetary policy coordination. But with today's inflation being a globally driven and experienced phenomenon, tightening monetary policy in a coordinated fashion would benefit all countries. If China and the United States attempt to free-ride on others' monetary contraction, hoping to shift the burden of adjustment, they will only delay and make more costly their own inevitable disinflations. Central bankers should engage in collective action to minimize the costs and equalize the burdens of the public good of disinflation.
If every relevant central bank raises rates simultaneously, then the needed contraction of demand for any one participating country will be reduced for all, and individual central banks will find it easier to stick to their plans despite domestic opposition. And if the People's Bank of China and the US Federal Reserve tighten in coordination with the majority of central banks, domestic concerns about each other's competitive depreciation will be muted. A joint public commitment by the world's monetary policymakers towards the common goal of reducing inflation would be powerful, effective, and fair.
Article
Markets and Famine in North Korea [pdf]
Stephan Haggard, Marcus Noland, and Erik Weeks—August 19, 2008
In the 1990s, as many as a million North Koreans died in one of the worst famines of the 20th century. Unlike the dramatic recent natural disasters in Burma and China, North Korea's current food crisis, a product of self-destructive policies, bad weather, and global food price increases, has metastasized largely beyond public view, abetted by Pyongyang's penchant for secrecy.
Op-ed
The Growth Future—India and China
Arvind Subramanian—August 19, 2008
Can China and India sustain their current growth rates? A traditional answer to this question is conditional: yes, provided they continue to implement policy reforms. But historical experience allows a less guarded answer. There are few examples of countries that have grown as strongly and for such long periods as India and China have—6 percent and 10 percent, respectively, for nearly three decades—and then suffered a sharp slowdown or collapse. If history is a reliable guide, then barring major upheavals, economic growth looks likely to continue in both countries until some threshold level of prosperity is attained.
Op-ed
Four Myths about Sovereign Wealth Funds
Edwin M. Truman—August 14, 2008
Edwin M. Truman identifies and debunks four common myths surrounding sovereign wealth funds (SWFs). Such funds are not held primarily by nondemocratic, nonwestern countries; The United States—closely followed by the United Arab Emirates as well as Norway, the Netherlands, and Japan—holds the largest collection of SWFs. The funds are not all equally opaque; Truman's scoreboard for 46 SWFs from 38 countries shows individual funds differ substantially in transparency. SWFs do not distort capital flows in the international financial system; the investment funds provided to financial institutions in other countries for the most part were already headed for the financial markets where those institutions reside. SWFs are in fact like hedge funds; they invest in hedge funds, private equity firms, and other highly leveraged financial institutions.
The real issue lies beyond these myths in reciprocal responsibility: Countries with SWFs should employ principles and practices to demystify and build confidence in their funds, and countries receiving SWF investments should be more open to foreign investment.
Op-ed
Financial Hybrids Do Not Work
Adam S. Posen—August 7, 2008
Hybrid financial institutions—those that combine both a public mission and a profit-maximizing goal—do not work and should cease to exist. It is no coincidence that the most spectacular crashes of the recent financial turmoil involved hybrids on both sides of the Atlantic. In the United States, it was Fannie Mae and Freddie Mac; in Germany, it was Sachsen LB and IKB Deutsche Industriebank. In both countries, these neither-fish-nor-fowl institutions were long recognized as financial accidents waiting to happen. Hybrid institutions are erected where there is political pressure to provide credit to borrowers whom the market left alone will not serve, but the cost is too large or embarrassing for the government to fund on its balance sheet. If these institutions do well, a few hybrid managers and shareholders end up very rich; but if they don't, the taxpayers end up with a large bill. In between, retired officials and politicians get high-paying jobs there, and government influence directs credit to purposes with electoral rewards. No government should leave financial hybrids in existence. The American agencies should be nationalized, since enhancing mortgage liquidity still has public utility, while the German Landesbanks should be privatized or shut down, since markets have superceded their purposes.
Working Paper 08-7
Policy Liberalization and FDI Growth, 1982 to 2006 [pdf]
Matt Adler and Gary Clyde Hufbauer—August 5, 2008
Global economic expansion over the last three decades has been remarkable. While nominal world GDP has increased four times, world bilateral trade flows have grown more than six-fold, and the stock of foreign direct investment (FDI) has grown by roughly 20 times since 1980. The sources of global trade and investment growth are well known—general economic expansion, policy liberalization, and better communications and technology—but the impact of each source is unclear.
Adler and Hufbauer attempt to uncover the contribution of policy liberalization to the rising ratios of US inward and outward FDI stocks to GDP over the last three decades. Drawing on stylized facts and an unorthodox calculation method the authors estimate that roughly 30 percent of US inward FDI stock growth and 18 percent of US outward FDI stock growth between 1982 and 2006 can be attributed to policy liberalization. In total, and as a conservative measure, US inward and outward FDI stock growth between 1982 and 2006 contributed roughly $234 billion annually to the level of US real GDP in 2006. Of this annual gain, roughly $77 billion results from the expected rate of FDI stock growth (as a simple consequence of GDP growth); $48 billion is attributable to FDI stock growth from policy liberalization; and $112 billion is attributable to FDI stock growth from "everything else"—a combination of market forces and technological change.
Op-ed
Looking Beyond the Boom
Marcus Noland and Howard Pack—August 1, 2008
The Arab world is experiencing an economic boom spurred by surging energy prices, reinforced by reform. But most Arabs do not live in major oil-producing countries, and the region has the world's lowest employment rate—less than half of adults are formally employed. The Arab world will have to create 55 to 70 million jobs between now and 2020 to keep pace and bring the rate of unemployment down to the global norm.
