Peterson Institute for International Economics Update Newsletter
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PIIE Update Newsletter
November 6, 2012

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  New Book
Global Economics in Extraordinary Times: Essays in Honor of John Williamson

C. Fred Bergsten and C. Randall Henning, editors
  Global Economics in Extraordinary Times: Essays in Honor of John Williamson Over five decades, John Williamson has written across an extraordinarily broad set of topics in international economics ranging from international monetary economics to development policy. The arc of his scholarship follows the main preoccupations of international economists during the second half of the 20th century and the first decade of the 21st. Bridging the scholarly literature and policy debates, his publications on the Washington Consensus, exchange rate policy, and international monetary reform have profoundly influenced public discourse, government policy, and the evolution of the economics discipline. As John marked his 75th birthday, his friends and colleagues prepared this collection of essays to celebrate these many contributions and reflect on their relevance to the challenges that confront the world economy in the wake of the 2008–09 global financial crisis and its current aftermath in Europe.

>> Preview and purchase book online
>> See also related event

  Policy Brief 12-21
How Can Trade Policy Help America Compete?

Robert Z. Lawrence
  Robert Z. Lawrence America deserves credit for not having succumbed to the global financial crisis by repeating the protectionist mistakes of the 1930s. Nonetheless, since 2007, although lip service has been paid to boosting US exports, its trade policy accomplishments have been modest. This is unfortunate because active trade policies can promote American living standards and facilitate America's return to full employment and sustained growth. These policies can also help to create a global trade order that advances American interests. This policy brief argues that the United States needs new initiatives to discipline foreign practices, increase access to foreign markets, revitalize the World Trade Organization (WTO), improve the administrative and regulatory environment for trade, and assist workers and communities adversely affected by change.

>> Read full policy brief [pdf]

China's Currency Rises in the US Backyard

Arvind Subramanian and Martin Kessler
  Arvind Subramanian The Republican presidential candidate Mitt Romney recently repeated his promise to declare China a currency manipulator on his first day in office. Even discounting the "get tough on China" bluster of the campaign season, this remark encapsulates American distance from, and denial about, changing economic realities. New research shows that since the global financial crisis, as the United States and Europe have struggled economically, the renminbi has increasingly become a reference currency (meaning emerging market exchange rates move closely with it). In fact, since June 2010 when the renminbi resumed floating, the number of currencies tracking it has increased compared with the earlier period of flexibility between July 2005 and 2008. East Asia is now a renminbi bloc with the currencies of seven out of ten countries in the region tracking the renminbi more closely than the US dollar. The message for the next US president is clear: America's top priority should be internal economic regeneration rather than targeting China's currency or other policies. In reality, this regeneration is a necessary, but by no means sufficient, condition for retaining American preeminence in the face of China's rise.

>> Read full op-ed
>> See also: The Renminbi Bloc Is Here: Asia Down, Rest of the World to Go?

  Working Paper 12-21
The Services Sector in Asia: Is It an Engine of Growth?

Donghyun Park and Kwanho Shin
  The underdeveloped services sector in Asia has the potential to become a new engine of economic growth in developing Asia, which has traditionally relied on export-oriented manufacturing to power its growth. In this paper, Park and Shin empirically analyze the prospects for the services sector in Asia. Their analysis of 12 Asian countries indicates that the services sector has already contributed substantially to the region's growth in the past. Somewhat surprisingly, in light of the difficulty of achieving productivity gains in services, they also find that services labor productivity grew at a healthy pace in much of the region. Overall their analysis provides substantial cause for optimism about the role of the services sector as an engine of growth in Asia. However, they caution that some Asian countries where the services sector is currently struggling, such as Korea and Thailand, will find it more challenging to develop the sector.

>> Read full working paper [pdf]

  Working Paper 12-20
Performance of the Services Sector in Korea: An Empirical Investigation

Donghyun Park and Kwanho Shin
  There is a widespread perception that Korea's services sector lags behind its dynamic world-class manufacturing sector. This paper empirically analyzes the past performance of Korea's services sector in order to assess its prospects as an engine of growth. The analysis resoundingly confirms the conventional wisdom of an underperforming services sector. In light of Korea's high income and development level, the poor performance of modern services is of particular concern. The authors identify a number of factors underlying the poor performance and set forth policy recommendations for addressing them. Overall, Korea faces a challenging but navigable road ahead in developing a high value-added services sector.

>> Read full working paper [pdf]

Peterson Perspectives Interviews

audio  The World According to John Williamson: Part I
John Williamson, who is retiring at the end of 2012, reflects on a career of challenging shibboleths and why he calls himself a "saltwater economist."

audio  The World According to John Williamson: Part II
John Williamson discusses the origins and distortions surrounding "the Washington Consensus," a phrase he coined, and the challenges facing policymakers in Europe and the United States.

audio  Obama, Romney, and Trade: Part I
Jeffrey J. Schott says that the Trans-Pacific Partnership trade talks will be a top priority in 2013 regardless of who wins the US election.

audio  Obama, Romney, and Trade: Part II
Jeffrey J. Schott discusses the prospects of broad new agreements to open up trade between the United States and Latin America, as proposed by Governor Romney.

Recent Blog Posts

RealTime Economic Issues Watch   China Economic Watch    North Korea:  Witness to Transformation
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Global Financial Reform and Cross-Border Integration: Is Asian Leadership Needed?

A Spate of Recent Positive Events in the Euro Area

Lithuania's Elections: Protest but No Earthquake

The First Step in Europe's Banking Union: Difficult but Achievable

Has the IMF Missed the Point on Public Debt Overhangs?
  Systemic Dangers in Chinese Wealth Management Products

Avoiding the Visible Hand of the State

China Rebalancing Update – Q3 2012

With Great Power Comes Great Responsibility

Two Charts to Explain the Current State of the Chinese Economy
  Vote Korea!

Agricultural reform in Our Own Style

Report on International Protest to Save North Korean Refugees

Two Films

North Korea Leadership Tracker

PIIE Noted in the News and on the Web

Bloomberg TV
Peterson Institute's Gagnon on Sandy, Fed, Economy
Joseph E. Gagnon does not expect Hurricane Sandy to have much impact on Federal Reserve policy or the US economy. Gagnon also responds to the Minneapolis Federal Reserve president's statement that monetary policy is currently "too tight."

Wall Street Journal
Lardy vs. Pettis—Debating China's Economic Future
Nicholas R. Lardy and Michael Pettis, Peking University, argue whether China's growth rate is sustainable or not. The Wall Street Journal has posted their opening arguments online, with conclusions to follow.

Minnesota Public Radio
As Economy Slows, China Looks for a New Model
Nicholas R. Lardy says China has done very well growing its economy through exports and investments, particularly through real estate over the last 10 years, but that the model needs to change.

Economics of the New Chinese Government
Arvind Subramanian discusses the economic future of China at a panel hosted by the Heritage Foundation.

The American Interest
Which Nations Failed?
Arvind Subramanian offers a critique of Why Nations Fail, citing China and India as examples that do not fit the book's central conclusion.

Europe's Role in the World Is at Stake
Robert B. Zoellick explains why he expects Europe to "muddle through" its economic and political crises.

The World
How Europe's Ailing Economy Affects the American Industry
Jacob Funk Kirkegaard says that while the euro crisis's most direct effect on US industry is reduced US exports to Europe, its most negative effect is that it is lowering financial market confidence.

World Politics Review
Global Inside: IMF Constituency Changes Don't Go Far Enough
Edwin M. Truman characterizes the reshuffling of the constituencies that elect IMF board members as "small, slow and largely cosmetic," as the Europeans have managed to retain overrepresentation.

Biz Asia America
Edwin M. Truman discusses the history of the US Federal Reserve and its mandate with CCTV's Sean Callebs. The segment begins 3:35 into the video.

Preview of Our Next Issue

Rosneft Is the Foundation of Putin's State Capitalism
Anders Åslund

In This Issue

John Williamson Global Economics in Extraordinary Times: Essays in Honor of John Williamson

John Williamson discusses designing economic policymaking at a Festschrift held in his honor. Stanley Fischer, governor of the Bank of Israel, delivered the keynote address.

Featured Book
Who Needs to Open the Capital Account? Who Needs to Open the Capital Account?

Olivier Jeanne
Arvind Subramanian
John Williamson

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