Peterson Institute for International Economics Update Newsletter
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PIIE Update Newsletter
March 18, 2013

"Washington's premier think tank on the global economy"
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  Live Webcast
Rising Tide: Is Growth in Emerging Economies Good for the United States?

March 19, 12:30 p.m.–2:00 p.m.
  The Peterson Institute will webcast the release of its latest book Rising Tide: Is Growth in Emerging Economies Good for the United States? on Tuesday, March 19, 12:30 p.m.–2:00 p.m. Authors Robert Z. Lawrence and Lawrence Edwards will discuss their study and address the fears that economic growth in emerging markets has or could reduce US living standards, lower US wages, and increase wage inequality. Lawrence and Edwards' research finds that these concerns are vastly overblown, and are arguably more than offset by the benefits to the United States of such trade, even with respect to inequality.

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>> More information

  Working Paper 13-2
The Elephant Hiding in the Room: Currency Intervention and Trade Imbalances

Joseph E. Gagnon
  Joseph E. Gagnon Official purchases of foreign assets—a broad definition of currency intervention—are strongly correlated with current account (trade) imbalances. Causality runs in both directions, but statistical analysis using instrumental variables reveals that the effect of official asset purchases on current accounts is very large. A country's current account balance increases between 60 and 100 cents for each dollar spent on intervention. This is a much larger effect than is widely assumed. These results raise serious questions about the efficiency of international financial markets.

>> Read full working paper [pdf]

  Congressional Testimony
Deepening US-India Trade Relations

Arvind Subramanian
  Arvind Subramanian Since 2000 US exports to India have increased by nearly 700 percent. Yet the United States is only the fourth largest exporter to India, and three major challenges stand in the way of US business gaining further market share: (1) India's regulatory and tax environment worries risk-adverse US business and is unlikely to change in the short term, (2) protectionism in selected sectors still exists in India, and (3) India's economic partnership agreements with major competitors to the United States substantially discriminate against US business. Without a strategy to overcome or adjust to these three challenges, US business risks losing out to foreign firms that are willing to take greater risks to navigate one of the world's largest and most dynamic markets.

>> Read full testimony [pdf]

  Congressional Testimony
Flirting with Disaster: Solving the Federal Debt Crisis

Simon Johnson
  Simon Johnson The disaster with which the United States now flirts is that it will inflict upon itself unnecessary and damaging austerity. There is no meaningful evidence that the United States needs to cut federal deficits dramatically this year or next or even over the next five years. Policymakers should instead build an economy within which federal revenue can be robust and public spending growth can be contained over the next decade. A separate, but very important, issue is how to limit healthcare spending as a percent of GDP over the next 20 to 50 years.

>> Read full testimony [pdf]

The Prime Minister's Speech on the Economy Asserted the Incredible in Defense of the Indefensible

David Blanchflower and Adam S. Posen
  Adam S. Posen Prime Minister David Cameron made a number of indefensible assertions about the British economic situation in a recent speech. His plan may be clear, but it clearly does not deal with the deficit. The British structural budget deficit has grown rather than shrunk. He denies the short-term contractionary effect on growth of fiscal austerity—something the independent Office of Budget Responsibility affirms. And he claims there is no alternative path to his program. A pro-investment alternative program has been proposed by, among others, these authors and UK Business Minister Vince Cable, broadly supported by the International Monetary Fund. His government should stop denying reality.

>> Read full op-ed

Peterson Perspectives Interviews

audio  Doing Business in India: High Risk, High Reward
Arvind Subramanian discusses his Congressional testimony in favor of expanding US-Indian economic relations.

audio  Risky Repercussions from Cyprus: Another View
Jacob Funk Kirkegaard says depositors as well as bondholders might take losses in a Cyprus bank bailout—and that this would be a good thing.

audio  Risky Repercussions from Cyprus
Nicolas Véron says the discussion about forcing losses on Cyprus bank depositors could spread fears of bank runs elsewhere in Europe.

audio  The IMF Needs Support from Congress
Edwin M. Truman explains that a measure before Congress will strengthen the International Monetary Fund's ability to stabilize the world economy, at no cost to US taxpayers.

Recent Blog Posts

RealTime Economic Issues Watch   China Economic Watch    North Korea:  Witness to Transformation
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The Cyprus Bank Deal: What It Means

Japan's 'Third Arrow': Why Joining the TPP is a Game Changer

The Challenge of Climate Change (in One Chart)

A Reassuring Choice for the Central Bank of Russia

The Return of the Tobin Tax?
  Local Government Financing Vehicles Under Fire Again

Testimony before the U.S.-China Economic and Security Review Commission

Show me the money: Chinese banks retain profits despite interest rate reforms

Will municipal bonds save China's urbanization plan?

Beijing's 2015 Industry Consolidation Targets: Problem or Solution?
  Hugely important: North Korea running a current account surplus?

Event: North Korea Film Festival in Sydney March 21-22

What's not to believe?

Reviewing the Bidding: the North Korean Statements

Slave to the Blog: the March Madness Edition

PIIE Noted in the News and on the Web
Is Austerity the Way to Go to Get Us Out of the Fiscal Crisis?
As a guest on's weekly netcast, Adam S. Posen explains the history of the Peterson Institute, his experience as an American at the Bank of England, and why austerity is a lose-lose proposition right now.

NPR's All Things Considered
North Korea Severs 'Hotline' Communication with the South after Sanctions
Marcus Noland says deterrence by the United States and South Korea, not the armistice or hotlines, is what has maintained stability on the Korean Peninsula for the last 60 years.

The Wall Street Journal
Four Financial Books for Summer Reading
The Wall Street Journal calls White House Burning by Simon Johnson and James Kwak a "page-turner," recommending it as a top financial book for summer reading.

Preview of Our Next Issue

Policy Brief
The Congress Should Support IMF Governance Reform to Help Stabilize the World Economy
Edwin M. Truman

Policy Brief
Crafting a Transatlantic Trade and Investment Partnership: What Can Be Done
Jeffrey J. Schott and Cathleen Cimino

In This Issue

Adam S. Posen Exorcising Ghosts of Inflation and Unification from German Economic Policy

Adam S. Posen delivers the annual Kurt Viermetz Distinguished Visitorship in Economics lecture at the American Academy in Berlin.
Canadian Trade Minister Fast US-Canadian Trade Relations: Continued Leadership on the World Stage

Canadian Trade Minister Fast discusses the economic relationship between Canada and the United States.

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