Peterson Institute for International Economics Update Newsletter
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PIIE Update Newsletter
December 11, 2013

"Washington's premier think tank on the global economy"
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  Policy Brief 13-29
Estimates of Fundamental Equilibrium Exchange Rates, November 2013

William R. Cline
FEERs Interactive Map
Use the interactive FEERs map to see currency undervaluation and overvaluation, in terms of both multilateral and bilateral exchange rates, over time across the globe.
William R. Cline Many exchange rates have moved substantially since May in response to the belief that the US Federal Reserve would likely begin to taper its quantitative easing. Despite some earlier concern that this "taper shock" would wreak havoc in international capital and currency markets, according to the latest estimates of fundamental equilibrium exchange rates (FEERs) by the Peterson Institute, exchange rate misalignments have tended to narrow in the past six months. Overvalued currencies have corrected downward in Turkey, South Africa, India, Indonesia, and even Australia. Medium-term surplus estimates have moderated for Taiwan, Sweden, Switzerland, and Japan as well. Cases of large misalignments persist, however, most notably in Singapore, New Zealand, and Turkey according to this assessment. The overvaluation of the dollar and undervaluation of the Chinese renminbi remain modest, however, and no longer constitute a source of severe imbalances as during 2006–07.

>> Read full policy brief [pdf]
>> View the interactive FEERs map

Ukraine: The Basket Case

Anders Åslund
Published in Foreign Policy
Anders Aslund For years, the Ukrainian government has pursued a disastrous economic policy, raising the likelihood of a severe financial crisis. The outlook for Ukraine's economy looks even worse now that Ukraine's leaders have scrapped a planned agreement to deepen cooperation with the European Union. The last-minute decision by Ukraine's president, Viktor Yanukovych, to cancel that agreement is widely attributed to economic pressure from Russia and has led to protests erupting throughout Ukraine, adding a serious political challenge to the economic risks.

>> Read full op-ed

Russia Can't Grow and Steal at the Same Time

Anders Åslund
Published in the Moscow Times
  The Kremlin's two key goals are to maintain political power and to enrich the ruling elite. At best, Russian economic growth is the third-ranking goal, and successfully pursuing growth would undercut those two primary aims. What Russian economic growth there is has come from private domestic and foreign investors' actions. But the state limits what companies domestic tycoons can buy and sell, leaving them little choice but to take their money out of the country. The state also represses Russian small and medium-sized enterprises through tougher taxation and extortion, causing hundreds of thousands of such enterprises to close down this year. As the number of enterprises declines, competition diminishes and productivity stagnates. As long as President Vladimir Putin pursues an anti-growth and corrupt economic policy, no growth is likely.

>> Read full op-ed

Peterson Perspectives Interviews

audio  A 'Pretty Big Deal' for the World Trade Organization
Gary Clyde Hufbauer says the trade facilitation agreement forged at the WTO Ministerial Conference in Bali was a step forward that could yield major gains for the world trading system.

audio  Puerto Rico's Troubles Take It to Uncharted Waters
Douglas A. Rediker explains that because Puerto Rico is not a state or a country, it cannot turn to the usual sources of help but must solve its problems on its own.

audio  Ukraine's Turmoil Without End?
Anders Åslund explains the factors behind the protests in Ukraine and predicts that the next step, a Cabinet shakeup, will not end the stalemate or the country's economic troubles.

audio  Lifting Sanctions on Iran
Gary Clyde Hufbauer explains that economic sanctions on Iran have worked because of cooperation with Europe, Russia, and China—all of whom back the deal to lift some sanctions to support nuclear negotiations with Tehran.

Recent Blog Posts

RealTime Economic Issues Watch   China Economic Watch    North Korea:  Witness to Transformation
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Time for a "Nuclear Option" in the World Trade Organization

Why Bitcoins are Doomed in China

The German Grand Coalition Agreement: A Triumph for Merkel

Euro Revolution in Ukraine

Demands for a European Ukraine Plunge the Country into Crisis
  Why Bitcoins are Doomed in China

Economic Reform in the Third Plenum: Balancing State and Market

Interest Rate Liberalization – A Stepping Stone to Financial Reform in China

Third Plenum: Transformation of State Firms' Role Likely to Accelerate

The Third Plenum and State-owned Enterprises: A Step Backward or Forward?
  Slave to the Blog: Economic Priorities Edition

The Rise and (Possible) Fall of Jang Song Thaek

Jerome Cohen and Margaret K. Lewis on Labor Training Camps in Taiwan and China

Free Screening of "The Defector" in Washington, D.C.

The WFP/FAO Food Security Assessment

PIIE Noted in the News and on the Web

Wall Street Journal
Taper Shock Helped Emerging Markets Rebalance, Report Says
The Wall Street Journal assesses William R. Cline's updated estimates of fundamental equilibrium exchange rates (FEERs).

Bloomberg News
ECB Looks More Aggressive to Markets
While in London, PIIE President Adam S. Posen stops by the Bloomberg studio to discuss European Central Bank policy.

NPR's All Things Considered
Long Road Ahead For Permanent Iran Nuclear Deal To Be Reached
Gary Clyde Hufbauer discusses on NPR how sanctions pressed Iran to make a deal on its nuclear program. Listen to related Peterson Perspectives Interview: Lifting Sanctions on Iran

Preview of Next Issue

Poland Doesn't Need to Fix Unbroken Pension System
Anders Åslund
Published in Bloomberg

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