Peterson Institute for International Economics Update Newsletter
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PIIE Update Newsletter
December 19, 2013

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Poland Doesn't Need to Fix Unbroken Pension System

Anders Åslund
Published in Bloomberg
  Anders Aslund Since 1989, Poland has stood out among the former communist countries as the most successful reformer with the highest cumulative economic growth. It sailed through the global crisis and was the only European Union nation that didn't experience a recession in 2009. It is therefore puzzling that the center-right government of Prime Minister Donald Tusk has proposed a reversal of the country's successful pension reforms of 1999 as a way to reduce the near-term budget deficit. Such a reversal would swiftly reduce pension savings and, therefore, the demand for Polish equities. The current Polish government's inability to manage the country's public finances cannot be repaired or disguised by undoing reforms that work.

>> Read full op-ed

Our Chance to Slash the High Costs of Currency Manipulation

C. Fred Bergsten
Published in the Financial Times
  C. Fred Bergsten The United States is negotiating two mega-regional trade agreements across the Atlantic and the Pacific that could become a template for global trade rules in the 21st century. But members of Congress, citing studies by C. Fred Bergsten and Joseph E. Gagnon, have challenged this agenda by demanding "strong and enforceable" responses to currency manipulation that distorts trade. Bergsten reviews the ways that "currency manipulation" can be defined and offers suggestions on how it can be regulated in the new trade accords. Ignoring the issue could sink trade deals that represent a potentially huge benefit to the global economy.

>> Read full op-ed
>> See also Policy Brief 12-25: Currency Manipulation, the US Economy, and the Global Economic Order

Ukraine's False Choice

Douglas A. Rediker and Heidi Crebo-Rediker
Published in Foreign Policy
  Douglas Rediker Ukraine president Viktor Yanukovych has rejected his country's painstakingly negotiated Association Agreement with the European Union. Instead, he is finalizing the terms of a Russian counteroffer of financial support in return for political allegiance. Ukraine will have to accept the need to reform its economy, however, regardless of which political direction it chooses to pursue. Recent experience in Egypt and Belarus, for example, demonstrates that countries that offer the prospect of financial support in return for political fealty often end up pushing for International Monetary Fund (IMF)-style reforms on their ally in any case. The real choice for Ukraine is only between who imposes and enforces reforms and its external orientation.

>> Read full op-ed

India's Troubling Trilemma: The Reason Why Macro-Stability Is So Elusive for India

Arvind Subramanian
Published in the Business Standard, New Delhi
  Arvind Subramanian After a year of economic setbacks, India's economic prospects appear to have improved. The stock market is soaring, foreign money is pouring back in, and the current account deficit has declined. But India's macroeconomic problems, including high inflation, are far from over. They have deeper structural origins in the form of a trilemma, or three-way competing objectives. As a lively democracy with a weak state, India's embrace of financial globalization will make it difficult to maintain economic stability. India can pursue two of these three objectives—competitive and imperfect democracy, global financial integration, and macroeconomic stability—but not all three of them simultaneously.

>> Read full op-ed

The European Central Bank's Big Moment

Nicolas Véron
Published in Financial World
  Nicolas Veron Europe's effort to establish a banking union has to overcome many doubters, but there is no doubt about its transformative nature. EU leaders have entrusted the European Central Bank (ECB) with centralized authority over bank supervision across euro area countries. This step could reestablish trust in European banks, reboot the interbank market, end dysfunctional credit allocation, and reverse the vicious circle between bank and sovereign credit. The upcoming asset quality review and stress tests of 130 credit institutions (covering 85 percent of the euro area's banking assets) should trigger the triage, recapitalization, and restructuring of the banking system. Doing so honestly, however, poses the risk of confrontation between the ECB and euro area member states. But if the assessment lacks credibility, the reputations of the ECB and Europe itself may be damaged, with dangerous political consequences.

>> Read full op-ed

Peterson Perspectives Interviews

audio  PIIE Debate: Germany's Role in Europe, Part II
Jacob Funk Kirkegaard and Edwin M. Truman say Germany needs to accept more inflation to help others in Europe, but the difficulties of such a step are formidable.

audio  PIIE Debate: Germany's Role in Europe, Part I
Jacob Funk Kirkegaard and Edwin M. Truman discuss whether Germany has imposed too much fiscal consolidation on troubled euro area countries and on itself.

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.

Recent Blog Posts

RealTime Economic Issues Watch   China Economic Watch    North Korea:  Witness to Transformation
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Proposed Export Ban in Indonesia

Europe's Cypriot Solution for Failing Banks

Payback Time for the "Yanukovych Family"

An Unintended Consequence of Sanctions: OFAC Risks Granting North Korea Debt Relief

Time for a "Nuclear Option" in the World Trade Organization
  China's Partially Marketized Financial System

The Shanghai Free Trade Zone's Financial Firewall

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
  Monolithic Ideological System Update

The Levitating North Korean Economy

The Late, Great Korean Peninsula Security Report

Myanmar and North Korea: Divergent Paths

Commission of Inquiry Washington Hearings

PIIE Noted in the News and on the Web

PBS NewsHour
Federal Reserve Announces Pull Back on Stimulus as Bernanke Nears End of Tenure
PIIE President Adam S. Posen joins Judy Woodruff, David Wessel, and John Taylor to discuss the Federal Reserve Board's announcement that it will begin to taper its bond buying program in January.

Chicago Public Radio
Russia Offers Economic Support to Ukraine
Anders Åslund discusses the causes behind Ukraine's financial troubles and the announcement that Russia will purchase $15 billion in Ukraine bonds.

Diane Rehm Show
Debate Over Proposed Global Trade Agreements
Simon Johnson discusses the pros and cons of the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership and what lessons can be drawn from NAFTA.

Diane Rehm Show
Puerto Rico's Troubled Economy and Dissent Over Statehood Options
Barbara Kotschwar discusses Puerto Rico's troubled economy and rising debt.

Diane Rehm Show
Unrest in Ukraine
Anders Åslund joins a distinguished panel of experts to discuss the ongoing unrest in Ukraine.

Wall Street Journal
Fed Moves Toward New Tool for Setting Rates [subscription required]
The Wall Street Journal discusses an experimental Federal Reserve bond-trading program that Joseph E. Gagnon and Brian Sack are proposing in a forthcoming research paper.

NPR's All Things Considered
How NAFTA Drove the Auto Industry South
Gary Clyde Hufbauer discusses how the biggest industry transformation resulting from NAFTA occurred in Mexico's automobile industry.

Preview of Next Issue

Policy Brief
Five Challenges for Janet Yellen at the Federal Reserve
David J. Stockton

Putin's Conservative State Capitalism
Anders Åslund
Published in the Moscow Times

In This Issue

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