Search

Begin New Search Publishing Institution Peterson Institute for International Economics Publication Year within 25 Years

51. The Return of Economic Nationalism in Germany

Author:
Jeromin Zettelmeyer
Publication Date:
03-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
ermany’s new National Industrial Strategy 2030, unveiled by Economy Minister Peter Altmaier in February 2019, advocates an aggressive industrial policy. Although it stays clear of the virulent economic nationalism of the 1930s and the protectionism of President Donald Trump, its tone and much of its content are unmistakably nationalist. Zettelmeyer concludes that three of Altmaier’s five proposals—attempting to further raise the German share of manufacturing, restricting non-EU imports of intermediate goods, and promoting national champions in Germany and the European Union—are bad policies. The two remaining ideas—preventing some foreign takeovers and ramping up state support for certain technologies—are somewhat easier to justify, based on either market failures or the risk of technological dependence on foreign companies susceptible to political interference. But even in these areas, the specific policies proposed may well do more harm than good.
Topic:
Economics, Nationalism, European Union, and Donald Trump
Political Geography:
Europe and Germany

52. International Coordination of Economic Policies in the Global Financial Crisis: Successes, Failures, and Consequences

Author:
Edwin M. Truman
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper evaluates international efforts to diagnose the global financial crisis and decide on appropriate responses, the treatments that were agreed and adopted, and the successes and failures as the crisis unfolded. International coordination of economic policies eventually contributed importantly to containing the crisis, but the authorities failed to agree on a diagnosis and the consequent need for joint action until the case was obvious. The policy actions that were adopted were powerful and effective, but they may have undermined prospects for coordinated responses to future crises.
Topic:
International Affairs, Financial Crisis, Economic Policy, and Fiscal Policy
Political Geography:
Global Focus

53. Aggregate Effects of Budget Stimulus: Evidence from the Large Fiscal Expansions Database

Author:
Jeremie Cohen-Setton, Egor Gornostay, and Colombe Ladreit de Lacharrière
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper estimates the effects of fiscal stimulus on economic activity using a novel database on large fiscal expansions for 17 OECD countries for the period 1960–2006. The database is constructed by combining the statistical approach to identifying large shifts in fiscal policy with narrative evidence from contemporaneous policy documents. When correctly identified, large fiscal stimulus packages are found to have strong and persistent expansionary effects on economic activity, with a multiplier of 1 or above. The effects of stimulus are largest in slumps and smallest in booms.
Topic:
Budget, Fiscal Policy, and Stimulus
Political Geography:
Global Focus

54. Keeping Up with the Future: Upgrading Forecasts of Political Instability and Geopolitical Risk

Author:
Cullen S. Hendrix and Sooyeon Kang
Publication Date:
07-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The nature and magnitude of geopolitical risk is changing more rapidly than the ability to anticipate it, with increasingly severe economic consequences. This Policy Brief discusses the economic costs and risks associated with episodes of political instability, arguing that firms, government agencies, and international institutions must update their forecasting and risk assessment efforts to take global factors into account. Since the global financial crisis, political instability has shifted from emerging-market countries in the developing world to larger, more globally impactful econo¬mies. Acknowledging this changing risk profile—and developing better tools to predict major episodes of instability—will allow both policymakers and firms to plan with greater confidence.
Topic:
Economics, Financial Crisis, Geopolitics, Political stability, and Risk
Political Geography:
Global Focus

55. EU Trade Policy amid the China-US Clash: Caught in the Cross-Fire?

Author:
Felipe González and Nicolas Véron
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's rapid rise and unique economic system and the increasingly aggressive and disruptive US trade policy are posing an unprecedented threat to the global rules-based trading and economic system. The European Union has critical interests at stake in the current escalation, even as it has so far been comparatively spared from US trade policy belligerence and China's reactions. In this context, the European Union should adopt an independent and proactive stance, building on recent efforts and going beyond them. The European Union, even more than the United States or China, has a strategic interest in the preservation of the global rules-based order embodied by the World Trade Organization (WTO). It must play a leading role in steering WTO reform and modernization, working closely with broadly aligned third countries such as Japan and other players. It should expand its outreach beyond its immediate negotiating counterparts in both the United States and China, and leading European officials at both the EU and member state levels should work at better understanding China. While strengthening its domestic policy instruments to address new challenges, such as the screening of foreign direct investment for security purposes, the European Union must also resist its own temptations of protectionism and economic nationalism. In support of these objectives, the European Union should prepare itself for difficult decisions, which may involve revising some of its current red lines in international trade negotiations. Conversely, the European Union should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies. The European Parliament, in working with the European Council and the European Commission, will have a critical role to play in steering the European Union through these challenging times.
Topic:
International Relations, Economics, Trade Wars, and Trade Policy
Political Geography:
China, Europe, Asia, North America, United States of America, and European Union

56. Creating a Euro Area Safe Asset without Mutualizing Risk (Much)

Author:
Alvaro Leandro and Jeromin Zettelmeyer
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper explains and evaluates three proposals to create “safe assets” for the euro area based on sovereign bonds, in which sovereign risk is limited through diversification and some form of seniority. These assets would be held by banks and other financial institutions, replacing concentrated exposures to their own sovereigns. The paper focuses on three ideas: (1) to create multitranche “sovereign bond-backed securities” (SBBS), of which the senior tranche would constitute a safe asset; (2) to create a senior, publicly owned financial intermediary that would issue a bond backed by a diversified portfolio of sovereign loans (“E-bonds”); and (3) to issue sovereign bonds in several tranches and induce banks to hold a diversified pool of senior sovereign bonds (“multitranche national bond issuance”). Public attention (including public criticism) has so far focused on the first idea; the other two have not yet been seriously debated. The authors find that none of the competing proposals entirely dominates the others. SBBS do not deserve most of the criticism to which they have been subjected. At the same time, E-bonds and multitranche national bond issuance have several interesting features—including inducing fiscal discipline—and warrant further exploration.
Topic:
Economics, Regional Integration, Risk, and Fiscal Policy
Political Geography:
Europe

57. China, Like the US, Faces Challenges in Achieving Inclusive Growth Through Manufacturing

Author:
Robert Z. Lawrence
Publication Date:
08-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For more than three decades the goal of becoming “the factory of the world” has been at the core of China’s development strategy. This strategy, in combination with high rates of domestic investment and low rates of consumption, made Chinese production the most manufacturing intensive in the world. But as its wages have risen, China’s competitiveness in the most labor-intensive manufacturing industries has eroded. Its ability to assemble products remains a major source of its exports, but it has also tried to shift toward more sophisticated value-added production domestically. Chinese domestic spending has shifted away from investment toward more consumption as citizens’ incomes have grown. Like Americans, Chinese people are also spending more on services than on manufactured goods. All these changes are fundamentally altering the structure of China’s production, reducing the role of manufacturing, and increasing the skill levels of workers in manufacturing. This Policy Brief reviews the challenges posed by these developments for China’s long-term goal of achieving more inclusive growth. It presents evidence that commonly held perceptions that Chinese manufacturing employment growth is robust are wrong. In fact, such growth has peaked and China is now following the pattern of structural change that is typical of a more mature emerging economy, in which the share of employment in manufacturing declines as workers are increasingly employed in services.
Topic:
Economic growth, Manufacturing, and Trade
Political Geography:
China, Asia, North America, and United States of America

58. Does Trade Reform Promote Economic Growth? A Review of Recent Evidence

Author:
Douglas A. Irwin
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the two decades since the critical survey of empirical work on this question by Francesco Rodriguez and Dani Rodrik in 2000, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. This paper examines three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms that significantly reduce import barriers have a positive impact on economic growth, on average, although the effect differs across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance.
Topic:
Reform, Economic growth, and Trade
Political Geography:
Global Focus

59. The Rise of Global Innovation by US Multinationals Poses Risks and Opportunities

Author:
Lee G. Branstetter, Britta Glennon, and J. Bradford Jensen
Publication Date:
06-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For decades, US multinational corporations (MNCs) conducted nearly all their research and development (R&D) within the United States. Their focus on R&D at home helped establish the United States as the unrivaled leader of innovation and technology advances in the world economy. Since the late 1990s, however, the amount of R&D conducted overseas by US MNCs has grown nearly fourfold and its geographic distribution has expanded from a few advanced industrial countries to many parts of the developing world, creating an innovation system that spans the globe. Like many aspects of globalization, including the offshoring of manufacturing over recent decades, the globalization of R&D raises concerns about US competitiveness and loss of technological leadership. At the same time, the spreading geographic location of innovation presents opportunities for US-based companies if the right policies are adopted to seize them. The research presented in this Policy Brief demonstrates that US innovators continue to remain involved in important ways in US MNCs' global R&D activities, and fears of a hollowing out of US capacity to innovate—based probably on previous fears about the hollowing out of US-based manufacturing—may be overstated. Indeed, the large and growing pool of highly educated scientists and engineers in the developing world could increase the rate of global productivity growth, to the advantage of US-based companies and the world in general. The authors conclude that a productive way to capitalize on the globalization of MNC R&D is not to oppose it but to combine emerging-market talent with MNC experience so that innovation can flourish to improve global living standards and fuel economic progress.
Topic:
Economics, Globalization, Multinational Corporations, Risk, and Innovation
Political Geography:
North America and United States of America

60. Protectionism under Trump: The China Shock, Intolerance, and the "First White President"

Author:
Marcus Noland
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 2016, the United States elected an avowedly protectionist president. This paper uses US county-level electoral data to examine this outcome. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the reestablishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear.
Topic:
Economics, Politics, Donald Trump, and Protectionism
Political Geography:
China, Asia, North America, and United States of America