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41. The US Trade Deficit: A Disaggregated Perspective

Author:
Catherine L. Mann and Katharina Plück
Publication Date:
09-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The paper prepares new estimates for the elasticity of US trade flows using bilateral, commodity-detailed trade data for 31 countries, using measures of expenditure and trade prices matched to commodity groups, and including a commodity-and-country specific proxy for global supply-cum-variety. Using the United Nations Commodity Trade Statistics Database (UN Comtrade) we construct bilateral trade flows for 31 countries in four categories of goods based on the Bureau of Economic Analysis's "end-use" classification system--autos, industrial supplies and materials-excluding energy, consumer goods, and capital goods. We find that using expenditure matched to commodity category yields more plausible values for the demand elasticities than does using GDP as the measure of demand that drives trade flows. Controlling for country and commodity fixed effects, we find that industrial and developing countries have demand elasticities that are statistically significant and that generally differ between development groups and across product categories. Relative prices for the industrial countries have plausible parameter values, are statistically significant and differ across product groups, but the relative prices for developing countries are poorly estimated. We find that variety is an important variable for the behavior of capital goods trade. Because the commodity composition of trade and of trading partners has changed dramatically, particularly for imports, we find that the demand elasticity for imports is not constant. Comparing the in-sample performance of the disaggregated model against a benchmark that uses aggregated data and GDP as the expenditure variable, our disaggregated model predicts exports better in-sample but does not predict imports as well as the benchmark model.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
United States

42. Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global Imbalances

Author:
Edwin M. Truman
Publication Date:
07-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Halving the US current account deficit as a share of GDP is likely to impose a burden of $2,350 per capita on the United States, which explains why US policymakers want to postpone adjustment. The rest of the world relies on the economic stimulus of a widening US external deficit, which explains why they are not eager to see global adjustment. The paper examines three scenarios of exchange rate adjustments, calls on the Federal Reserve to take more account of the external deficit in its words and policy actions, and familiarly notes the need for US fiscal adjustment as part of an efficient adjustment process. Complementary policies are required in the rest of the world. The paper discusses the pattern of recent international capital flows and proposes an international reserve diversification standard to remove some of the uncertainty about the management of foreign exchange reserves.
Topic:
Debt, Development, and Globalization
Political Geography:
United States

43. What Iraq and Argentina Might Learn from Each Other

Author:
Anna Gelpern
Publication Date:
06-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Financial collapse usually triggers a flurry of market, academic, and policy innovation. The Latin American debt crisis of the 1980s produced the Brady Bonds and led to the rise of today's emerging markets. In the late 1990s, crises in Pakistan, Ecuador, and Ukraine helped teach the markets how to restructure international sovereign bonds. Crises in Mexico, Russia, Brazil, Turkey, and throughout East Asia raised doubts about the international system's ability to manage vast and rapid capital flows, and prompted a big-picture reassessment under the rubric “international financial architecture.” This included most famously the sovereign bankruptcy proposals discussed elsewhere in this volume.
Topic:
Development and Economics
Political Geography:
Pakistan, Russia, Turkey, Ukraine, Middle East, East Asia, Brazil, South America, Latin America, and Mexico

44. What Bond Markets Can Learn from Argentina

Author:
Anna Gelpern
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Argentina has completed the largest and most complex sovereign bond restructuring in history. Before the debt exchange, it owed about $82 billion in principal and $20 billion in past due interest. Hundreds of thousands of creditors held 150 kinds of defaulted instruments issued in six currencies under the laws of eight jurisdictions. Creditors owed just over 76% of the total, or $62 billion, got $35 billion in new performing bonds. Other performing debt includes $40 billion in domestic and about $30 billion in multi-lateral obligations. Argentina left behind almost $25 billion in defaulted principal and interest.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Argentina and South America

45. Reflections

Author:
Edwin M. Truman
Publication Date:
03-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
My reflections on the new operating procedures that were adopted by the Federal Open Market Committee (FOMC) on October 6, 1979, derive from my responsibilities at the Federal Reserve Board at the time. Those responsibilities included preparation of the international component of the staff forecast, analysis of economic and financial developments in other countries, and assisting the Chairman and members of the Board (primarily Henry C. Wallich) with international responsibilities in connection with their attendance at international meetings. Therefore, mine was and is an international perspective. I was not involved in the design of the new operating procedures, although I was informed that the project was under way.
Topic:
Development, Economics, and Emerging Markets
Political Geography:
United States

46. A Revived Bretton Woods System? Implications for Europe and the United States

Author:
Edwin M. Truman
Publication Date:
02-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This note addresses three topics: (1) Do the recent musings by Dooley, Folkerts-Landau, and Garber (DFG), in particular their argument that the world is operating under a revived Bretton Woods system (BW2), provide a useful framework for thinking about international economic and financial developments and prospects? (2) What does the DFG framework imply for the euro area, and are those implications reasonable? (3) What does the DFG framework imply for the United States, and are those implications reasonable?
Topic:
Development and Economics
Political Geography:
United States and Europe

47. Breaking Up Is Hard To Do: Global Co-dependency, Collective Action, and the Challenges of Global Adjustment

Author:
Catherine L. Mann
Publication Date:
01-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Global imbalances have continued, indeed deepened, far longer than both researchers and pundits would have thought. On the US side, the current account deficit at about $630 billion (2004q1-3, AR) and 5.5 percent of GDP (2004q3) falls outside the oft-quoted range of 4-5 percent after which, research on industrial countries suggests, economic forces tend to narrow the imbalance. There is some-what less research on the persistence of global imbalances from the standpoint of the rest of the world, in part because individually most of those imbalances are not so notable. Clearly though, collectively growth in the rest of the world has come to be co-dependent on US demand patterns.
Topic:
International Relations, Development, Economics, and Industrial Policy
Political Geography:
United States

48. China Bashing 2004

Author:
Gary Clyde Hufbauer and Yee Wong
Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
On April 26, 2004, Senator John Kerry released his six-point trade pro - gram, “Trade Enforcement: Asleep at the Wheel,” and conspicuously targeted China for violating worker rights, dumping, and supporting “illegal currency manipulation” (Kerry 2004). Five days earlier, senior Bush administration officials met with Chinese Vice Premier Wu Yi to settle a few trade disputes (e.g., WiFi) but did not resolve the most contentious ones (exchange rates, semiconductors, and labor rights).
Topic:
Development, Globalization, and International Trade and Finance
Political Geography:
China and Asia

49. Islam, Globalization, and Economic Performance in the Middle East

Author:
Marcus Noland and Howard Pack
Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The Middle East is a demographic time bomb. According to the United Nations Development Program's (UNDP) Arab Human Development Report 2002, the population of the Arab region is expected to increase by around 25 percent between 2000 and 2010 and by 50 to 60 percent by 2020—or by perhaps 150 million people, a figure equivalent to more than two Egypts. Even under the UNDP's more conservative scenario, Bahrain, Kuwait, Qatar, and the United Arab Emirates will be the only Arab countries in 2020 with median ages above 30.
Topic:
Development, Globalization, and International Trade and Finance
Political Geography:
Middle East, Kuwait, Arabia, Egypt, Bahrain, Qatar, and United Arab Emirates

50. Senator Kerry on Corporate Tax Reform: Right Diagnosis, Wrong Prescription

Author:
Gary Clyde Hufbauer and Paul Grieco
Publication Date:
04-2004
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Senator John Kerry has proposed a major overhaul in corporate taxation, with the goal of persuading multinational companies (MNCs) to employ more workers at home and fewer abroad. Kerry has correctly emphasized that domestic production is often taxed at a higher rate than production abroad, but his prescriptions will not boost US jobs.
Topic:
Development, Globalization, and International Trade and Finance
Political Geography:
United States, South America, Central America, Caribbean, and North America