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21. Understanding Differences in Growth Performance in Latin America and Developing Countries between the Asian and Global Financial Crises

Author:
Roberto Alvarez and José De Gregorio
Publication Date:
11-2014
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Latin American performance during the global fi nancial crisis was unprecedented. Many developing and emerging countries successfully weathered the worst crisis since the Great Depression. Was it good luck? Was it good policies? In this paper we compare growth during the Asian and global fi nancial crises and fi nd that a looser monetary policy played an important role in mitigating crisis. We also fi nd that higher private credit, more fi nancial openness, less trade openness, and greater exchange rate intervention worsened economic performance. Our analysis of Latin American countries confi rms that eff ective macroeconomic management was key to good economic performance. Finally, we present evidence from a sample of 31 emerging markets that high terms of trade had a positive impact on resilience.
Topic:
Economics, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
Asia and Latin America

22. Estimates of Fundamental Equilibrium Exchange Rates, November 2014

Author:
William R. Cline
Publication Date:
11-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
This semiannual review finds that most of the major international currencies, including the US dollar, euro, Japanese yen, UK pound sterling, and Chinese renminbi, remain close to their fundamental equilibrium exchange rates (FEERs). The new estimates find this result despite numerous significant exchange rate movements associated with increased volatility in international financial markets at the beginning of the fourth quarter of 2014, and despite a major reduction in the price of oil. The principal cases of exchange rate misalignment continue to be the undervalued currencies of Singapore, Taiwan, and to a lesser extent Sweden and Switzerland, and the overvalued currencies of Turkey, New Zealand, South Africa, and to a lesser extent Australia and Brazil. Even so, the medium-term current account deficit for the United States is already at the outer limit in the FEERs methodology (3 percent of GDP), and if the combination of intensified quantitative easing in Japan and the euro area with the end to quantitative easing in the United States were to cause sizable further appreciation of the dollar, an excessive US imbalance could begin to emerge.
Topic:
Economics, Foreign Exchange, International Trade and Finance, and Monetary Policy
Political Geography:
Africa, United States, Japan, Turkey, South Africa, Brazil, and New Zealand

23. Five Challenges for Janet Yellen at the Federal Reserve

Author:
David J. Stockton
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Janet Yellen, who will serve as the 15th chair of the Board of Governors of the Federal Reserve System after her likely confirmation in December 2013, has the experience, intelligence, and judgment to be an excellent successor to Ben S. Bernanke. But she will need to employ all those strengths, and then some, to deal with the challenges facing the nation's central bank. Her success in confronting these challenges will profoundly affect the United States and world economies. Five key challenges await her.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
United States

24. Estimates of Fundamental Equilibrium Exchange Rates, November 2013

Author:
William R. Cline
Publication Date:
11-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Since the previous estimates of fundamental equilibrium exchange rates (FEERs) in this series in May (Cline 2013), numerous exchange rates have moved substantially in response to the announcement in late May that the US Federal Reserve would likely begin to "taper" its quantitative easing program of large-scale asset purchases. The new estimates here again take as their point of departure the medium-term current account projections of the most recent World Economic Outlook (WEO) of the International Monetary Fund (IMF 2013b). However, because of a seeming inertia in the Fund's projections despite large exchange rate moves, this round of calculations pays special attention to compiling alternative estimates for economies with large changes in exchange rates.
Topic:
Economics, Foreign Exchange, International Trade and Finance, Markets, Monetary Policy, and Governance
Political Geography:
United States

25. The Greek Debt Restructuring: An Autopsy

Author:
Jeromin Zettelmeyer, Christoph Trebesch, and Mitu Gulati
Publication Date:
08-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The Greek debt restructuring of 2012 stands out in the history of sovereign defaults. It achieved very large debt relief— over 50 percent of 2012 GDP—with minimal financial disruption, using a combination of new legal techniques, exceptionally large cash incentives, and official sector pressure on key creditors. But it did so at a cost. The timing and design of the restructuring left money on the table from the perspective of Greece, created a large risk for European taxpayers, and set precedents—particularly in its very generous treatment of holdout creditors—that are likely to make future debt restructurings in Europe more difficult.
Topic:
Debt, Economics, Monetary Policy, and Financial Crisis
Political Geography:
Europe and Greece

26. How to Form a More Perfect European Banking Union

Author:
Ángel Ubide
Publication Date:
10-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The euro area has made significant strides in the last six months in designing a banking union. The goal has been to centralize supervisory decision making and improve the management of failing banks while protecting European taxpayers and imposing costs on creditors through so-called bail-ins to reduce moral hazard. Euro area leaders have reached some political agreements, and legislation is being prepared for eventual adoption by the European Parliament and then the various member states. This progress has been hailed as a step in the right direction, with particular praise for the euro area leaders' plan to endow the European Central Bank (ECB) with supervisory powers and create new rules for managing troubled banks.
Topic:
Economics, Markets, Regional Cooperation, and Monetary Policy
Political Geography:
Europe

27. Why Growth in Emerging Economies Is Likely to Fall

Author:
Anders Åslund
Publication Date:
11-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Emerging-market growth from 2000 to 2012 was untypically high. This paper highlights the many reasons why emerging-economy growth is likely to be lower going forward. Much of the catch-up potential has already been used up. The extraordinary credit and commodity booms are over, and many large emerging economies are financially fragile. They have major governance problems, so they need to carry out major structural reforms to be able to proceed with a decent growth rate, but many policymakers are still in a state of hubris and not very inclined to opt for reforms. They are caught up in state and crony capitalism. Rather than providing free markets for all, the West might limit its endeavors to its own benefit. Economic convergence has hardly come to an end, but it has probably reached a hiatus that is likely to last many years. The emerging economies need to improve their quality of governance and other economic policies substantially to truly catch up. For a decade or so, the West could take the global economic lead once again as in the 1980s.
Topic:
Economics, Emerging Markets, International Trade and Finance, Monetary Policy, and Governance
Political Geography:
Russia, China, India, South Africa, and Brazil

28. Updated Estimates of Fundamental Equilibrium Exchange Rates

Author:
William R. Cline and John Williamson
Publication Date:
11-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In 2008 we introduced a semiannual series providing estimates of fundamental equilibrium exchange rates, or FEERs (Cline and Williamson 2008a). The economic concept of FEERs was first set forth by Williamson (1983). An operational method for arriving at multilaterally consistent estimates of FEERs was developed by Cline (2008) and has been applied over the past five years in this series of estimates. This issue marks the valedictory round of the series for Williamson, who is retiring.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
Europe and Lisbon

29. Hyperinflations Are Rare, but a Breakup of the Euro Area Could Prompt One

Author:
Anders Åslund
Publication Date:
11-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Hyperinflation is one of the most misused words in the English language. Two years ago, I heard a prominent American investor say that we were about to get hyperinflation, “not 15 percent a year as under Jimmy Carter but perhaps 5 percent a year.” Hyperinflation is usually 1,000 percent or more a year. The standard definition by Philip Cagan (1956) is that hyperinflation starts when inflation reaches 50 percent a month, and then the economy is in hyperinflation for one year until monthly inflation falls and stays below 50 percent.
Topic:
Economics, International Trade and Finance, Markets, Regional Cooperation, and Monetary Policy
Political Geography:
Europe

30. How Can Trade Policy Help America Compete?

Author:
Robert Z. Lawrence
Publication Date:
10-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
America deserves credit for not having succumbed to the global financial crisis by repeating the protectionist mistakes of the 1930s. Nonetheless, since 2007, although lip service has been paid to boosting US exports, its trade policy accomplishments have been modest. This is unfortunate because active trade policies can promote American living standards and facilitate America's return to full employment and sustained growth. These policies can also help to create a global trade order that advances American interests. This policy brief argues that the United States needs new initiatives that discipline foreign practices, increase access to foreign markets, revitalize the World Trade Organization (WTO), improve the administrative and regulatory environment for trade, and assist workers and communities adversely affected by change.
Topic:
Economics, Globalization, International Trade and Finance, Markets, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
United States and America