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2352. Trade and growth – again
- Author:
- Per Botolf Maurseth
- Publication Date:
- 02-2010
- Content Type:
- Working Paper
- Institution:
- Norwegian Institute of International Affairs
- Abstract:
- A stylised fact from the large and growing literature on relationships between trade and growth is that liberal trade policies may stimulate growth. However, there is no academic consensus that liberal trade policies are either necessary or sufficient ingredients in growth promoting policies. In this paper, the relationships between trade policy and growth are investigated. The paper adds some new findings. My measure of trade policy is not only applied average tariff rates which have been used by others, but such tariff rates for agriculture and manufacturing separately. The results indicate opposite results of the two: Protection of manufacturing correlates negatively with growth, while tariffs on agriculture imports seem to have a weaker though positive correlation. These results are robust in the sense that they remain significant with the same sign independently of different specifications and inclusions of various control variables.
- Topic:
- Agriculture, Economics, Industrial Policy, and International Trade and Finance
2353. Lawless Policy: TARP as Congressional Failure
- Author:
- John Samples
- Publication Date:
- 02-2010
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- The U.S. Constitution vests all the “legislative powers” it grants in Congress. The Supreme Court allows Congress to delegate some authority to executive officials provided an “intelligible principle” guides such transfers. Congress quickly wrote and enacted the Emergency Economic Stabilization Act of 2008 in response to a financial crisis. The law authorized the secretary of the Treasury to spend up to $700 billion purchasing troubled mortgage assets or any financial instrument in order to attain 13 different goals. Most of these goals lacked any concrete meaning, and Congress did not establish any priorities among them. As a result, Congress lost control of the implementation of the law and unconstitutionally delegated its powers to the Treasury secretary. Congress also failed in the case of EESA to meet its constitutional obligations to deliberate, to check the other branches of government, or to be accountable to the American people. The implementation of EESA showed Congress to be largely irrelevant to policymaking by the Treasury secretary. These failures of Congress indicate that the current Supreme Court doctrine validating delegation of legislative powers should be revised to protect the rule of law and separation of powers.
- Topic:
- Economics, Monetary Policy, and Financial Crisis
- Political Geography:
- United States and America
2354. Globalization: Curse or Cure? Policies to Harness Global Economic Integration to Solve Our Economic Challenge
- Author:
- Jagadeesh Gokhale
- Publication Date:
- 02-2010
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Globalization holds tremendous promise to improve human welfare but can also cause conflicts and crises as witnessed during 2007–09. How will competition for resources, employment, and growth shape economic policies among developed nations as they attempt to maintain productivity growth, social protections, and extensive political and cultural freedoms?
- Topic:
- Development, Economics, Globalization, and International Trade and Finance
- Political Geography:
- Global Focus
2355. Financial Integration and Foreign Banks in Latin America: Do They Amplify External Financial Shocks?
- Author:
- Liliana Rojas-Suarez, Arturo J. Galindo, and Alejandro Izquierdo
- Publication Date:
- 02-2010
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- This paper explores the impact of international financial integration on credit markets in Latin America. Using a cross-country dataset covering 17 Latin American countries between 1996 and 2008, the authors find that financial integration amplifies the impact of international financial shocks on aggregate credit and interestrate fluctuations. Despite this pernicious effect, the net impact of integration on deepening credit markets is positive and dominates for the large majority of states of nature. The paper also uses a detailed bank-level dataset covering more than 500 banks in Latin America for a similar time period to explore the role of financial integration—captured through the participation of foreign banks—in propagating external shocks. The authors find that interest rates charged and loans supplied by foreign-owned banks respond more to external financial shocks than those supplied by domestically owned banks. However, this result does not hold for all foreign banks: Spanish banks in the sample behave more like domestic banks and do not amplify the impact of foreign shocks on credit and interest rates. Important policy recommendations to avoid foreign banks' amplification of external financial shocks include the establishment of ring-fencing mechanisms, the development of early-warning systems, and the incorporation for agreements between domestic and foreign supervisors.
- Topic:
- Economics and Markets
- Political Geography:
- Latin America and Spain
2356. The International Financial Crisis: Eight Lessons for and from Latin America
- Author:
- Liliana Rojas-Suarez
- Publication Date:
- 01-2010
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- The international financial crisis of 2008–09 exposed the strengths and weaknesses of the current paradigm of development in Latin America, a paradigm based on liberalized capital accounts and significantly improved macroeconomic conditions. This paper presents lessons derived from the crisis, not only for the region itself, but also for other developing countries that might seek economic growth in the context of greater integration to the international capital markets. Some of the lessons are not new but have been reinforced by the crisis, such as Latin America's imperative need for export diversification (not only in products but in partners). Other lessons break with longstanding myths about the region, such as its inability to undertake counter-cyclical policies—at least on the monetary side. Yet other lessons reflect new developments in the current growth paradigm, such as a renewed assessment of (1) the relative roles of foreign and domestic banks in shielding the financial system against external shocks and (2) the potential costs of adopting blanket international financial regulations that do not account for a country's degree of development. Taken together, the lessons in this paper bring a new sense of optimism for growth in Latin America.
- Topic:
- Economics, International Trade and Finance, and Financial Crisis
- Political Geography:
- Latin America
2357. Is the recovery sustainable in the US and Europe?
- Publication Date:
- 02-2010
- Content Type:
- Working Paper
- Institution:
- Oxford Economics
- Abstract:
- Following the worst recession since the 1930s, the US, UK and Eurozone economies have all now returned to positive growth. With the boost from policy stimulus and the inventory cycle peaking, however, this raises questions about the sustainability of the current rebound. The analysis presented here suggests that the recoveries in both the US and Europe will be relatively muted compared to recent historical experience. The US is likely to be the growth leader, reflecting the more dynamic nature of its economy and financial sector. A key uncertainty relates to how labour markets will perform during the recovery phase. To date, the rise in US unemployment been particularly severe when compared to the experience of Europe. In light of the sharp falls in European productivity, we expect employment gains in Europe to be more muted in the recovery phase than in the US. The performance of residential real estate markets also remains important. Home prices in the US are now close to fair value by most metrics, suggesting that the correction in prices is likely to be bottoming out. In Europe, only Spain and Ireland appear to be in the midst of substantial housing market corrections. Commercial real estate markets are also facing ongoing corrections in many countries. While conditions in the US and Eurozone may deteriorate further, commercial property values appear to be stabilising in the UK following earlier sharp declines. The ability of the banking sector to finance the economic recoveries in the US and Europe remains a key risk to the growth outlook. As the process of absorbing credit losses and rebuilding capital is likely to be protracted, the normalisation of lending standards is likely to take longer than following recent recessions. This is a particular concern for the Eurozone, where bank funding is more important for companies. Whether domestic demand in the US and Europe recovers will also depend on whether private sector deleveraging has further to run. The destruction of household net wealth in the US suggests that the personal savings rate has further to rise, whereas there no longer appears to be a pressing need for households in the UK and Eurozone to consolidate their balance sheets. In contrast, non-financial corporations in the US are in a stronger financial position than their European peers, having not increased debt levels as rapidly during the credit boom. Risks around public finances have received the most attention in recent weeks. In particular, the adjustments underway in Greece pose a risk of potential contagion from sovereign credit risk that could threaten growth on both sides of the Atlantic.
- Topic:
- Economics, Markets, and Financial Crisis
- Political Geography:
- United States, United Kingdom, and Europe
2358. Indonesia: The Deepening Impasse in Papua
- Publication Date:
- 08-2010
- Content Type:
- Policy Brief
- Institution:
- International Crisis Group
- Abstract:
- The two sentiments that define the political impasse in Papua are frustration on the part of many Papuans that “special autonomy” has meant so little, and exasperation on the part of many Indonesian government officials that Papuans are not satisfied with what they have been given. The gulf between the two might be reduced by dialogue, but any prospect of serious talks is hampered by an un-willingness of Jakarta to treat the problem as essentially a political, rather than an economic one. To move forward, President Susilo Bambang Yudhoyono needs personally to take the lead in recognising that autonomy means more than increased budgetary allocations or accelerated economic development. He needs to explore directly with credible Papuan leaders how political autonomy can be expanded; affirmative action policies strengthened in all sectors; and Papuan fears about in-migration addressed. Unless these three issues are tackled head on in face-to-face meetings, the impasse is unlikely to be broken and increased radicalisation is likely.
- Topic:
- Diplomacy, Economics, Treaties and Agreements, and Territorial Disputes
- Political Geography:
- Indonesia and Asia
2359. The Economy of Burma/Myanmar on the Eve of the 2010 Elections
- Author:
- Lex Rieffel
- Publication Date:
- 07-2010
- Content Type:
- Working Paper
- Institution:
- United States Institute of Peace
- Abstract:
- The government of Burma is undergoing a critical transition: Before the end of 2010, the military regime that has ruled the country since a palace coup in 1998 will hold an election based on a constitution drafted in a nondemocratic process and approved by a referendum in 2008. The referendum fell far short of global standards of credibility and the election is likely to yield a government that neither the antimilitary movement nor the international community view as legitimate. However, the constitution and election also may offer opportunities for further international involvement that began in the wake of Cyclone Nargis in 2008. Burma's lagging economic performance—socioeconomic indicators placed it among the world's most impoverished in 2000—is due to a simmering internal conflict based on ethnic and religious differences. Successive military regimes after the failure of Burma's parliamentary government in 1962 have managed to further alienate the population and monopolize the benefits of Burma's abundant natural resources. Growth-disabling economic policies and brutal suppression of dissent since 1988 have caused an exodus of political and economic refugees estimated to be in excess of 3 million. However, Burma occupies a strategic space in the Southeast Asian region. It is a major supplier of natural gas to Thailand and could be a major agricultural exporter, as it was before World War II. Also, Burma is arguably the greatest obstacle to the 2015 integration objectives of the Association of Southeast Asian Nations (ASEAN), and its internal conflict contributes to tension between China and India. There is a glimmer of hope that the next government will consider economic policies conducive to sustainable economic growth, thereby improving the environment for political reconciliation. If so, the challenge for the international community will be to find ways to support economic policy changes in this direction that do not trigger a backlash from the country's military rulers. Though difficult, it may be possible to accomplish this through a patient economic strategy that involves more nuanced use of sanctions and effective collaboration with other actors in the region, particularly ASEAN.
- Topic:
- Conflict Resolution, Economics, and Human Rights
- Political Geography:
- China, India, Burma, Southeast Asia, and Myanmar
2360. The Relational Economy: A Buddhist and Feminist Analysis
- Author:
- Julie A. Nelson
- Publication Date:
- 05-2010
- Content Type:
- Working Paper
- Institution:
- Global Development and Environment Institute at Tufts University
- Abstract:
- This much-cited adage from 9th century Zen master Lin-Chi is a key Buddhist warning about nonattachment. Like so many Zen sayings and koans, it can surprise and unsettle us. It reminds us that even our highest ideals, goals, and aspirations are not something we can cling to. If we think we've finally "got it," that is a sure sign that we do not, and it's back to the meditation cushion for us.
- Topic:
- Economics, Gender Issues, and Religion