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1111. Do Markets Care Who Chairs the Central Bank?

Author:
Adam S. Posen and Kenneth N. Kuttner
Publication Date:
05-2007
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper assesses the effects of central bank governor appointments on financial market expectations of monetary policy. To measure these effects, we assemble a new dataset of appointment announcements from 15 countries, and conduct an event study analysis on exchange rates, bond yields, and stock prices. The analysis reveals a significant reaction of exchange rates and bond yields to unexpected appointments. The reactions are not unidirectional, and thus do not suggest new governors suffer from a generic credibility problem. Federal Reserve chairman appointments stand out in terms of their unusually pronounced effects on financial markets.
Topic:
Economics, International Trade and Finance, Markets, and Politics

1112. The Politics of Antitrust and Merger Review in the European Union: Institutional Change and Decisions from Messina to 2004

Author:
Gabriel T. Swank and Tim Büthe
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
Antitrust regulation and the related merger review are essential for making a market economy work. Merger review is also among the most prominent powers of the European Commission in the Common Market of the EU. How did this supranational actor come to acquire such power? And what explains the variation in the Commission's decisions in some of the trans-atlantically most controversial merger review cases in recent years? In this paper, we develop a modified neofunctionalist theory as a historical institutionalist theory of institutional change that integrates elements of rational choice and social constructivism. We argue that it provides a superior explanation of (1) the institutional development of the European Commission's competence over antitrust matters and merger review from the 1950s negotiations over the Treaty of Rome through the changes of 2004 and (2) the Commission's decisions in some of the most prominent cases, where a high level of politicization makes a neofunctionalist explanation least likely.
Topic:
International Relations, Economics, and Markets
Political Geography:
Europe

1113. The Case for Wage Insurance

Author:
Robert LaLonde
Publication Date:
06-2007
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
An important component of U.S. productivity growth and economic competitiveness is a flexible labor market that shifts workers quickly into the jobs where they are most needed. Much of the time, this job shifting is fairly painless: Workers quickly find new positions that pay at least as much as their previous ones, often without an intervening spell of unemployment. But prime-aged and older workers can sometimes suffer large, long-term income losses. Such workers' well-founded fears about job displacement lead them and their advocates to resist policies such as free trade that are sometimes blamed for the job shifting. This resistance harms the majority of households because trade helps to lower prices, raise real incomes and promote economic growth. It also has foreign policy consequences since it threatens the United States' ability to play its traditional post–World War II role as the bulwark of a relatively open international trading system. And by reducing the dynamism of the U.S. economy, resistance to trade and other pro-growth policies can weaken the nation's long-term ability to exert global leadership.
Topic:
Economics, Government, and Markets
Political Geography:
United States

1114. Europe's External Energy Policy: Between Geopolitics and the Market

Author:
Richard Youngs
Publication Date:
11-2007
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
While energy security has gradually been incorporated into the EU's foreign policy calculus, the declared approach of extending a nexus of 'market-governance' energy norms has been realised only to a limited extent. The EU has eschewed a comprehensively political approach to energy security, with its energy security policy currently hovering ineffectively between market and geopolitical approaches. The EU needs to address more effectively the way in which governance structures in producer states impact upon European energy interests.
Topic:
Energy Policy, Markets, and Oil
Political Geography:
Europe

1115. Bubbles in real estate? A Longer-Term Comparative Analysis of Housing Prices in Europe and the US

Author:
Daniel Gros
Publication Date:
10-2007
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The downturn in the US housing market has attracted a lot of attention as it has sparked a global financial crisis. It is generally assumed that the eurozone does not face a similar problem. This paper shows that this assumption is wrong. The euro area average index of real housing prices has risen almost as much as that of the US and is now (as that of the US) about 40% above its 30-year average. This is similar to the overvaluation of Japanese real estate at the height of the Japanese bubble, which was then followed by over a decade of continuous decline. Over the last 30 years, the euro area index for real housing prices has tended to follow that of the US quite closely. The lag is now much shorter than in the 1970s or 1980s. The euro area market is thus likely to turn soon as well. One feature of housing price cycles that tends to be forgotten is their extraordinary length: many last for more than ten years. This persistence means that the downswing, which now seems to have started, is likely to last at least until the next decade. Within the euro area, there are large divergences: cases of 'froth' (Spain, for example) co-exist alongside cases of declining prices (Germany). These divergences have persisted for over a decade and have led to important macroeconomic disequilibria. The paper also develops an indicator of 'housing overhang', which shows by how much demand for new construction has to decline to bring the supply of housing back to normal levels. This indicator suggests that there is virtually no housing overhang in the eurozone on average and that it is of a manageable magnitude in the US. Spain and Ireland, however, face a massive housing overhang and thus probably a sharp deceleration of construction demand.
Topic:
Economics and Markets
Political Geography:
United States and Europe

1116. Credit Crisis: The Sky is not Falling

Author:
Anthony Downs
Publication Date:
10-2007
Content Type:
Policy Brief
Institution:
The Brookings Institution
Abstract:
U.S. stock markets are gyrating on news of an apparent credit crunch generated by defaults among subprime home mortgage loans. Such frenzy has spurred Wall Street to cry capital crisis. However, there is no shortage of capital – only a shortage of confidence in some of the instruments Wall Street has invented. Much financial capital is still out there looking for a home.
Topic:
Economics and Markets
Political Geography:
United States

1117. Seeking Common Grounds: Analysis of the Draft Proposals for the International Coffee Agreement

Publication Date:
01-2007
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
The International Coffee Agreement (ICA) establishes the only dedicated intergovernmental forum for coffee-related matters: the International Coffee Organization (ICO). The ICO brings together various stakeholders—including coffeeimporting and coffee-exporting countries, the private sector, and nongovernmental organizations (NGOs)—to discuss, negotiate, and cooperate on shared strategies and policies regarding the global coffee economy.
Topic:
Agriculture, International Cooperation, International Trade and Finance, Markets, and Treaties and Agreements

1118. Fueling Educational Entrepreneurship Addressing the Human Capital Challenge

Author:
Frederick M. Hess and Bryan C. Hassel
Publication Date:
06-2007
Content Type:
Working Paper
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In October 2006, the American Enterprise Institute convened a meeting in Washington, D.C. to discuss what might be done to grow the human capital pipeline to support entrepreneurship in K–12 education. Participants included foundation officers, educational entrepreneurs, and policy analysts. While the gathering did not seek to formulate any grand consensus or blueprint, the authors hope that the following summary will spark further discussion and action on this critical issues in education reform.
Topic:
Development, Economics, Education, and Markets

1119. Famine in North Korea: AsiaSource Interview with Marcus Noland

Author:
Nermeen Shaikh
Publication Date:
04-2007
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
Marcus Noland is a senior fellow at the Peterson Institute for International Economics. His work encompasses a wide range of topics including the political economy of US trade policy and the Asian financial crisis. Mr Noland is unique among American economists in having devoted serious scholarly effort to the problems of North Korea and the prospects for Korean unification. He won the 2000–01 Ohira Masayoshi Award for his book Avoiding the Apocalypse: The Future of the Two Koreas.
Topic:
Development, Economics, and Markets
Political Geography:
United States, America, Asia, North Korea, and Korea

1120. Great Expectations: Mexico's Short-lived Convergence under NAFTA

Author:
Carol Wise
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
Upon Mexico's entry into the North American Free Trade Agreement (NAFTA), neo-classical trade theory assumed, first, that it had the greatest potential for higher rates of growth, productivity and overall welfare gains due to its relatively underdeveloped status; and second, that Mexico's adjustment to an integrated, liberal economy would be the most painful but also the most beneficial. It was envisioned that the blending of Mexico's endowment factors – cheap labour, natural resources, and proximity to the US market – with the abundant capital and advanced technology of Canada and the US would maximize on NAFTA's competitive potential over the long-term. However, these expectations have yet to fully materialize. This paper reviews the convergence/divergence debate with regard to NAFTA and Mexico, and analyzes the empirical data that have been used to tout both the benefits and the costs of asymmetrical integration. In light of the standstill in Mexico's per capita growth since 2001, this paper concludes with a critique of the potential role of NAFTA as a development tool and argues that the steep regional asymmetries call for a more proactive continental strategy.
Topic:
Development, Economics, and Markets
Political Geography:
America, Central America, and Mexico