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702. Three Lessons from the Financial Crisis
- Author:
- John H. Makin
- Publication Date:
- 09-2009
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- More than two years have passed since the U.S. housing bubble burst. That event ushered in a financial crisis that was not only intense but also stunning. So stunning in fact, that in August of last year, just a month before the collapse of Lehman Brothers, the global economy was close to a crisis worthy of comparison with the Great Depression, yet neither the markets nor the Federal Reserve had much of an inkling of what was to come. The Standard and Poor's (S) 500 Index had come down to about 1,300 from its October 2007 high of 1,576. Positive growth had just been reported for the U.S. economy during the second quarter of 2008 at an annual rate of 2.8 percent (later revised down to 1.5 percent). Almost one percentage point of that growth came from U.S. consumption, and government spending also contributed. The wave of relief after the Bear Stearns scare in March 2008 had provided a nice boost to the economy and to markets. That boost was further enhanced by the substantial contribution to growth from net exports (2.9 percentage points) thanks to what was, then, continuing strength in the global economy, especially in China, which had reported blistering 10.1 percent year-over-year growth in the second quarter of 2008. These and other positive components more than offset a drag from inventories and residential investment. In short, the real economy had not shown much evidence of damage emanating from the chaos that was churning in the financial sector.
- Topic:
- Economics, International Political Economy, International Trade and Finance, Markets, Monetary Policy, and Financial Crisis
- Political Geography:
- United States and China
703. Wall Street Is Dancing Again
- Author:
- John H. Makin
- Publication Date:
- 10-2009
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- Wall Street is dancing again to the music of a sharp rise in stock prices. The question that remains is whether Main Street, currently languishing in a sad world of job losses, unavailable credit, and weakened balance sheets, will get to join the party. To put the question more precisely, will the “adverse feedback loop” that saw a financial collapse last fall that crushed the real economy work in reverse, so that a financial bounce boosts the real economy in coming quarters? The jury is still out on this important question.
- Topic:
- Economics, Markets, and Financial Crisis
- Political Geography:
- United States
704. Beyond Market Forces: Regulating the Global Security Industry
- Author:
- James Cockayne (ed.)
- Publication Date:
- 07-2009
- Content Type:
- Book
- Institution:
- International Peace Institute
- Abstract:
- In late 2008, seventeen states, including the US, UK, China, Iraq, Afghanistan, and others, endorsed the Montreux Document on Pertinent International Legal Obligations and Good Practices for States related to Operations of Private Military and Security Companies during Armed Conflict (2008). This provides important guidance to states in regulating private military and security companies (PMSCs). However, there is a need to do more, to provide increased guidance to the industry and ensure standards are enforced.
- Topic:
- Conflict Prevention, Security, and Markets
- Political Geography:
- Afghanistan, United States, China, and Iraq
705. The Asymmetry of European Integration or why the EU cannot be a "Social Market Economy"
- Author:
- Fritz W. Scharpf
- Publication Date:
- 09-2009
- Content Type:
- Working Paper
- Institution:
- The Kolleg-Forschergruppe (KFG)
- Abstract:
- Judge-made law has played a crucial role in the process of European integration. In the vertical dimension, it has greatly reduced the range of autonomous policy choices in the member states, and it has helped to expand the reach of European competences. At the same time, however, “Integration through Law” does have a liberalizing and deregulatory impact on the socio-economic regimes of EU member states. This effect is generally compatible with the status quo in “Liberal Market Economies”, but it tends to undermine the institutions and policy legacies of Continental and Scandinavian “Social Market Economies”. Given the high consensus requirements of European legislation, this structural asymmetry cannot be corrected through political action at the European level.
- Topic:
- Economics, Markets, and Law
- Political Geography:
- Europe
706. Tax Smoothing in Frictional Labor Markets
- Author:
- David M. Arseneau and Sanjay K. Chugh
- Publication Date:
- 01-2009
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- We re-examine the optimality of tax smoothing from the point of view of frictional labor markets. Our central result is that whether or not this cornerstone optimal fiscal policy pre- scription carries over to an environment with labor market frictions depends crucially on the cyclical nature of labor force participation. If the participation rate is exogenous at business- cycle frequencies — as is typically assumed in the literature — we show it is not optimal to smooth tax rates on labor income in the face of business-cycle shocks. However, if households do optimize at the participation margin, then tax-smoothing is optimal despite the presence of matching frictions. To understand these results, we develop a concept of general-equilibrium efficiency in search-based environments, which builds on existing (partial-equilibrium) search- efficiency conditions. Using this concept, we develop a notion of search-based labor-market wedges that allows us to trace the source of the sharply-contrasting fiscal policy prescriptions to the value of adjusting participation rates. Our results demonstrate that policy prescriptions can be very sensitive to the cyclical nature of labor-force participation in search-based environments.
- Topic:
- Markets, Labor Issues, and Tax Systems
- Political Geography:
- Global Focus
707. On the Current Links Capital Markets and Investment in MENA Countries
- Author:
- Randa Alami
- Publication Date:
- 03-2009
- Content Type:
- Working Paper
- Institution:
- School of Oriental and African Studies - University of London
- Abstract:
- This paper considers the current status of some Middle Eastern markets (Arab countries excluding the Gulf countries). These markets have matured significantly over the last six years, and this helped the concurrent strong economic and investment growth. Evidence gathered here indicates the markets have become a minor source of corporate investment, mobilising both domestic and foreign investors. It allowed them to capture both part of the surge in intra-regional capital flows, and part of rising Foreign Direct Investment. A more enhanced economic impact is constrained by their nascent nature, their volatility and illiquidity, and by what remain poor governance structures. Moreover, these Arab stock markets are still the realm of very large corporations: they have only began to address the needs of smaller entreprises, with venture capital and private equity funds at an embryonic stage. They also support a limited number of economic sectors, while governments and top income elites continue to dominate shareholding. They cannot and should not be relied upon to fulfil all the financing needs of the private sector. This message has been reinforced by the current world crisis, which ended the euphoric but unrealistic expectations that regional capital markets will continue to expand as rapidly as they did between 2002 and 2008.
- Topic:
- Markets, Foreign Direct Investment, Capitalism, Economic growth, Investment, and Corporations
- Political Geography:
- Middle East
708. Why Warner-Lieberman Failed and How to Get America's Working Families behind the Next Cap-and-Trade Bill
- Author:
- David Wheeler
- Publication Date:
- 07-2008
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- Among partisans of greenhouse gas emissions regulation, the Senate's failure to pass the Warner-Lieberman cap-and-trade bill is often attributed to rampant denial, fueled by diehard political conservatism, energy-company propaganda, and government suppression of evidence on global warming. If so, the solution to the problem is electoral change, exposure of the propaganda, and public education. However, public concern is already so widespread that even leaders of the Southern Baptist Convention have acknowledged the need for action. In this paper, I consider two additional forces that have stymied carbon emissions regulation in developing countries. The first is the perception that costly carbon regulation promoted by the rich will inflict an unjust burden on the poor. The second is hostility to taxation of critical fossil-fuel resources that were developed long before climate risk was identified. My econometric analysis suggests that these same forces have significantly affected senators' votes on Warner-Lieberman. By implication, Congress is not likely to approve cap-and-trade legislation unless Americans with below-median incomes are compensated for expected losses. My analysis supports recent proposals for direct distribution of emissions permit auction revenues to American families on an equal per-capita basis.
- Topic:
- Climate Change, Environment, Government, Markets, and Politics
- Political Geography:
- America
709. Square pegs in round holes: How the Farm Bill squanders chances for a pro-development trade deal
- Publication Date:
- 07-2008
- Content Type:
- Policy Brief
- Institution:
- Oxfam Publishing
- Abstract:
- When trade ministers from 35 countries gather in Geneva at the World Trade Organization [WTO] for what is being billed yet again as a last-ditch attempt to forge a Doha trade deal, they will be forced to meet an unwelcome guest: the 2008 US Farm Bill. With a host of newly bolstered subsidies that will hurt farmers in developing countries, as well as higher farm payment rates, squeezing the new Farm Bill into the 'boxes' defined under existing WTO obligations will be a remarkable trick. That speaks poorly about the willingness of the US to accept new disciplines on agricultural subsidies, and demonstrates that the US Congress is unwilling - thus far - to take the necessary steps for a new trade agreement that would prioritize development.
- Topic:
- Agriculture, International Organization, International Trade and Finance, Markets, and World Trade Organization
- Political Geography:
- Geneva and United States
710. Trade Liberalization and the Self-employed in Mexico
- Author:
- Gurleen K. Popli
- Publication Date:
- 01-2008
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- In this paper I examine the trend in income inequality and poverty among the selfemployed workers in Mexico over the last two decades (1984–2002). This is the period over which Mexico opened its economy to the global market through trade and investment liberalization. For the first decade following the liberalization, inequality and poverty among the self-employed increased; as the economy stabilized and the country saw economic growth inequality started to go down, but poverty kept increasing. To understand the changes in inequality and poverty I decompose the inequality and poverty indices into within and between group components. Rising returns to skilled labour, regional differences in impact of liberalization and sectoral shifts in employment are important factors in explaining the trends in both inequality and poverty.
- Topic:
- International Trade and Finance and Markets
- Political Geography:
- Mexico