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812. International Competition and Inflation: A New Keynesian Perspective
- Author:
- Luca Guerrieri, Christopher Gust, and David López-Salido
- Publication Date:
- 01-2008
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- We develop and estimate an open economy New Keynesian Phillips curve (NKPC) in which variable demand elasticities give rise to changes in desired markups in response to changes in competitive pressure from abroad. A parametric restriction on our specification yields the standard NKPC, in which the elasticity is constant, and there is no role for foreign competition to influence domestic inflation. By comparing the unrestricted and restricted specifications, we provide evidence that foreign competition plays an important role in accounting for the behavior of inflation in the traded goods sector. Our estimates suggest that foreign competition has lowered domestic goods inflation about 1 percentage point over the 2000-2006 period. Our results also provide evidence against demand curves with a constant elasticity in the context of models of monopolistic competition.
- Topic:
- Economics, International Trade and Finance, and Markets
- Political Geography:
- United States
813. Measuring U.S. International Relative Prices: A WARP View of the World
- Author:
- Charles P. Thomas, Jaime Marquez, and Sean Fahle
- Publication Date:
- 01-2008
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- In this paper we construct a new measure of U.S. prices relative to those of its trading partners and use it to reexamine the behavior of U.S. net exports. Our measure differs from existing measures of the dollar's real effective exchange rate (REER) in that it explicitly incorporates both the difference in price levels between the United States and developing economies and the growing importance of these developing economies in world trade. Unlike existing REERs, our measure shows that relative U.S. prices have increased significantly over the past 15 years. In terms of simple correlations, the relationship between our measure of relative prices and U.S. net exports is much more coherent than that between existing REERs and net exports. To explore this relationship further, we use our measure to construct an index of foreign prices relevant for U.S. export volumes and reexamine several export equations. We find that export equations with the new index dominate those with previous measures in terms of in-sample fit, outof- sample fit, and parameter constancy. In addition, we find that with the new index of foreign prices the estimated elasticity of U.S. exports with respect to foreign income is a good bit higher than the unitary elasticity found in previous studies using other price measures. This has implications for U.S. current account adjustment.
- Topic:
- Economics, Foreign Exchange, International Trade and Finance, and Markets
- Political Geography:
- United States
814. Trade Liberalization: Cordell Hull and the Case for Optimism
- Author:
- Douglas A. Irwin
- Publication Date:
- 07-2008
- Content Type:
- Working Paper
- Institution:
- Council on Foreign Relations
- Abstract:
- The news from Geneva of the breakdown of the Doha Round after seven years of effort has generated a great deal of pessimism about the future of multilateral trade agreements. America's troubles with the World Trade Organization (WTO) are of course only the beginning. There are also domestic problems when it comes to trade policy, an issue that ties together America's economic prosperity and its global political influence. Recent public opinion polls in the United States reveal increased skepticism about the benefits of globalization and diminished support for free trade policies. The post–World War II bipartisan consensus in favor of open trade has broken up, leading to gr eater resistance to new trade agreements in Congress, as reflected in the House's recent decision to postpone consideration of the Colombia free trade agreement (FTA). Despite efforts in the Doha Round to limit agricultural subsidies, Congress recently showered domestic farmers with more cash in the recently passed Farm Bill, even at a time when commodity prices are soaring.
- Topic:
- Economics, International Trade and Finance, and Markets
- Political Geography:
- Geneva, United States, America, and Colombia
815. Fine in 2009 (Not So Great in 2008)
- Author:
- John H. Makin
- Publication Date:
- 01-2008
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The good news about the problems in the financial sector and the larger economy in the United States emanating from the persistent drop in house prices is that they will eventually end, and the underlying resiliency of the U.S. economy will reemerge. The bad news about these problems is that they are going to continue for some time and get worse before they improve. Efforts to address them so far have been ineffective because they have been aimed at containing a subprime credit crisis, not at containing a rapidly spreading primecredit, solvency crisis that is leading the U.S. economy into recession.
- Topic:
- Economics, International Trade and Finance, and Markets
- Political Geography:
- United States
816. The Klein Doctrine: The Rise of Disaster Polemics
- Author:
- Johan Norberg
- Publication Date:
- 05-2008
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Naomi Klein's The Shock Doctrine ;purports to be an exposé of the ruthless nature of free-market capitalism and its chief recent exponent, Milton Friedman. Klein argues that capitalism goes hand in hand with dictatorship and brutality and that dictators and other unscrupulous political figures take advantage of "shocks"-catastrophes real or manufactured-to consolidate their power and implement unpopular market reforms. Klein cites Chile under General Augusto Pinochet, Britain under Margaret Thatcher, China during the Tiananmen Square crisis, and the ongoing war in Iraq as examples of this process.
- Topic:
- Democratization, Economics, and Markets
- Political Geography:
- China and Chile
817. Asset Bubbles and Their Consequences
- Author:
- Gerald P. O'Driscoll Jr.
- Publication Date:
- 05-2008
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- In the past, the federal government has introduced moral hazard in the banking system through deposit insurance. Banks underpriced risk because of the federal guarantee that backed deposits. After banking crises in the 1980s and 1990s, deposit insurance was put on a sound basis and that source of moral hazard was mitigated. In its place, monetary policy has become a source of moral hazard. In acting to counter the economic effects of declining asset prices, the Federal Reserve has come to be viewed as underwriting risky investments. Policy pronouncements by senior Fed officials have reinforced that perception. These actions and pronouncements are mutually reinforcing and destructive to the operation of financial markets. The current financial crisis began in the subprime housing market and then spread throughout credit markets. The new Fed policy fueled the housing boom. Refusing to accept responsibility for the housing bubble, the Fed's recent actions will likely fuel a new asset bubble. The cumulative effects of recent monetary policy undermine the case for free markets.
- Topic:
- Economics, Government, and Markets
- Political Geography:
- United States
818. FASB: Making Financial Statements Mysterious
- Author:
- T.J. Rodgers
- Publication Date:
- 08-2008
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Since the passage of the Sarbanes-Oxley Act in 2002, the Financial Accounting Standards Board has passed rules that it promises will make corporate accounting more transparent. In fact, its revised Generally Accepted Accounting Principles have made it difficult for investors — or even CEOs — to understand a company's financial report.
- Topic:
- Economics, Government, and Markets
- Political Geography:
- United States
819. Does Barack Obama Support Socialized Medicine?
- Author:
- Michael F. Cannon
- Publication Date:
- 10-2008
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Democratic presidential nominee Sen. Barack Obama (IL) has proposed an ambitious plan to restructure America's health care sector. Rather than engage in a detailed critique of Obama's health care plan, many critics prefer to label it "socialized medicine." Is that a fair description of the Obama plan and similar plans? Over the past year, prominent media outlets and respectable think tanks have investigated that question and come to a unanimous answer: no.
- Topic:
- Economics, Government, Health, and Markets
- Political Geography:
- United States
820. Global Tensions, Global Possibilities: Everyday Forces of Conformity and Contestation
- Author:
- Jean Michel Montsion, Samah Sabra, James Gaede, Jeremy D. Kowalski, Rhiannon Mosher, Teresa Kramarz, Kathryn Mossman, Adam Sneyd, Luis Alfredo Marroquin-Campos, Rob Downie, Heather Battles, Adrienne Smith, Ahmed T. Rashid, Joanne Nowak, Liam Riley, David Haldane Lee, Greg Shupak, Arun Nedra Rodrigo, Lauren Scannell, Naomi Achus, and Ethel Tungohan
- Publication Date:
- 07-2008
- Content Type:
- Working Paper
- Institution:
- Institute on Globalization and the Human Condition, McMaster University
- Abstract:
- Academics theorizing and analyzing the impacts of globalization on everyday life are conventionally divided between those who highlight the (overt or hidden) opportunities and advantages afforded by globalizing processes and others who emphasize their negative impacts on populations across the world. The former tend to focus on such things as increased access to paid labour, faster modes of communication, and technological ease of transportation (of people and information) across global networks. The latter, in contrast, generally stress the vicious implications of globalization's systemic processes, which continue to exacerbate polarization between rich and poor and, invariably, mean uneven access to labour, communication, and transportation. With this division in mind, the Graduate Student Research Group of the Institute on Globalization and the Human Condition held a conference titled Global tensions, global possibilities in September 2007. The conference organizers intended to bring together graduate students to challenge the above oppositions which often characterize contemporary globalization theories. By gathering an eclectic group of young scholars from various disciplines and backgrounds, the key aim driving Global tensions, global possibilities was to question disciplinary and attitudinal divides in theorizing globalization. A secondary, and related, intention of the organizers was for the conference to be a space in which participants (i.e. presenters, discussants, and audience) would together (re)think the implications of globalizing processes in non-dichotomizing ways that transcend such traditional divides. The organizers recognized that their intentions were not necessarily revolutionary. The works of several prominent scholars in various disciplines have denoted the need to be critical of further polarizing contemporary globalization theory (Comaroff and Comaroff 2001; Mudimbe-Boyi 2002; Ong 2006). For example, in their discussions of globalization, Jean and John Comaroff (2001) have indicated that globalizing processes and their attendant consequences can be neither classified nor understood in simple terms. Like the Comaroffs, the conference organizers felt that one cannot deny the intense messiness of any investigation of globalizing processes. Instead, they wanted to stress that globalization is simultaneously creative and destructive, enabling and constraining, beneficial and detrimental. Given that it has come out of the conference, the same line of reasoning forms the driving force behind this graduate student volume of the Working Paper Series. Below, we discuss our rationale for organizing the volume in the way we have. We begin with a brief discussion of our understanding of the need to move beyond theorizing globalization as either liberating or oppressive. Throughout the following sections, we move back and forth between our theorization of this necessity and the specifics of how the dichotomy beyond which we want to move re-emerged in the context of the conference. In the final section, we provide a brief description of the papers and our motivation for organizing them as we have.
- Topic:
- Gender Issues, Globalization, Health, Human Rights, Human Welfare, International Organization, Markets, Migration, and Science and Technology