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361. How Long Can the Unsustainable U.S. Current Account Deficit Be Sustained?

Author:
Steven B. Kamin, Carol C. Bertaut, and Charles P. Thomas
Publication Date:
07-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper addresses three questions about the prospects for the U.S. current account deficit. Is it sustainable in the long term? If not, how long will it take for measures of external debt and debt service to reach levels that could prompt some pullback by global investors? And if and when such levels are breached, how readily would asset prices respond and the current account start to narrow?
Topic:
Economics, Foreign Exchange, Government, International Political Economy, and Political Economy
Political Geography:
United States

362. Simple Monetary Rules Under Fiscal Dominance

Author:
Ricardo Nunes, Michael Kumhof, and Irina Yakadina
Publication Date:
07-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper asks whether an aggressive monetary policy response to inflation is feasible in countries that suffer from fiscal dominance, as long as monetary policy also responds to fiscal variables. We find that if nominal interest rates are allowed to respond to government debt, even aggressive rules that satisfy the Taylor principle can produce unique equilibria. But following such rules results in extremely volatile inflation. This leads to very frequent violations of the zero lower bound on nominal interest rates that make such rules infeasible. Even within the set of feasible rules the optimal response to inflation is highly negative, and more aggressive inflation fighting is inferior from a welfare point of view. The welfare gain from responding to fiscal variables is minimal compared to the gain from eliminating fiscal dominance.
Topic:
Economics, Government, and Political Economy

363. Policy Liberalization and FDI Growth, 1982 to 2006

Author:
Matthew Adler and Gary Clyde Hufbauer
Publication Date:
08-2008
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Over the last three decades the global economy has expanded in a remarkable fashion. While nominal world GDP has increased four times, world bilateral trade flows have grown more than six-fold, and the stock of foreign direct investment (FDI) has grown by roughly 20 times since 1980. The sources of global trade and investment growth are well known—general economic expansion, policy liberalization, and better communications and technology—but the impact of each source is unclear. In this paper we attempt to uncover the contribution of policy liberalization to the rising ratios of US inward and outward FDI stocks to GDP over the last three decades.
Topic:
Economics, Globalization, International Political Economy, International Trade and Finance, Markets, and Political Economy
Political Geography:
United States

364. Burundi: Restarting Political Dialogue

Publication Date:
08-2008
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
En dépit des progrès enregistrés dans la mise en œuvre de l'accord de paix avec le Parti pour la libération du peuple hutu – Forces nationa les de libération (Palipe-hutu-FNL), dernier mouvement rebelle en activité dans le pays, le Burundi traverse une crise politique dange-reuse qui risque de compromettre la tenue d'élections libres et démocratiques en 2010 et d'affecter la stabi-lité du pays. Le retour du chef rebelle Agathon Rwasa à Bujumbura, et la signature de l'accord politique de Magaliesburg le 11 juin 2008 sont des pas importants pour le processus de paix burundais. Toutefois, le processus de désarmement commence à peine, et la question de l'intégration du mouvement rebelle dans les institutions politiques et les corps de défense et de sécurité n'est toujours pa s réglée. Dans ce contexte, l'absence de dialogue avec les partis politiques d'opposition est dommageable à la bonne gestion du pays. Il est urgent que les acteurs politiques locaux et les partenaires extérieurs du Burundi prennent la mesure de ces risques et s'efforcent de les conjurer par un renouveau du dialogue national.
Topic:
Conflict Resolution, Conflict Prevention, Government, and Political Economy
Political Geography:
Africa and Burundi

365. PolicyWatch #1363: Electoral and Social Tensions Spike in Egypt

Author:
David Schenker
Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
On April 8, Egypt held elections for nearly 53,000 municipal representatives. Not surprisingly, participation was abysmal: Egypt's ruling faction, the National Democratic Party (NDP), ran unopposed for more than 80 percent of the seats, while the Muslim Brotherhood -- the country's only real opposition party -- boycotted the contest in response to government harassment. Although the White House issued a statement expressing concern about "widespread electoral violations," these issues represent only a fraction of Egypt's domestic problems, which also include food shortages, labor unrest, and increasing Islamist social and political penetration. Complicating matters, these crises coincide with the first political transition in decades -- the impeding retirement of eighty-year-old President Hosni Mubarak, who has ruled since 1981. Taken together, these developments raise the specter of instability for a key U.S. ally.
Topic:
Government, Political Economy, and Politics
Political Geography:
United States and Egypt

366. PolicyWatch #1353: Fayad's Reform Plan: Difficulties and Political Implications

Author:
Mohammad Yaghi
Publication Date:
03-2008
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
A month after visiting Washington, Palestinian prime minister Salam Fayad continues to face significant political, economic, and security challenges to his reform plan. Fatah, the ruling political party in the West Bank, has resisted many aspects of his agenda and is critical of his cabinet's composition and performance. And although Fayad has spearheaded several important initiatives, his plan is in jeopardy, and the Palestinian Authority (PA) is still far from representing a compelling alternative to Hamas. To make matters worse, the PA has received just $260 million out of the $7.7 billion pledged during the December international donors conference in Paris, leaving the prime minister with month-to-month uncertainty about fulfilling the PA's salary commitments.
Topic:
Government and Political Economy
Political Geography:
Israel

367. PolicyWatch #1349: Who Represents the Iraqi Sunnis?

Author:
Nazar Janabi
Publication Date:
03-2008
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Since the fall of Saddam Hussein, Sunnis in Anbar and other western Iraqi provinces have struggled to develop a coherent and representative political leadership. The recently formed Iraqi Awakening Convention (IAC) -- a collective of so-called "Awakening council" leaders -- could represent the next step in that evolution and, if nurtured, make a significant contribution to broader political reconciliation. It will also mean, however, that current elected leaders will have to give way to new local leaders or compete politically with them, since it is pointless to compete violently given the asymmetry of the current power balance.
Topic:
Islam, Political Economy, and Politics
Political Geography:
Iraq and Middle East

368. PolicyWatch #1335: Kirkuk's Article 140: Expired or Not?

Author:
Nazar Janabi
Publication Date:
01-2008
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Away from the headlines, Sunnis and Shiites are testing the waters of reconciliation in the Iraqi parliament with an agreement that may come at the expense of country's Kurdish population. The Kurdish political reaction to such an agreement could potentially exacerbate anti-Kurdish sentiment among many Arab parliamentarians, costing the Kurds some of the hard-earned political ground they have gained thus far.
Topic:
Government, Political Economy, and Religion
Political Geography:
Iraq, Middle East, and Arabia

369. The Political Economy of Successful Reform: Asian Stratagems

Author:
Dennis Arroyo
Publication Date:
06-2008
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
Major economic reforms are often politically difficult, causing pain to voters and provoking unrest. They may be opposed by politicians with short time horizons. They may collide with the established ideology and an entrenched ruling party. They may be resisted by bureaucrats and by vested interests. Obstacles to major economic reform can be daunting in democratic and autocratic polities alike.
Topic:
Economics, Government, and Political Economy
Political Geography:
China, India, Asia, South Korea, Vietnam, Singapore, and Thailand

370. Constraints to Economic Development and Growth in the Middle East and North Africa

Author:
Juliane Brach
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
German Institute of Global and Area Studies
Abstract:
When comparing the speed and extent of economic development in different geographic regions of the world over the past 20 years, the under-average performance of Arab countries in general and Arab Mediterranean countries in particular is striking. This is despite an overall favorable geo-strategic situation at the crossroads of three continents, with excellent connections to sea and waterways and in direct proximity to the European Union, one of the world's economic hubs. It is also despite the minor importance of negative factors such as a high-burden diseases or high levels of ethnic fractionalization. In this paper, I focus on identifying the most important constraints on Arab Mediterranean economic development. I use state-of-the-art econometric tools to quantify constraints that have been identified through economic theory and studies of the political economy characteristics of the region. The empirical results offer support for the central hypothesis that limited technological capacities and political economy structures are the primary constraints on economic development. With a view to international structural adjustment efforts, my findings imply that the limited success of the Euro-Mediterranean policy to stimulate the economic development of the Arab Mediterranean countries might be because structural adjustment efforts do not tackle—or at least do not sufficiently tackle— these constraints.
Topic:
Development and Political Economy
Political Geography:
Europe, Middle East, Arabia, and North Africa