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34691. Toward A Sustainable FTAA: Does Latin America Meet The Necessary Financial Preconditions?

Author:
Liliana Rojas-Suarez
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper focuses on identifying preconditions that will ensure the sustainability of a Free Trade Area of the Americas (FTAA). It argues that the macro, micro, and political conditions advanced in the literature to measure a country's ability to compete internationally, while necessary, are not sufficient to ensure the success and permanence of a free trade agreement. Instead, two additional financial conditions are needed. The first is that each partner in the free trade area needs to have sustainable public debts as determined by the achievement of credible and sustainable structural fiscal balances. The second is that exchange rate regimes across trading partners should be compatible in the sense that adverse shocks in one country do not generate a policy dilemma in other partners between abandoning their exchange rate system or the free trade area.
Topic:
Economics and International Trade and Finance
Political Geography:
South America, Latin America, Central America, and Caribbean

34692. Home Bias, Transactions Costs, And Prospects For The Euro: A More Detailed Analysis

Author:
Catherine L. Mann and Ellen E. Meade
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. Our empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.
Topic:
Economics and International Trade and Finance
Political Geography:
United States and Europe

34693. Six Practical Views of Central Bank Transparency

Author:
Adam S. Posen
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In the span of fifteen years, central bank transparency has gone from being highly controversial to motherhood and apple pie (one can insert analogous certitudes by country here). It is now an accepted broad goal to which all central banks pay at least lip service. Yet, like many other broad concepts in economic policy, such as “fiscal discipline” or “price stability,” what central bank transparency actually means remains rather open to debate. With the widespread adoption of inflation targeting, seen usually as an expression of increased central bank transparency, it is worthwhile to try to apply some clarity and rigor to this central banking concept du jour.
Topic:
Economics, Government, and International Trade and Finance

34694. The Future of North Korea

Author:
Marcus Noland
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The Korean peninsula has entered a period of considerable change and uncertainty. This paper attempts to sketch out how internal and external forces may shape outcomes in North Korea over the next several years. The range of plausible outcomes is huge, and the paper identifies four possible end states: successful reform and engagement, “muddling through,” elite conflict that could affect the nature of the state, if not the regime, and finally, mass mobilization that could threaten the regime itself. This analysis proceeds under a number of assumptions.
Topic:
Development, Government, and Industrial Policy
Political Geography:
Israel, East Asia, and North Korea

34695. Passive Savers and Fiscal Policy Effectiveness in Japan

Author:
Adam S. Posen and Kenneth N. Kuttner
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The efficacy of fiscal policy in Japan in the last decade has been a subject of considerable dispute, and the coincidence of mounting deficits and continued stagnation has led some to conclude that fiscal policy was ineffective. This paper finds ample support for the opposite conclusion: exogenous fiscal policy shocks (as derived from a structural vector-autoregression model) had pronounced real effects in Japan. Expansionary fiscal policy was expansionary, and contractionary policy contractionary, consistent with the implications of conventional macroeconomic theory. A historical decomposition shows that Japan's burgeoning public debt stems almost entirely from the recession-caused slowdown in revenue growth, and that fiscal policy was at times procyclical rather than consistently expansionary. Direct examination of the long-run relationship between private saving, taxes, and spending confirms that any Ricardian effects of future public liabilities on saving were insufficient to offset the direct first-order effects of taxes and public expenditures. The passivity of Japanese savers therefore seems to have contributed to the efficacy of fiscal policy; otherwise, some combination of increased saving, capital outflow, and higher interest rates would have diminished its impact.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Japan, Israel, and East Asia

34696. Moral Hazard and the U.S. Stock Market: Analyzing the “Greenspan Put”?

Author:
Marcus Miller, Paul Weller, and Lei Zhang
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
When the risk premium in the US stock market fell far below its historic level, Shiller (2000) attributed this to a bubble driven by psychological factors. As an alternative explanation, we point out that the observed risk premium may be reduced by one-sided intervention policy on the part of the Federal Reserve, which leads investors into the erroneous belief that they are insured against downside risk. By allowing for partial credibility and state dependent risk aversion, we show that this 'insurance'—referred to as the Greenspan put—is consistent with the observation that implied volatility rises as the market falls. Our bubble, like Shiller's, involves market psychology, but what we describe is not so much 'irrational exuberance' as exaggerated faith in the stabilizing power of Mr. Greenspan.
Topic:
Economics, Government, International Trade and Finance, and Political Economy
Political Geography:
United States

34697. Enhancing the Turkish-American Alliance: The Campaign for Iraq and Other Possibilities

Author:
Soner Cagaptay
Publication Date:
10-2002
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Assistant Secretary of State Elizabeth Jones was in Ankara Monday to discuss foreign policy issues including Iraq with her Turkish counterparts. Interestingly, Iraq's vice premier Tariq Aziz visited Ankara yesterday for the same purpose. These trips come at a crucial time as Washington prepares for a confrontation with Saddam Husayn. While prepared to stand with its close NATO ally the United States, Turkey remains uneasy about several issues.
Topic:
Security, Foreign Policy, NATO, and Religion
Political Geography:
United States, Iraq, America, Turkey, Middle East, and Arab Countries

34698. Shaping a New UN Draft Resolution on Iraq

Author:
Patrick Clawson
Publication Date:
09-2002
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
The United States and Britain are consulting with the other three permanent members of the UN Security Council (Russia, France, and China) before introducing a new draft resolution on Iraq. Much attention has been given to whether the resolution will explicitly authorize the use of force. At least as important will be whether the resolution reverses the long, slow erosion of Iraq's UN-mandated obligations. For all their seemingly tough language, recent Security Council resolutions on Iraq have been ambiguous at best about the issues on which Saddam Husayn has been allowed to cheat in the past.
Topic:
Security, Religion, and United Nations
Political Geography:
Russia, United States, Iraq, Middle East, and Arab Countries

34699. November Elections in Turkey: Assessing the Ban on Justice and Development Party Leader Tayyip Erdogan

Author:
Soner Cagaptay
Publication Date:
09-2002
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
As the United States considers a possible military campaign in Iraq, Turkey is preoccupied with its upcoming elections. Although a party with roots in Islamism will be a major contender in the November 3 elections, it is unlikely that Turkey's approach to the Iraq issue will change much, regardless of which party wins. That said, continuing political uncertainty at home could preoccupy Turkish leaders, reducing Turkey's contribution to solving the Iraq problem.
Topic:
Security and Religion
Political Geography:
United States, Iraq, Turkey, and Middle East

34700. Special Policy Forum Report: Battling for the 'Hearts and Minds' of Middle Easterners, Post-September 11: A Year-End Assessment

Author:
Martin Kramer and Mouafac Harb
Publication Date:
09-2002
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Public diplomacy in the Middle Eastern context is not a new problem. Every non-Muslim state that has projected its power into the Middle East has had to win over the "hearts and minds" of the Muslim population under its control. Muslim Middle Easterners have always viewed the projection of non-Muslim power into the region with suspicion. Nevertheless, America does not have to reinvent the public diplomacy wheel. The United States should learn from the history of the European experience in the Middle East and from its own successful public diplomacy efforts in the Cold War era.
Topic:
Security, Cold War, and Religion
Political Geography:
United States, America, Europe, Middle East, and Arab Countries