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31. The GCC Monetary Union: Choice of Exchange Rate Regime

Author:
Mohsin S. Khan
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The creation of a monetary union has been the primary objective of the Gulf Cooperation Council (GCC) members since the early 1980s. Significant progress has already been made in regional economic integration: The GCC countries have largely unrestricted intraregional mobility of goods, labor, and capital; regulation of the banking sector is being harmonized; and in 2008 the countries established a common market. Further, most of the convergence criteria established for entry into a monetary union have already been achieved. In establishing a monetary union, however, the GCC countries must decide on the exchange rate regime for the single currency. The countries' use of a US dollar peg as an external anchor for monetary policy has so far served them well, but rising inflation and differing economic cycles from the United States in recent years have raised the question of whether the dollar peg remains the best policy.
Topic:
Economics, Foreign Exchange, and Regional Cooperation
Political Geography:
United States

32. Ownership and the Donor-Recipient Relationship

Author:
Lindsay Whitfield
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Danish Institute for International Studies
Abstract:
At the centre of the Paris Declaration on Aid Effectiveness is the idea of country ownership. It is meant to change the situation in many aid dependent African countries where donors dominate decision-making over which policies are adopted, how aid is spent, and what conditions are attached to its release. This article assesses the impact of recent aid reforms to put ownership into practice.
Topic:
Foreign Exchange, Poverty, Third World, and Foreign Direct Investment
Political Geography:
Africa

33. The Future of the Dollar

Author:
Richard N. Cooper
Publication Date:
09-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The US dollar is not the world's key currency by policy design, just as English is not the leading global language by policy design. It is the evolutionary outcome of practice and experience. It would take both a major shock to the dollar and a viable alternative to dislodge it from widespread use. Like a common language, the dollar enjoys “network externalities”— the greater the number of people who use and accept it, the more useful it is to everyone, and the more entrenched it becomes. Also, what is not quite the same thing, the dollar enjoys a large market in low-risk and highly liquid securities, most notably US Treasury bills; the liquidity both enhances and is enhanced by the network externalities. Most of the world's foreign exchange transactions directly involve the US dollar. It is easy to hold and easy to use, even on a large scale. In short, it is highly convenient.
Topic:
Economics, Foreign Exchange, and International Trade and Finance
Political Geography:
United States

34. Why SDRs Could Rival the Dollar

Author:
John Williamson
Publication Date:
09-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In a recent Cato Institute paper, Swaminathan S. Anklesaria Aiyar (2009) asserts that the International Monetary Fund's special drawing rights (SDRs) cannot rival the US dollar, as suggested by the Chinese central bank governor (Zhou Xiaochuan 2009). “The SDR is not a currency and never can be,” Swami declares confidently in the first paragraph of his paper. He presents two arguments, which are presumably supposed to be proofs of this proposition.
Topic:
Economics, Foreign Exchange, and International Trade and Finance
Political Geography:
United States

35. G20 Report: Stimulus and Regulation Compromise Needed

Author:
Robin Niblett, Alexei Monsarrat, and Aola Subacchi
Publication Date:
03-2009
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
What started last year as a growing international credit crunch and, by September, a global banking crisis has now spread into the real economy. International trade, investment and economic growth are all contracting. A drastic curtailment of credit, collapsing global demand and a loss of trade finance is having a devastating economic effect on both the developed and developing worlds, especially those economies that are heavily dependent on exports.
Topic:
Economics, Foreign Exchange, International Trade and Finance, and Financial Crisis

36. U.S.-EU Smart Grid Deployment

Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Atlantic Council
Abstract:
This report, based on the September 11, 2009 workshop on “U.S.-EU Cooperation toward Smart Grid Deployment” recommends that U.S. and EU leaders work in concert with the private sector to enhance the development and deployment of smart grid technologies across the Atlantic. The need for undertaking a holistic approach requires transatlantic cooperation in a number of complex areas, which warrant the establishment of specific public-private working groups focused on creating a common architecture with compatible standards, including those for cyber security, that can be applied in the transatlantic community and rolled out globally.
Topic:
Economics, Foreign Exchange, International Trade and Finance, and Treaties and Agreements
Political Geography:
United States and Europe

37. Outside the European Economic and Monetary Union: Consequences for the United Kingdom

Author:
Anna Konarzewska
Publication Date:
03-2008
Content Type:
Journal Article
Journal:
Connections
Institution:
Partnership for Peace Consortium of Defense Academies and Security Studies Institutes
Abstract:
The consequences of staying outside the European Economic and Monetary Union can be divided into three categories: political, economic, and social. For the United Kingdom, most attention has been concentrated on the issue of economic gains and losses. The potential gains include a possibility for the British government to conduct its own national economic and monetary policy, the elimination of so-called social dumping, preserving the British mortgage and housing markets, and promoting London as a worldwide financial center. Moreover, approving the Euro could enlarge British foreign trade and enhance inflows of foreign direct investment. On the other hand, the negative economic consequences focus on lack of transparency of prices, no elimination of transaction costs, and the risk of disrupting the exchange rate of the pound sterling. The political and social consequences of staying outside the Euro zone must also be taken into account when analyzing the British case. Without participating in the common currency, the United Kingdom could preserve her national sovereignty and independence, although this remains questionable in the current world, which is characterized by high levels of interdependence. Likewise, the British stand to lose their influence in the European Union and in the world by not participating in the third stage of the EMU.
Topic:
Foreign Exchange
Political Geography:
United Kingdom, Europe, and London

38. 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

39. At What Cost Price Stability? New evidence about the Phillips Curve in Europe and the United States

Author:
Daniel Gros and Andrea Beccarini
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
With inflation increasing all over the world, central banks have to consider with some care how quickly to re-establish price stability. A key issue in this context is the short-run cost in terms of foregone output and higher unemployment. The aim of this paper is to determine the 'sacrifice ratio' for the Euro Area and for the United States. The main findings are: the cost of reducing inflation is in most cases higher in the US than in the EA. For example, reducing (headline) inflation by 1% point requires a decline of output of 1.4% in the EU, but 2.3% for the US. Considering core inflation, the sacrifice ratio in terms of output is somewhat higher for the Euro Area (around 4) compared to 3.2 for the US. However, the sacrifice ratios in terms of unemployment are always much larger for the US. Reducing headline inflation by 1% requires an increase in unemployment of little more than 1% in the EA, compared to 8% in the US.
Topic:
Economics and Foreign Exchange
Political Geography:
United States and Europe

40. Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
02-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Two aspects of global imbalances—undervalued exchange rates and sovereign wealth funds (SWFs)—require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund (IMF) has not been effective in dealing with undervalued exchange rates. We propose new rules in the World Trade Organization (WTO) to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The WTO would not be involved in exchange rate management, and our proposals do not entail the WTO displacing the IMF: Rather, they would harness the comparative advantage of the two institutions, with the IMF providing the essential technical expertise in the WTO enforcement process. On SWFs, there is a bargain to be struck between countries with SWFs, which want secure and liberal access for their capital, and capital-importing countries that have concerns about the objectives and operations of SWFs. The WTO is the natural place to strike this bargain. Its services agreement, the General Agreement on Trade in Services (GATS), already covers investments by SWFs, and other agreements offer a precedent for designing disciplines for SWFs. Placing exchange rates and SWFs on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups, many of whom are currently disengaged from the round.
Topic:
Foreign Exchange, International Organization, International Trade and Finance, and Markets