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301. The International Monetary Fund and Regulatory Challenges

Author:
Edwin M. Truman
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The International Monetary Fund (IMF) plays a substantial regulatory role in the international monetary and financial system. The IMF has been assigned a formal regulatory role in a limited number of areas such as obligations covering exchange rate policies. The Fund has a broader informal regulatory role derived from the voluntary consent of its members such as in surveillance over members' financial sector policies and international payments imbalances. The IMF's regulatory role is unlike that of its member governments within their own jurisdictions. The Fund's formal and informal regulation must be constantly nurtured and renewed via peer-review processes.
Topic:
Debt, Economics, International Organization, International Trade and Finance, International Monetary Fund, and Monetary Policy

302. The Dollar and the Deficits

Author:
C. Fred Bergsten
Publication Date:
11-2009
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
The global economic crisis has revealed the folly of large U.S. budget and trade deficits, as well as of the strong dollar that makes them possible. If it is serious about recovery, the United States must balance the budget, stimulate private saving, and embrace a declining dollar.
Topic:
Economics and Monetary Policy
Political Geography:
United States

303. Inflation Scare: Crazy but Real

Author:
John H. Makin
Publication Date:
07-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The recent steps by the Federal Reserve to preempt deflation have—ironically and unexpectedly— prompted a surge in inflation fears both inside the United States and abroad, especially in China. Specifically, the Fed's measures to go beyond the stimulus inherent in a zero percent federal funds rate by purchasing Treasury and mortgage securities has conjured visions—especially in the eyes of major buyers of Treasury securities, China foremost— of massive money printing to underwrite trillions of dollars of additional government borrowing at low interest rates. As markets have shown, if that were the Fed's intention—which it decidedly is not—the effort would fail because excessive money printing—creating a money supply larger than the quantity of money demanded— would push up interest rates as inflation expectations rose.
Topic:
Economics, International Political Economy, International Trade and Finance, and Monetary Policy
Political Geography:
United States and China

304. 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

305. Postcrisis Risks

Author:
John H. Makin
Publication Date:
11-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The only thing scarier than the slide of the dollar, which has dropped by 15 percent since March, would be an attempt by the Federal Reserve to stop it. Such an attempt would show that we have learned nothing from the Bank of Japan's disastrous premature exit from a zero-interest policy in August 2000. Closer to home, it would resemble the Fed's premature move to mop up “excess” reserves by doubling reserve requirements in three steps between August 1936 and May 1937, which was followed by the third-worst recession of the twentieth century, from May 1937 to June 1938.
Topic:
Economics, International Political Economy, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
United States and Japan

306. Recovery: The Global Financial Crisis and Middle-Income Countries

Author:
Alejandro Foxley
Publication Date:
07-2009
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
No country has proved immune to the devastating effects of the current global financial crisis. But the middle-income countries of Eastern Europe, Latin America, and East Asia, which previously had achieved significant progress—economically and socially—have shown themselves to be particularly vulnerable. The crisis has highlighted important lessons for these countries, which inhabit a twilight zone between the developed and developing worlds?and those that aspire to join their ranks—as they rebuild.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe, East Asia, and Latin America

307. The Swiss National Bank: 1907–2007 by Werner Abegg, Ernst Baltensperger, et al., contributors

Author:
Kurt Schuler
Publication Date:
09-2008
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Swiss franc is the world's best-performing currency over the last century: it has lost only about 87 percent of its value in terms of gold, compared to 97 percent for the U.S. dollar and more than 99 percent for almost all other currencies. Switzerland's avoidance of wars, which is part policy and part lucky geography, has contributed to the relative stability of the franc. So have the conservative financial habits of its citizens, which have been reflected in the country's generally prudent government finances. But some credit undoubtedly belongs to the central bank, the Swiss National Bank. It has consistently pursued monetary policies that have produced low inflation, and has made few consequential errors since it was established in 1907. Its experience therefore should be of interest far beyond the borders of Switzerland. This centennial volume, by a constellation of 40 Swiss and foreign authors, is a history and an examination of issues in monetary policy the central bank has faced. It is typically Swiss in its occasionally ponderous thoroughness, pleasing design, and high quality.
Topic:
Economics, International Trade and Finance, and Monetary Policy
Political Geography:
France and Switzerland

308. Should central banks target stock prices?

Author:
Paul De Grauwe
Publication Date:
09-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
The question of whether central banks should react to stock price developments has been hotly debated. This discussion has intensified since the eruption of the credit crisis. According to some analysts, including myself, the failure of the US Federal Reserve under Alan Greenspan to react to the bubbles in the stock and housing markets helps to explain the financial excesses and the subsequent crisis.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
United States

309. Nafta toward a Common Currency: An Economic Feasibility Study

Author:
Kelly Hugger
Publication Date:
07-2008
Content Type:
Working Paper
Institution:
Department of Economics and Business, Colorado College
Abstract:
The recent emergence of the Euro, combined with the completion of a decade of North American Free Trade Agreement (NAFTA) has sparked interest in adopting a common currency for North America. This study examines the likelihood that Canada, Mexico, and the United States will adopt a common currency under fixed exchange rate regimes. The benefits and costs of a common currency are explored using the theory of optimum currency areas (OCA). Empirical research focuses on several variables including intra-regional and intra-industry trade, trade openness, gross domestic product, inflation rates, interest rates, economic growth rates, business cycle synchronization, factor mobility, fiscal policy and monetary policy coordination. The analysis also presents a comparative analysis of NAFTA with Economic and Monetary Union (EMU) nations on different economic criteria. Finally, correlation and regression analysis further explores the likelihood that members of NAFTA will economically integrate. Though this research concludes that it is economically feasible for NAFTA members to move towards a common currency, this venture depends on the political readiness of the nations.
Topic:
International Trade and Finance, Regional Cooperation, Treaties and Agreements, and Monetary Policy
Political Geography:
United States, Canada, North America, and Mexico

310. The End of Monetary Dominance? How Crises Can Influence Monetary Policy Decisions and Institutions

Author:
Pierre L. Siklos
Publication Date:
11-2008
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Has the global financial crisis made monetary policy more powerful, or it has exposed its limitations? For the most part, the answer is the former, at least today, but the outlook may not be so rosy. When the former British Prime Minister, Harold Macmillan, was asked what were the greatest challenges he faced, he replied: “Events, my dear boy, events.” We have certainly witnessed in the last year a series of events that are challenging policy makers as well as their beliefs about how monetary policy ought to be conducted in future. Indeed, these same events may come to haunt the monetary authorities, and we may well see a return to a period when monetary policy was subservient to a fiscal policy that steps in, ostensibly to impose order on an apparently unruly private sector. Central banks, among other players, appear to have unwittingly put in place the conditions necessary for what we can now confidently call the perfect storm of 2008. There were several observers who predicted that a train wreck was looming on the horizon. Indeed, perhaps most stunning of all, the Bank for International Settlements (BIS), created from the ashes of World War I and which quickly became the forum for central bank cooperation, a role it continues to fill to this day, had repeatedly warned about the troubles that lay ahead. “…these facts also suggest that the magnitude of the problems yet to be faced could be much greater than many now perceive” (BIS Annual Report, 2008: 9). The failure of central banks to act on these warnings may come back to haunt them in the near future.
Topic:
Economics, International Cooperation, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Britain