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381. Not All Financial Regulation Is Global

Author:
Nicolas Véron and Stéphane Rottier
Publication Date:
09-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
“All politics is local,” as the saying goes, but all economics is global, and regulation is one area where these two realities meet and conflict. This has been particularly true for financial regulation in the wake of the unprecedented financial crisis.
Topic:
Economics, Genocide, International Cooperation, International Trade and Finance, and Monetary Policy
Political Geography:
Europe

382. Regional Monetary Cooperation in East Asia

Author:
Melissa Murphy and Wen Jin Yuan
Publication Date:
11-2010
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
After a decade of negotiations revolving around regional monetary cooperation, the Association of Southeast Asian Nations (ASEAN) plus China, Japan, and South Korea (ASEAN+3) finally reached agreement to establish a regional foreign reserve pool in February 2009. The launch of the Chiang Mai Initiative Multilateralization (CMIM) came amid the global financial crisis, when the ASEAN nations hit so hard during the 1997 Asian financial crisis were once again reminded of the utility of a joint policy initiative to ensure regional financial stability.
Topic:
Economics, Monetary Policy, and Financial Crisis
Political Geography:
Israel and Asia

383. The Transformational Impact of EMU and the Global Financial Crisis

Author:
Francesco Paolo Mongelli
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The headwinds facing the euro area are many and substantial: there is no pretence of denial. While most attention is correctly devoted to the size of rescue packages for some countries and the terms of crisis management and resolution mechanisms, we argue that these challenges must also be met from within the euro area. We are aided by a simple framework illustrating how the benefits the euro can generate depend on the degree of openness, flexibility and income correlation among euro area countries. Sharing the euro has steadily transformed euro area economies that are now deeply interconnected. This is generating largely benign effects that represent the intrinsic value of the euro area: it is a shared asset. Yet, such integration has provided the ground for the transmission of the sovereign crisis: through financial exposure, trade linkages and cross-country asset ownership.
Topic:
Economics, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
Europe

384. A Renewed Political Deal for Sustainable Growth within the Eurozone and the EU: An Open Letter to the President of the European Council

Author:
Daniel Gros, Stefano Micossi, Richard Baldwin, Giuliano Amato, and Pier Carlo Padoan
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Under current policies, the European Union will only be able to pull itself out of low growth and high unemployment very slowly – too slowly to exclude dangerous economic and political assaults on the Union's continuing cohesion and viability. What is needed is a substantial increase in the EU output growth rate, which has been persistently low for too long a time. With low growth, sovereign debt sustainability in a number of member states will remain uncertain, possibly leading to renewed strains in financial markets and rising spreads that will aggravate the costs of budgetary consolidation. The divergences in productivity and competitiveness and the current external imbalances they engendered can be unwound at an acceptable cost only if growth accelerates in the core and the periphery. On present trends, the adjustment burden might be unbearable for peripheral countries and generate strains that may eventually undermine the euro.
Topic:
Economics, Regional Cooperation, Monetary Policy, and Governance
Political Geography:
Europe

385. The European Council Summit and the Political Economics of the EMU Crisis

Author:
Christian Fahrholz and Cezary Wójcik
Publication Date:
11-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Roger Ailes, a former advisor to Ronald Reagan, recalls in his book an intriguing practice of the ancient Romans: when they finished building a bridge or an arch, they enforced accountability by placing the engineer in charge beneath the construction when the scaffolding was removed. If the edifice did not hold, he was the first to know. We do not follow such drastic practices these days in Europe, but with some European economies shaking and the Greek sovereign debt crisis still not over, the architecture of the euro area has been certainly come under severe stress. Unfortunately, the 28-29 October 2010 European Council Summit has not made this architecture much safer.
Topic:
Economics, Regional Cooperation, Monetary Policy, and Financial Crisis
Political Geography:
Europe

386. Is the euro really a 'teuro'? Effects of introducing the euro on prices of everyday non-tradables in Slovakia

Author:
Miroslav Beblavý
Publication Date:
11-2010
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper looks at the Slovak experience with euro adoption from the point of view of perceived versus actual inflation and with a focus on a specific set of non-tradable prices. It examines whether Slovak consumers experienced or perceived (or both) an unusual price jump at the time of euro adoption and the possible explanations for such a phenomenon.
Topic:
Economics and Monetary Policy
Political Geography:
Slovakia

387. Progressive and Regressive Taxation in the United States: Who's Really Paying (and Not Paying) their Fair Share?

Author:
Brian Roach
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Global Development and Environment Institute at Tufts University
Abstract:
The 2010 debate over extending the 2001 and 2003 Bush tax cuts often focused the fairness of the tax distribution in the United States. Unfortunately, discussions of tax fairness rarely take into account the distribution of the overall tax system, typically focusing only on the federal income tax or on federal taxes without consideration of the state and local tax system. This paper updates a 2003 analysis (Roach, 2003) to present a current assessment of the distribution of all components of the U.S. tax system, including recent trends. The results show that the overall federal tax system is quite progressive. But when state and local taxes are included as well, the overall U.S. tax system is only slightly progressive. Further, most of the progressivity of the overall tax system occurs in the lower half of the income spectrum. At upper-income levels, progressivity levels off and actually reverses at the highest income levels. Median-income taxpayers pay about 25% of their total income in taxes, while taxpayers in the top 1% pay about 31% of their income in taxes. Thus claims that America has a “highly progressive” tax system do not appear to be valid.
Topic:
Economics, Social Stratification, and Monetary Policy
Political Geography:
United States

388. Sovereign Bankruptcy in the European Union in the Comparative Perspective

Author:
Leszek Balcerowicz
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper distinguishes four alternative sovereign debt resolution mechanisms: pure market solutions, modified market solutions, crisis lending by the IMF and other institutions, and the proposed Sovereign Debt Restructuring Mechanism (SDRM). It is hard to find—at the general level of analysis—the unique advantages of SDRM. The assessment of the European Stabilization Mechanism will ultimately depend on its operation, especially whether it will be a tool of subsidizing countries in debt distress or an instrument of fiscal crisis lending. The present fiscal problems in the eurozone are due to the erosion of fiscal discipline and not to the lack of strong compensatory transfers within the eurozone. The right model to look at the conditions for the stability of the eurozone is not a single state but the gold standard–type system, a system of sovereign states with a (de facto) single currency. Based on this analogy and considering modern developments, three types of measures are needed to safeguard the stability of the eurozone: (1) measures that would reduce the procyclicality of the macroeconomic policies and of the economy; (2) reforms that would help the eurozone economies grow out of increased public debt; and (3) steps to increase the flexibility of the economy so that it can deal with the future shocks in a better way.
Topic:
Debt, Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

389. An Update on EU Financial Reforms

Author:
Nicolas Véron
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
In the context of a transatlantic comparison, the first thing to be mentioned is the difference between the time sequence of financial reforms in the European Union and its equivalent in the United States. The financial crisis started simultaneously on both sides of the Atlantic, with the initial disruption of some financial market segments in August 2007 and the major panic episode of September through October 2008. But they are not at the same stage of policy reaction and especially regulatory reform now. At least four reasons can be identified for this difference.
Topic:
Economics, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
United States and Europe

390. Strengthening IMF Surveillance: A Comprehensive Proposal

Author:
Edwin M. Truman
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The central challenge facing the global economy and financial system today is the failure of countries to limit the negative effects of their policies on other countries and on global economic and financial stability. The most prominent manifestations of this challenge are the balance-of-payments adjustment process and the notorious asymmetry therein, spillovers from other countries' financial-sector policies such as those involved in the crisis of 2007–10, and the prospect of sustained unbalanced growth in the global economy with some countries overheating and others facing substantial excess capacity. Against this background, I propose an approach to strengthened IMF surveillance over the economic and financial policies of its member countries.
Topic:
Economics, Globalization, International Monetary Fund, Monetary Policy, and Financial Crisis