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2561. Updated Estimates of Fundamental Equilibrium Exchange Rates

Author:
William R. Cline and John Williamson
Publication Date:
11-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In 2008 we introduced a semiannual series providing estimates of fundamental equilibrium exchange rates, or FEERs (Cline and Williamson 2008a). The economic concept of FEERs was first set forth by Williamson (1983). An operational method for arriving at multilaterally consistent estimates of FEERs was developed by Cline (2008) and has been applied over the past five years in this series of estimates. This issue marks the valedictory round of the series for Williamson, who is retiring.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
Europe and Lisbon

2562. Hyperinflations Are Rare, but a Breakup of the Euro Area Could Prompt One

Author:
Anders Åslund
Publication Date:
11-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Hyperinflation is one of the most misused words in the English language. Two years ago, I heard a prominent American investor say that we were about to get hyperinflation, “not 15 percent a year as under Jimmy Carter but perhaps 5 percent a year.” Hyperinflation is usually 1,000 percent or more a year. The standard definition by Philip Cagan (1956) is that hyperinflation starts when inflation reaches 50 percent a month, and then the economy is in hyperinflation for one year until monthly inflation falls and stays below 50 percent.
Topic:
Economics, International Trade and Finance, Markets, Regional Cooperation, and Monetary Policy
Political Geography:
Europe

2563. How Can Trade Policy Help America Compete?

Author:
Robert Z. Lawrence
Publication Date:
10-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
America deserves credit for not having succumbed to the global financial crisis by repeating the protectionist mistakes of the 1930s. Nonetheless, since 2007, although lip service has been paid to boosting US exports, its trade policy accomplishments have been modest. This is unfortunate because active trade policies can promote American living standards and facilitate America's return to full employment and sustained growth. These policies can also help to create a global trade order that advances American interests. This policy brief argues that the United States needs new initiatives that discipline foreign practices, increase access to foreign markets, revitalize the World Trade Organization (WTO), improve the administrative and regulatory environment for trade, and assist workers and communities adversely affected by change.
Topic:
Economics, Globalization, International Trade and Finance, Markets, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
United States and America

2564. Why a Breakup of the Euro Area Must Be Avoided: Lessons from Previous Breakups

Author:
Anders Åslund
Publication Date:
08-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
One of the big questions of our time is whether the Economic and Monetary Union (EMU) will survive. Too often, analysts discuss a possible departure of one or several countries from the euro area as little more than a devaluation, but I argue that any country's exit from the euro area would be a far greater event with potentially odious consequences. Exit from the EMU cannot be selective: It is either none or all.
Topic:
Economics, International Trade and Finance, and Monetary Policy
Political Geography:
Europe

2565. Combating Widespread Currency Manipulation

Author:
Joseph E. Gagnon Gagnon
Publication Date:
07-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Widespread currency manipulation, mainly in developing and newly industrialized economies, is the most important development of the past decade in international financial markets. In an attempt to hold down the values of their currencies, governments are distorting capital flows by around $1.5 trillion per year. The result is a net drain on aggregate demand in the United States and the euro area by an amount roughly equal to the large output gaps in the United States and the euro area. In other words, millions more Americans and Europeans would be employed if other countries did not manipulate their currencies and instead achieved sustainable growth through higher domestic demand.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
United States, America, and Europe

2566. The Coming Resolution of the European Crisis: An Update

Author:
C. Fred Bergsten and Jacob Funk Kirkegaard
Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Getting the diagnosis right is a prerequisite for understanding the euro area predicament and evaluating key decisions taken since early 2010. As we laid out in Bergsten and Kirkegaard (2012), while the euro area faces multiple overlapping and mutually reinforcing elements of fiscal (Greece), banking (Ireland/Spain), and competitiveness (Southern periphery) crises, it is first and foremost facing a crisis of institutional design. The common currency as designed in the Maastricht Treaty of 1992 is a half-built house without the critical components of banking and fiscal union necessary to sustain it through the type of crushing economic and financial down- turn witnessed since October 2008.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe

2567. L'Est du Congo : la rébellion perdue des ADF-Nalu

Publication Date:
12-2012
Content Type:
Policy Brief
Institution:
International Crisis Group
Abstract:
Les Forces démocratiques alliées-Armée nationale de libération de l'Ouganda (ADF-N alu) sont un des groupes armés les plus anciens et les moins connus de l'Est de la République démocratique du Congo (RDC) et le seul de cette région à être considér é comme une organisation terroriste appartenant à la nébuleuse islamiste d'Afrique de l'Est. S'ils ne constituent pas une menace déstabilisatrice comme le Mouvement du 23 mars (M23), ils tiennent cependant tête à l'armée congolaise depuis 2010. Créé en RDC en 1995 et situé aux confins montagneux de la RDC et de l'Ouganda, ce groupe armé congolo-ougandais fait preuve d'une extraordinaire résilience qui tient à sa position géostratégique, son inse rtion dans l'économie transfrontalière et la corruption de s forces de sécurité. Par con- séquent, avant d'envisager toute nouvelle intervention militaire contre les ADF-Nalu, il convient de faire la part du mythe et de la réalité et de réduire sa base socioéconomique tout en proposant une offre de démobilisation et de réinsertion à ses combattants.
Topic:
Conflict Resolution, Political Violence, Ethnic Conflict, and Armed Struggle
Political Geography:
Africa

2568. Threats to Security in the Sahel: The Mali Crisis

Author:
Mohamed Mahmoud Mohamed Salah
Publication Date:
12-2012
Content Type:
Policy Brief
Institution:
International Peace Institute
Abstract:
This issue brief provides a view from the Sahel on the current threats to peace and security in the region. As part of its project on peace and security in the Sahel- Sahara region, IPI's Africa Program has partnered with the Mauritania-based think tank, the Centre for Strategies for Security in the Sahel Sahara Region. The Centre 4S was established in June 2011 to help countries in the Sahel take the lead in transforming the region's daunting security and development challenges into opportunities. Originally written in French, this June 2012 research paper from the Centre 4S examines the principal threats to peace and security in the Sahel and their impact on development. It then offers proposals and recommendations for surmounting the current conflicts before presenting possible future scenarios for the region.
Topic:
Conflict Resolution, Security, Political Violence, Development, Armed Struggle, and Counterinsurgency
Political Geography:
North Africa

2569. Middle East in 2013: Promise and (Lots of) Peril

Author:
Robin Wright and Garrett Nada
Publication Date:
12-2012
Content Type:
Policy Brief
Institution:
United States Institute of Peace
Abstract:
The Middle East faces even bigger challenges in 2013 than it did during the first two years of the so-called Arab Spring. So far—a pivotal caveat—the Arab uprisings have deepened the political divide, worsened economic woes and produced greater insecurity. Solutions are not imminent either. More than 120 million people in Egypt, Tunisia, Libya and Yemen have experienced successful uprisings that ousted four leaders who together ruled a total of 129 years. But more than half of the Arab world's 350 million people have yet to witness any real change at all. Defining a new order has proven far harder than ousting old autocrats. Phase one was creating conditions for democracy. Phase two is a kind of democratic chaos as dozens of parties in Egypt, Libya and Tunisia do political battle (and in some cases physical battle) over constitutions. Ancien regimes have not totally given up, as in Yemen. The cost of change has exceeded even the highest estimates, as in Syria. So most Arabs are probably disappointed with the “Arab Spring” for one of many reasons. Nevertheless the uprisings were never going to happen in one season. This is instead only the beginning of a decades-long process—as most in the West should know from their own experiences.
Topic:
Conflict Resolution, Political Violence, Democratization, Post Colonialism, and Regime Change
Political Geography:
Middle East, Libya, Yemen, Arabia, Egypt, and Tunisia

2570. Political Economy and Conflict Dimensions of Afghanistan's Mineral Resources: A Preliminary Exploration

Author:
William Byrd
Publication Date:
12-2012
Content Type:
Policy Brief
Institution:
United States Institute of Peace
Abstract:
Afghanistan has sizable underground mineral resources, which have potential positive economic impacts but also possible downsides—the so-called “resource curse” often involving negative macroeconomic, developmental, fiscal, governance, political and conflict effects. The success of the broader political transition in coming years as well as regional geopolitical factors will have a major influence on prospects for Afghanistan's underground resources. For “mega-resources” such as the Aynak copper and Hajigak iron deposits, the Afghan government has conducted credible tendering to ensure that contracts with foreign companies are on favorable terms for Afghanistan. Good-practice approaches for mega-resources should continue and be further strengthened, but there will probably be further delays in exploitation, and realization of potential will take much time. Exploitation of other largish and medium-sized resources may involve joint ventures with politically-connected Afghan firms and deals with local strongmen, or sometimes criminal networks with linkages to corrupt officials and insurgents. Spreading patronage can reduce short-run conflict risks, but there are risks of corruption, and conflicts could arise over time. For these resources, priorities include transparent contracting and clarity about ownership of companies; setting basic financial parameters for different resources (e.g. royalty rates) to reduce the risk of overly favorable arrangements for extracting entities; and addressing criminal elements and associated corruption. For smaller, concentrated, high-value resources (notably gemstones), informal exploitation using crude techniques is typically combined with illicit export trade, and local strongmen are involved, which can mean periods of stability but also conflicts when bargains are reopened or new actors get involved. The way forward for these resources includes gradually improving and regularizing the framework; setting low royalty rates to encourage formalization of existing activities rather than leasing resources to outsiders; technical assistance to promote more effective extraction; and encouraging processing and value addition within Afghanistan. Finally, further analytical work is required to better understand the political economy and conflict ramifications of mining in Afghanistan.
Topic:
Conflict Resolution, Development, Economics, Political Economy, and Natural Resources
Political Geography:
Afghanistan