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12. A Proposed Code to Discipline Local Content Requirements
- Author:
- Gary Clyde Hufbauer, Jeffrey J. Schott, and Cathleen Cimino
- Publication Date:
- 02-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Proponents of liberalized trade and finance were relieved when the global economic crisis in 2008 produced a broad range of pledges from countries around the world to avoid new barriers to trade and investment (see Evenett 2013). These promises, designed to avert a replay of the Great Depression of the 1930s, were largely honored when it came to classic forms of protection (tariffs and quotas). But the spirit of that pledge was violated as countries shifted from traditional forms of protection to behind-the-border nontariff barriers (NTBs), including local content requirements (LCRs)—policies mandating that local suppliers of goods, services, and even entire projects be favored by governments and private firms, even when foreign firms offer lower costs, better quality, and faster delivery.
- Topic:
- Debt, Economics, International Trade and Finance, Markets, Financial Crisis, and Reform
13. Income Inequality Developments in the Great Recession
- Author:
- Tomas Hellebrandt
- Publication Date:
- 01-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The Great Recession, which cost tens of millions of jobs, a collapse of asset values around the world, and threatened the global financial system, has generated renewed concern over the long-standing issue of the fairness of the distribution of wealth and income in many societies. Economic inequality has increased in the United States and many other advanced economies over the past 20 to 30 years. This trend generated less worry in the boom years, when unemployment rates were low and cheap credit enabled consumers to borrow and maintain higher standards of living, masking the impact of growing income disparity on consumption patterns and perceptions of well-being.
- Topic:
- Debt, Economics, International Trade and Finance, Poverty, Social Stratification, and Financial Crisis
- Political Geography:
- United States, United Kingdom, Germany, Spain, Italy, and Ireland
14. Understanding Differences in Growth Performance in Latin America and Developing Countries between the Asian and Global Financial Crises
- Author:
- Roberto Alvarez and José De Gregorio
- Publication Date:
- 11-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Latin American performance during the global financial crisis was unprecedented. Many developing and emerging countries successfully weathered the worst crisis since the Great Depression. Was it good luck? Was it good policies? In this paper we compare growth during the Asian and global financial crises and find that a looser monetary policy played an important role in mitigating crisis. We also find that higher private credit, more financial openness, less trade openness, and greater exchange rate intervention worsened economic performance. Our analysis of Latin American countries confirms that effective macroeconomic management was key to good economic performance. Finally, we present evidence from a sample of 31 emerging markets that high terms of trade had a positive impact on resilience.
- Topic:
- Emerging Markets, International Trade and Finance, Monetary Policy, and Financial Crisis
- Political Geography:
- Asia and Latin America
15. Is China's Property Market Heading toward Collapse?
- Author:
- Li-gang Liu
- Publication Date:
- 08-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- China's property market has slowed significantly since the first half of 2014, with sharp declines in sales and a buildup in the inventory of new homes. This sharper than expected downturn—which has affected not only second- and third tier smaller cities but also first-tier megacities such as Beijing, Shanghai, Shenzhen, and Guangzhou—contrasts with last year's buoyant sales and double-digit price surge. Compounded by fears of a default in the shadow banking system and the perception of a highly leveraged Chinese economy, the sudden declines in the property sector are being watched closely. Many commentators believe this could be a turning point for the sector, triggering a hard landing of the Chinese economy and even a financial crisis. Over the last decade, China's property sector has become an important pillar for the country's growth as well as the key source for elevated commodity prices. A property market slump would hurt other sectors, as well as drag down resource-rich economies that rely heavily on China to buy their exports.
- Topic:
- Economics, Financial Crisis, and Urbanization
- Political Geography:
- Japan, China, and United Nations
16. The Federal Reserve Engages the World (1970–2000): An Insider's Narrative of the Transition to Managed Floating and Financial Turbulence
- Author:
- Edwin M. Truman
- Publication Date:
- 08-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper traces the evolution of the Federal Reserve and its engagement with the global economy over the last three decades of the 20th century: 1970 to 2000. The paper examines the Federal Reserve's role in international economic and financial policy and analysis covering four areas: the emergence and taming of the great inflation, developments in US external accounts, foreign exchange analysis and activities, and external financial crises. It concludes that during this period the US central bank emerged to become the closest the world has to a global central bank.
- Topic:
- Economics, Foreign Exchange, and Financial Crisis
- Political Geography:
- United States
17. Versailles Redux? Eurozone Competitiveness in a Dynamic Balassa-Samuelson-Penn Framework
- Author:
- Arvind Subramanian and Kevin Stahler
- Publication Date:
- 11-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Prima facie, competitiveness adjustments in the eurozone, based on unit labor cost developments, appear sensible and in line with what the economic analyst might have predicted and the economic doctor might have ordered. But a broader and arguably better—Balassa-Samuelson-Penn (BSP)—framework for analyzing these adjustments paints a very different picture. Taking advantage of the newly released PPP-based estimates of the International Comparison Program (2011), we identify a causal BSP relationship. We apply this framework to computing more appropriate measures of real competitiveness changes in Europe and other advanced economies in the aftermath of the recent global crises. There has been a deterioration, not improvement, in competitiveness in the periphery countries between 2007 and 2013. Second, the pattern of adjustment within the eurozone has been dramatically perverse, with Germany having improved competitiveness by 9 percent and with Greece's having deteriorated by 9 percent. Third, real competitiveness changes are strongly correlated with nominal exchange rate changes, which suggests the importance of having a flexible (and preferably independent) currency for effecting external adjustments. Fourth, internal devaluation—defined as real competitiveness improvements in excess of nominal exchange rate changes—is possible but seems limited in scope and magnitude. Our results are robust to adjusting the BSP framework to take account of the special circumstances of countries experiencing unemployment. Even if we ignore the BSP effect, the broad pattern of limited and lopsided adjustment in the eurozone remains.
- Topic:
- Economics, Industrial Policy, International Trade and Finance, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe
18. Understanding Differences in Growth Performance in Latin America and Developing Countries between the Asian and Global Financial Crises
- Author:
- Roberto Alvarez and José De Gregorio
- Publication Date:
- 11-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Latin American performance during the global fi nancial crisis was unprecedented. Many developing and emerging countries successfully weathered the worst crisis since the Great Depression. Was it good luck? Was it good policies? In this paper we compare growth during the Asian and global fi nancial crises and fi nd that a looser monetary policy played an important role in mitigating crisis. We also fi nd that higher private credit, more fi nancial openness, less trade openness, and greater exchange rate intervention worsened economic performance. Our analysis of Latin American countries confi rms that eff ective macroeconomic management was key to good economic performance. Finally, we present evidence from a sample of 31 emerging markets that high terms of trade had a positive impact on resilience.
- Topic:
- Economics, Global Recession, Monetary Policy, and Financial Crisis
- Political Geography:
- Asia and Latin America
19. Why Bail-In Securities Are Fool's Gold
- Author:
- Avinash D. Persaud
- Publication Date:
- 11-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Bailouts and bail-ins of failing financial institutions have been hotly disputed in the global financial crisis of the last five years. At the height of the crisis, several failing banks were bailed out with taxpayer money so they could service their debts, but as public outrage mounts, policymakers are increasingly looking at bailing in these institutions before using taxpayer funds. Bail-ins, also called haircuts, require the troubled institution's creditors to write off some of the debt or agree to a restructuring of the debt, which reduces their holdings. The public has demanded the imposition of these costs on creditors and bond - holders, arguing that if bad lending as well as bad borrowing went unpunished it would be encouraged. Additionally, the yawning fiscal deficits that have followed bailouts have led to unpopular fiscal retrenchment.
- Topic:
- Debt, Economics, Markets, Financial Crisis, and Reform
- Political Geography:
- United States
20. Stabilizing Properties of Flexible Exchange Rates: Evidence from the Global Financial Crisis
- Author:
- Joseph E. Gagnon
- Publication Date:
- 11-2013
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- There is a long-standing debate among economists and policymakers on the benefits of flexible versus fixed exchange rates (Klein and Shambaugh 2010). In principle, flexible exchange rates allow a country's central bank to focus on stabilizing economic growth and inflation, which are the ultimate goals of monetary policy. However, some argue that in practice central banks often do not use their powers wisely and it may be better to restrict their freedom by requiring them to peg their currency to that of an important trading partner. Others note that flexible exchange rates are far more volatile than fundamental factors can explain (Flood and Rose 1995), raising the possibility that they may introduce wasteful cross-sectoral fluctuations in economic activity. One common viewpoint is that flexible exchange rates may be fine for large countries but that the smallest countries are better off with fixed exchange rates (Åslund 2010).
- Topic:
- Economics, Foreign Exchange, International Trade and Finance, Markets, and Financial Crisis
- Political Geography:
- United States, Japan, China, and United Kingdom