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11. Negotiating the Korea-United States Free Trade Agreement

Author:
Jeffrey J. Schott, Scott C. Bradford, and Thomas Moll
Publication Date:
06-2006
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Five years ago the Institute published Free Trade between Korea and the United States? by Inbom Choi and Jeffrey J. Schott, which analyzed the potential benefits and costs of pursuing a bilateral free trade agreement (FTA). At the time, neither government had vetted the idea in bilateral consultations, though some business groups in each country—and some members of the US Congress—had voiced support for deepening US-Korea economic ties through an FTA.
Topic:
Economics, International Organization, and Political Economy
Political Geography:
United States, Asia, and Korea

12. What Kind of Landing for the Chinese Economy?

Author:
Nicholas R. Lardy and Morris Goldstein
Publication Date:
11-2004
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Rarely has the outlook for the Chinese economy been so contested. The financial press widely quotes three alternative perspectives on the short-and medium-term outlook. One school argues that the Chinese government's recent efforts to rein in overly rapid growth are working and that the economy is now on a glide path to what is referred to as a soft landing. While “soft landing” is usually not fully defined, its chief feature in this case is that Chinese economic growth slows modestly from its current pace of 9 to 10 percent to around 8 percent and that the rate of job creation does not slow enough to constitute a major political challenge for the regime. At the other end of the spectrum is the hard landing school, which argues that the authorities to date have not tightened sufficiently, that loan and investment growth remain excessive, and that the authorities soon will be forced to take more drastic action that will trigger a sharp correction. Finally, the no landing school argues that China's efforts to slow growth modestly are misguided since the economy was not overheating in 2003 and early 2004. In this view, China is in the early stages of a secular boom that has several additional years to run.
Topic:
Economics and Political Economy
Political Geography:
China and Asia

13. The US Current Account, New Economy Services, and Implications for Sustainability

Author:
Catherine L. Mann
Publication Date:
01-2004
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This essay considers the implications for sustainability of the US current account of widespread uptake of new economy services around the world. The main contribution of this paper is to estimate new income elasticities for US exports and imports of services that have become increasingly internationally tradable on account of the networked information technologies characteristic of the new economy. These elasticity estimates are then incorporated into a simple model of the US current account. Assumptions on the increase in global growth coming from widespread uptake of new economy services around the world are taken from other sources. The new estimates of income elasticities and the assumptions on global growth yield a trajectory for the US current account deficit that is compared to a base case without increased integration of new economy services in international trade and around the world. The paper concludes that although new economy services reduce the asymmetry in estimated income elasticities and contribute to raising global growth, reasonable estimates of these two structural improvements are not sufficient to stabilize the US current account deficit, in part because the share of new economy services in trade is still small.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States

14. More Pain, More Gain: Politics and Economics of Eliminating Tariffs

Author:
Gary Hufbauer and Ben Goodrich
Publication Date:
06-2003
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
A good proposal to eliminate tariffs must take into account both the pain and gain that developing countries are likely to experience. The authors take the measure of these costs and benefits and urge rich countries to maximize the benefits to developing countries while giving them ample time to accept, and adjust to, the changes that trade liberalization will require. But trade liberalization should not stop with tariff proposals. The United States and other industrial countries should generously reduce subsidies to farmers and eliminate nontariff barriers on agricultural imports. The United States should offer more concessions on services trade, particularly in its allowances for temporary foreign workers. Unless rich countries put more on the table, a WTO agreement to eliminate tariff barriers may be postponed for years.
Topic:
Economics, International Trade and Finance, Political Economy, and Third World
Political Geography:
United States

15. The Impact of Economic Sanctions on US Trade: Andrew Rose's Gravity Model

Author:
Gary Clyde Hufbauer and Barbara Oegg
Publication Date:
04-2003
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
With the end of the Cold War, the focus of US foreign policy changed—and so did that of economic sanctions. Partly because of increased cooperation within the UN framework, economic sanctions were imposed so routinely in the early 1990s that scholars called that period the sanctions decade. This proliferation sparked intense debate about the effectiveness of sanctions as a policy tool and moved US sanctions policy to the center of public discourse.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States

16. The Foreign Sales Corporation: Reaching the Last Act?

Author:
Gary Hufbauer
Publication Date:
11-2002
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Some trade disputes—like long Russian novels—never seem to end. The United States, Europe, and other trading nations have disputed the taxation of export earnings since the 1970s. To understand why the Foreign Sales Corporation (FSC) dispute is so hard to resolve, we must start with a historical tour.
Topic:
Economics and Political Economy
Political Geography:
Russia, United States, and Europe

17. Passive Savers and Fiscal Policy Effectiveness in Japan

Author:
Adam S. Posen and Kenneth N. Kuttner
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The efficacy of fiscal policy in Japan in the last decade has been a subject of considerable dispute, and the coincidence of mounting deficits and continued stagnation has led some to conclude that fiscal policy was ineffective. This paper finds ample support for the opposite conclusion: exogenous fiscal policy shocks (as derived from a structural vector-autoregression model) had pronounced real effects in Japan. Expansionary fiscal policy was expansionary, and contractionary policy contractionary, consistent with the implications of conventional macroeconomic theory. A historical decomposition shows that Japan's burgeoning public debt stems almost entirely from the recession-caused slowdown in revenue growth, and that fiscal policy was at times procyclical rather than consistently expansionary. Direct examination of the long-run relationship between private saving, taxes, and spending confirms that any Ricardian effects of future public liabilities on saving were insufficient to offset the direct first-order effects of taxes and public expenditures. The passivity of Japanese savers therefore seems to have contributed to the efficacy of fiscal policy; otherwise, some combination of increased saving, capital outflow, and higher interest rates would have diminished its impact.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Japan, Israel, and East Asia

18. Moral Hazard and the U.S. Stock Market: Analyzing the “Greenspan Put”?

Author:
Marcus Miller, Paul Weller, and Lei Zhang
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
When the risk premium in the US stock market fell far below its historic level, Shiller (2000) attributed this to a bubble driven by psychological factors. As an alternative explanation, we point out that the observed risk premium may be reduced by one-sided intervention policy on the part of the Federal Reserve, which leads investors into the erroneous belief that they are insured against downside risk. By allowing for partial credibility and state dependent risk aversion, we show that this 'insurance'—referred to as the Greenspan put—is consistent with the observation that implied volatility rises as the market falls. Our bubble, like Shiller's, involves market psychology, but what we describe is not so much 'irrational exuberance' as exaggerated faith in the stabilizing power of Mr. Greenspan.
Topic:
Economics, Government, International Trade and Finance, and Political Economy
Political Geography:
United States

19. Economic Policy Following the Terrorist Attacks

Author:
Martin Neil Baily
Publication Date:
10-2001
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
America has shown its best side in recent weeks in the efforts to help the victims of September 11. And it is showing its strength as it moves to strike back and tighten security at home. Dealing with the economic impact of these horrendous crimes has, appropriately, not been the first priority.
Topic:
Government, Political Economy, and Terrorism
Political Geography:
America

20. Can International Capital Standards Strengthen Banks in Emerging Markets?

Author:
Liliana Rojas-Suarez
Publication Date:
11-2001
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Who should determine banks' capital standards: authorities or markets? What is the right definition of core capital: equity only or equity plus subordinated debt? Can the assessment of banks' individual credit risks by external rating agencies be of equal or better quality than the assessments derived from banks' own internal rating systems? These are some of the key financial regulatory issues currently being discussed by analysts in industrial countries, especially in the context of the proposed modification to the Basel Capital Adequacy Accord: Basel II is expected to replace the original 1988 Accord.
Topic:
Economics, International Trade and Finance, and Political Economy