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132. 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
133. Demographic versus Cyclical Influences on US Labor Force Participation
- Author:
- William R. Cline and Jared Nolan
- Publication Date:
- 07-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper applies time series analysis to distinguish between cyclical and demographic causes of the decline of the labor force participation rate. Some public discussions suggest that the decline of US unemployment from its 2009 peak of 10 percent to about 6 percent by mid-2014 grossly exaggerates recovery because most of the decline reflects the exit of discouraged workers from the labor force. This study finds instead that one-half to two-thirds of the decline in labor force participation by about 3 percentage points from late 2007 to early 2014 is attributable to aging of the population. Although about one-third is found attributable to the lagged influence of high, and especially long-term, unemployment, going forward the potential rebound in the participation rate from recovery is projected to be approximately offset by further aging of the population.
- Topic:
- Demographics, Economics, Labor Issues, and Population
- Political Geography:
- United States
134. Oil Prices and Interstate Conflict Behavior
- Author:
- Cullen S. Hendrix
- Publication Date:
- 07-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Anecdotal evidence suggests high oil prices embolden leaders in oil-rich states to pursue more aggressive foreign policies. This article tests the conjecture in a sample of 153 countries for the time period 1947–2001. It finds strong evidence of a contingent effect of oil prices on interstate disputes, with high oil prices associated with significant increases in dispute behavior among oil-exporting states, while having either a negative or null effect on dispute behavior in nonexporting states.
- Topic:
- Conflict Resolution, International Relations, Foreign Policy, Oil, and History
135. Should Korea Join the Trans-Pacific Partnership?
- Author:
- Jeffrey J. Schott and Cathleen Cimino
- Publication Date:
- 09-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The negotiation of the Trans-Pacific Partnership (TPP), a megaregional agreement to lower barriers to trade and investment and promote economic integration in the Asia-Pacific region, has been a dynamic process with a number of countries joining the talks in midstream. Since negotiations began in March 2010, participation in the TPP talks has expanded several times to include Malaysia (October 2010), Vietnam (December 2010), Canada and Mexico (October 2012), and Japan (July 2013). In November 2013, Korea announced its interest in participating in the TPP and began consulting with the countries involved. The TPP now has 12 participants. Korea is still considering whether to become lucky 13.
- Topic:
- Economics, International Trade and Finance, and Bilateral Relations
- Political Geography:
- Malaysia, Canada, Asia, Vietnam, Korea, and Mexico
136. 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
137. Sustainability of Public Debt in the United States and Japan
- Author:
- William R. Cline
- Publication Date:
- 10-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper applies the probabilistic debt sustainability model developed for the euro area in Cline (2012, 2014) to sovereign debt in the United States and Japan. The results indicate that to avoid further increases in the expected ratio of public debt to GDP over the next decade, average annual primary deficits will need to be reduced by about 0.75 percent of GDP in the United States and by about 3 percent of GDP in Japan from the likely baselines as of mid-2014.
- Topic:
- Debt, Diplomacy, and International Trade and Finance
- Political Geography:
- United States, Japan, and East Asia
138. Official Financial Flows, Capital Mobility, and Global Imbalances
- Author:
- Joseph E. Gagnon, Tamim Bayoumi, and Christian Saborowski
- Publication Date:
- 10-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- We use a cross-country panel framework to analyze the effect of net official flows (chiefly foreign exchange intervention) on current accounts. We find that net official flows have a large but plausible effect on current account balances. The estimated effects are larger with instrumental variables (42 cents to the dollar on average compared with 24 without instruments), reflecting a possible downward bias in regressions without instruments owing to an endogenous response of net official flows to private financial flows. We consistently find larger impacts of net official flows when international capital flows are restricted and smaller impacts when capital is highly mobile. A further result is that there is an important positive effect of lagged net official flows on current accounts that we believe operates through the portfolio balance channel.
- Topic:
- Economics, Foreign Exchange, and Monetary Policy
139. What Goes into a Medal: Women's Inclusion and Success at the Olympic Games
- Author:
- Marcus Noland and Kevin Stahler
- Publication Date:
- 10-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper examines determinants of women's participation and performance in the Olympics. Female inclusion and success are not merely functions of size, wealth, and host advantage, but a more complex process involving the socio-economic status of women and, more weakly, broad societal attitudes on gender issues. Female labor force participation and educational attainment in particular are tightly correlated with both participation and outcomes, even controlling for per capita income. Female educational attainment is strongly correlated with both the breadth of participation across sporting events and success in those events. Host countries and socialist states also are associated with unusually high levels of participation and medaling by female athletes. Medal performance is affected by large-scale boycotts. Opening competition to professionals may have leveled the playing field for poorer countries. But the historical record for women's medal achievement is utterly distorted by the doping program in the former East Germany, which specifically targeted women. At its peak in the 1970s and 1980s, the program was responsible for 17 percent of the medals awarded to women, equivalent to the medal hauls of the Soviet or American team in 1972, the last Olympics not marred by widespread abuse of performance-enhancing drugs.
- Topic:
- Education, Gender Issues, Human Rights, and Labor Issues
- Political Geography:
- America and Germany
140. 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