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41. Why Did Inflation Rise and Fall So Rapidly? Lessons from the Korean War

Author:
Joseph Gagnon and Asher Rose
Publication Date:
01-2025
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The speed of both the rise and fall of US inflation in 2021–23 took many economists by surprise. This paper shows that the rise of COVID era inflation reflects three independent shocks: a plethora of pandemic-related shifts in demand patterns and supply disruptions; the largest commodity price surge in 40 years caused by the Ukraine war; and strong monetary and fiscal responses to the pandemic, which kept labor markets tight. This paper documents the transmission of these shocks through the main components of private consumption: durable goods, nondurable goods, and services. The rapid fall of inflation reflects the credibility of the Federal Reserve’s commitment to low inflation, something that was not apparent during the inflationary shocks of the 1970s but that was important during the Korean War inflation of 1950–51. Another similarity with the Korean War episode is the temporary surge in demand for durable goods.
Topic:
Economy, Inflation, Korean War, COVID-19, and Goods and Services
Political Geography:
Asia and South Korea

42. Managing an Aging Society: Learning the Right Lessons from Japan

Author:
Jacob Funk Kirkegaard
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
As the world and especially other Asian and European economies enter the accelerated process of aging that Japan experienced from the mid-1990s onwards, learning the right policy lessons from Japan’s response is crucial. This paper argues that, overall, Japan has done relatively well by implementing a response that—even if often belatedly so—has mitigated some of the worst economic effects of aging. Japan has successfully raised domestic labor utilization and immigration levels, integrated its economy more with the rest of the world, and implemented a fiscal policy based on debt expansion that has seen debt costs decline. Other advanced Asian economies and China now face aging processes materially faster than Japan’s and will age simultaneously rather than alone like Japan. In addition, many advanced economies will age during a period of much slower global economic growth and less rather than more global trade and investment opening than what Japan faced from the mid-1990s. These less benign international economic and political circumstances mean that many advanced economies will likely not age with the same relative political and economic stability seen in Japan in the last 30 years. In time, this paper argues, “Japanification” will no longer mean a slowly developing economic disaster but will come to mean competent management of a very difficult economic transition.
Topic:
Debt, Demographics, Labor Issues, Immigration, Fiscal Policy, Aging, and Productivity
Political Geography:
Japan and Asia

43. The Effects of US-China Cooperation on Fentanyl Markets and Overdose Deaths

Author:
Marcus Noland, Julieta Contreras, and Lucas Rengifo-Keller
Publication Date:
05-2025
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Drug overdose is the leading cause of death among Americans aged 15–44, exceeding heart disease, cancer, suicide, vehicular accidents, and COVID-19 in 2023. Most drug deaths are associated with fentanyl. This paper uses data on illicit drug prices to estimate reduced-form price equations of fentanyl, oxycodone, and alprazolam based on supply and demand, including hedonic characteristics. The results are used to estimate the relationship between fentanyl prices and overdoses. They suggest that the Chinese embargo on fentanyl shipments to the United States beginning in May 2019 raised street prices for a limited period, reducing fentanyl overdose deaths in the United States by roughly one-quarter over a three- to five-month period after the announcement.
Topic:
Bilateral Relations, Drugs, Opioid Crisis, Cooperation, and Fentanyl
Political Geography:
China, Asia, North America, and United States of America

44. Alignment or Misalignment? US and EU High-Tech Trade and Sanctions Policies toward China

Author:
Antonio Calcara and Jeffrey J. Schott
Publication Date:
04-2025
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This Policy Brief focuses on the alignment or misalignment of the European Union and the United States on high-technology trade and sanctions vis-à-vis China. The Trump administration is likely to continue the aggressive US stance toward China in the technological realm, putting increasing pressure on its European allies to align with US policy. The Europeans, for their part, are in a difficult position: On the one hand, they are under pressure from the US government; on the other hand, the more Washington restricts Chinese trade, the more Chinese exporters will look to the European market to sell their manufactured goods. Increased competition from Chinese imports in Europe, especially in the automotive sector, could in turn trigger a political backlash that weakens support for transatlantic coordination on China.
Topic:
Science and Technology, Sanctions, European Union, Trade Policy, and Imports
Political Geography:
China, Asia, United States of America, and European Union

45. Significant, but Not Systemic: The Challenge of China’s Efforts to Rival Western Financial Predominance

Author:
Martin Chorzempa and Lukas Spielberger
Publication Date:
05-2025
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Despite worldwide concerns about the US dollar, the Chinese renminbi is not yet ready to be a serious contender for leading international currency status. This Policy Brief examines three of the most important Chinese approaches to increasing the renminbi’s role as an international settlement currency: promote bilateral swap agreements between the People's Bank of China and other central banks; create international payment systems that do not involve the dollar, most notably the Cross-Border Interbank Payment System; and develop a central bank digital currency for alternative payment infrastructures. The authors find that Beijing’s efforts fall short of posing a systemic challenge to the dollar or to infrastructures like SWIFT. Nevertheless, these approaches have enabled China to use its currency for bilateral foreign policy. US and European policymakers should consider countering or attenuating these efforts, even though they have had limited success in increasing renminbi usage.
Topic:
Foreign Policy, Central Bank, Currency, Digital Currency, and SWIFT
Political Geography:
China and Asia

46. North Korea, Russia, and China: Past Cooperation & Future Prospects

Author:
Sydney Seiler
Publication Date:
06-2025
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Syd Seiler argues that recent developments in the relationship between North Korea, China, and Russia should be examined within the context of past interactions and North Korea’s geopolitical reality over the past several decades. North Korea’s pursuit of a distanced approach toward China and the Soviet Union during the Cold War, its post-Cold War management of the bilateral relationships while developing nuclear weapons, and contemporary developments within the North Korea-China-Russia triangle highlight limited shared interests and few signs of deliberate trilateralism. Despite skepticism regarding the durability of trilateralism, Seiler warns against neglecting the threat of collaboration and cooperation among the three countries. In particular, the evolving relationship between North Korea, China, and Russia holds the potential to harm the existing balance of power on the Korean Peninsula and embolden North Korea to believe that the use of force might be justified within the New Cold War structure. Seiler outlines three scenarios in which the evolution of trilateralism could lead to North Korea employing military force on the Korean Peninsula, highlighting the critical role of China and Russia in either restraining or encouraging North Korean revisionism. To properly respond to the dangerous transformation of the geopolitical environment, Seiler recommends the United States, South Korea, and like-minded states reinforce conventional and extended deterrence by convincing China and Russia that they will incur high costs for enabling North Korea’s coercive and revisionist behavior.
Topic:
Security, International Cooperation, Nuclear Weapons, Geopolitics, and Regional Politics
Political Geography:
Russia, China, Eurasia, Asia, and North Korea

47. Siloed No More: The U.S.-ROK Alliance and a Taiwan Conflict

Author:
Clint Work
Publication Date:
03-2025
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This project was motivated by and builds upon earlier research tracing the evolution and apparent alignment of U.S. and South Korean signaling on Taiwan, wherein the South Korean government adopted a more outspoken position regarding “the importance of peace and stability in the Taiwan Strait” and framed it in increasingly expansive terms—as a regional and global issue yet also directly linked to the peace and stability of the Korean Peninsula. The previous research indicated the U.S.-ROK alliance faced a gap between its topline diplomatic rhetoric on Taiwan and its preparedness to navigate an actual conflict between the United States and China over Taiwan and the attendant risk of a simultaneous conflict on the Korean Peninsula. This project aimed to go beyond diplomatic rhetoric. Forty-two interviews were conducted from June 2024 to February 2025 in both Washington and Seoul. Most were in-person interviews with some conducted virtually or by written response via email. Through these interviews with U.S. and ROK current and former government officials, think tank experts, and academics—as well as open-source research—this project offers insight on the evolution and state of U.S.-ROK alliance discussions on a Taiwan conflict, key challenges obstructing such discussions, and critical variables or dynamics the alliance would have to navigate in the event of a conflict.
Topic:
Security, Alliance, Conflict, and Regional Security
Political Geography:
Taiwan, Asia, South Korea, and United States of America

48. Why democracies stick together: The theory and empirics behind alliance formation

Author:
Markus Jaeger
Publication Date:
03-2025
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Domestic regime type affects both inter-state conflict and alliance formation. Democratic peace theory posits that democracies do not go to war with one another, while democratic alliance theory suggests that they rarely, if ever, join nondemocratic alliances (or alliances led by nondemocratic powers). Empirical evidence strongly supports both theories. The Atlantic Council’s Freedom and Prosperity Indexes further reinforces the hypothesis that economically prosperous democracies tend to align with one another, whereas authoritarian states gravitate toward similarly nondemocratic and less prosperous partners. If these theories hold, they carry significant implications for Western and especially US foreign policy. First, global democratization would reduce the number of potential conflicts, at least among an increasing number of democracies. Second, it would expand the pool of democratic alliance partners, while at the same limiting the alliance options available to nondemocratic powers. This strategic logic underscores the importance of upholding democratic norms abroad and promoting democratization in nondemocratic states. However, advocating for democratization of nondemocratic great powers will be perceived as both a geopolitical and domestic political challenge aimed at weakening their international position and threatening their governments’ domestic grip on power. Efforts to democratize nondemocratic great-power like Russia and China therefore provoke intense countermeasures. If such a strategy is deemed to be too high risk or too difficult to pursue successfully, a less provocative, “peripheral” strategy may focus on fostering democracy and economic development in authoritarian regimes’ weaker, less prosperous partners, thereby depriving them of potential allies.
Topic:
NATO, Diplomacy, Politics, Democracy, and Alliance
Political Geography:
Russia, China, and Asia

49. How China sees the future and what it means for NATO

Author:
Alice Politi
Publication Date:
03-2025
Content Type:
Special Report
Institution:
NATO Defense College
Abstract:
China’s military expansion and its geopolitical ambitions, especially in the Indo-Pacifi c macro-area, potentially present growing challenges for NATO. Offi cial documents show that the reunifi cation with Taiwan plays a critical role in China’s 2049 “Great Rejuvenation” goals. However, China’s military capabilities are still too limited to allow for an intervention in Taiwan in the short term. Despite China’s rapid progress in outer space and military sectors, internal challenges such as slowing economic growth and demographic issues raise doubts about its ability to achieve long-term ambitions.
Topic:
NATO, Geopolitics, Strategic Competition, and Military
Political Geography:
China, Taiwan, Asia, and Indo-Pacific

50. Friends with benefits: Assessing Russian-Chinese military exercises

Author:
Narantsatsral Enkhbat
Publication Date:
06-2025
Content Type:
Special Report
Institution:
NATO Defense College
Abstract:
China-Russia joint strategic air patrols and naval manoeuvres near U.S. territory in the Pacifi c have become a growing trend, serving as geopolitical messaging. China is likely to become more involved in maritime security and power projection in the Arctic, as evidenced by its Coast Guard’s manoeuvres with Russia in the Northern Pacifi c. Russia conducts military drills and manoeuvres with China in the South China Sea (and potentially in the Taiwan Strait) to show support to China on territorial issues.
Topic:
Security, NATO, Geopolitics, Navy, Maritime, and Military Exercises
Political Geography:
Russia, China, Eurasia, Taiwan, Asia, and Indo-Pacific