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91. The Japanese Experience with QE and QQE

Author:
John Greenwood
Publication Date:
01-2017
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article provides an overview of the three episodes of quantitative easing (QE) pursued by the Bank of Japan (BOJ) since 2001. It begins with a brief account of the initial reluctant shift to unorthodox policies under BOJ Governors Hayami and Fukui in 2001–06 (here designated QE1) and then covers the equally reluctant adoption of QE by Governor Shirakawa in 2010–13 (QE2). The article then turns to an account of the attempt since April 2013 by the BOJ under Governor Kuroda, designated “quantitative and qualitative easing” (QQE), to revive the economy and achieve a 2 percent inflation target. None of these attempts at QE has been successful in raising the broad money growth rate for M2 sustainably above the 2–3 percent per annum range where it has languished for the past 25 years. Consequently, Japan’s attempts at QE have all failed to raise the equilibrium level of Japanese nominal GDP by any material magnitude, and so far, attainment of the 2 percent inflation target under QQE has remained elusive. At the time of writing (October 2016), the Japanese economy therefore continues to grow at a low rate with periodic lapses into deflation. After discussing the case of Japan, the article compares the experience of the United States in 1929–33, when there was no QE, and the experience of 2008–14, when the Fed conducted QE over three periods. The comparison is deliberately focused on the quantitative aspects of the policy, not its interest rate effects. Finally, the article explains that there are two brands of QE, and that the failure of QE in Japan is fundamentally due to the choice of the wrong brand of QE. Given the type of QE that the Japanese authorities have chosen, the policy cannot be expected to succeed, except under limited conditions.1 If QE were to be implemented according to a different design, the prospects of success would be much greater. In brief, the primary reason for the failure of BOJ-style QE or QQE derives from the habitual tendency to buy securities from banks instead of from nonbank private-sector entities (such as nonbank financial firms, nonfinancial firms, households, or foreigners). While QE policy in Japan boosts the monetary base, it does not increase broad money. But it is broad money that drives nominal GDP, not the monetary base.
Topic:
History, Economy, Banks, and Central Bank
Political Geography:
Japan and Asia

92. Freeing the “Rice Bowl of Asia”: How Changing Patterns of Interdependence are Driving Political Change in Myanmar

Author:
Alex Ripley
Publication Date:
05-2017
Content Type:
Policy Brief
Institution:
Centre for the Study of Security and Development, Dalhousie University
Abstract:
Wedged between Southeast Asia, China, and the Indian subcontinent, Myanmar occupies a strategically important space which will ensure its relevance to some of the 21st century’s most significant questions, including those surrounding trade routes, energy security, and the competing geopolitical ambitions of Asia’s great powers. Exciting and important changes are underway in Myanmar. After decades of isolation under military governments, the country is taking convincing steps toward democratization. The junta relinquished much of its power in 2010. In 2011, the unpopular Myitsone hydroelectric project was suspended, suggesting a new sensitivity to public opinion. Beginning that year, a nominally civilian government led by Thein Sein (a former Tatmadaw general) embarked on a series of major political and economic reforms. These culminated in the relatively open 2015 elections, in which the opposition National League for Democracy (NLD)—the party of Nobel Prize winner Aung San Suu Kyi—won overwhelming majorities of both houses of parliament. In March 2016, parliament elected Htin Kyaw as the country’s first civilian president in half a century. What explains Myanmar’s relatively rapid transition from authoritarian pariah to fragile democracy? Perhaps international pressure forced the hand of the regime; then again, the West imposed sanctions on Myanmar for years before the military’s grip on power began to loosen. Lee Jones argues that the junta simply liberalized when its objectives were achieved.
Topic:
International Affairs, Military Affairs, Elections, Democracy, Economy, and Trade
Political Geography:
Asia and Myanmar

93. North Korean Agriculture: Recent Changes and Prospects after Unification

Author:
Randall Ireson
Publication Date:
10-2016
Content Type:
Journal Article
Journal:
International Journal of Korean Studies
Institution:
International Council on Korean Studies
Abstract:
Modern farming in Korea has followed two divergent paths since the partition of the peninsula. Both countries substantially raised agricultural production in the 1970s, but policy decisions in North Korea created a situation in which the farm sector stagnated and ultimately failed when faced with changes in the 1990s. In addition to reviewing the technical and policy changes since the start of the food crisis, this paper examines the likely consequences of reunification on the North Korean farm sector. Structural changes would include the dominance of a market economy, dissolution of cooperative and state farms, and the need to recapitalize the entire farm economy. Organizational changes regarding land tenure, operation and management of formerly collective resources, and new roles for former North Korean agricultural guidance and research organizations would be challenging. Rural residents would face personal challenges of adapting to the requirements and thinking patterns of a market economy, coupled with the loss of close technical direction by the North Korean planning system. Although there are opportunities for enhanced farm productivity and economic well being at the household level, smoothly adapting to reunification would greatly depend on planning, policies and resources set in place for such an event.
Topic:
Agriculture, History, Famine, and Economy
Political Geography:
Asia, South Korea, and North Korea

94. Understanding India’s Urban Frontier: What Is behind the Emergence of Census Towns in India?

Author:
Partha Mukhopadhyay, Marie-Hélène Zérah, Gopa Samanta, and Augustin Maria
Publication Date:
12-2016
Content Type:
Working Paper
Institution:
Centre for Policy Research, India
Abstract:
This paper presents the results of an investigation of selected census towns in northern India. Census towns are settlements that India’s census classifies as urban although they continue to be governed as rural settlements. The 2011 census featured a remarkable increase in the number of census towns, which nearly tripled between 2001 and 2011, from 1,362 to 3,894. This increase contributed to nearly a third (29.5 percent) of the total increase in the urban population during this period. Only part of this evolution can be attributed to the gradual urbanization of settlements in the vicinity or larger towns. Instead, the majority of census towns appear as small “market towns,” providing trade and other local services to a growing rural market. The case studies of representative census towns in Bihar, Jharkhand, Orissa, and West Bengal show the role of increased connectivity and growing rural incomes in driving the demand for the small scale and non-tradable services, which are the main sources of nonfarm employment in these settlements.The case studies also reveal that the trade-offs between urban and rural administrative statuses are actively debated in many of these settlements. Although statistical comparisons do not show a significant impact of urban or rural administrative status on access to basic services, urban status is often favored by the social groups involved in the growing commercial and services sectors, and resisted by the residents still involved in the traditional farming sectors.
Topic:
Urbanization, Economy, Census, and Rural
Political Geography:
South Asia, India, and Asia

95. China and the World in the Coming Decade

Author:
Shyam Saran
Publication Date:
11-2016
Content Type:
Working Paper
Institution:
Centre for Policy Research, India
Abstract:
In the next decade, how US-China relations unfold will shape the external environment for countries like India. How does China perceive the Trump presidency?
Topic:
International Relations, Bilateral Relations, Economy, and Trump
Political Geography:
China, South Asia, India, Asia, North America, and United States of America

96. Impact of China Slowdown on India

Author:
Geetima Das Krishna and Ankit Bhardwaj
Publication Date:
02-2016
Content Type:
Working Paper
Institution:
Centre for Policy Research, India
Abstract:
After three decades of double-digit growth, China is slowing as it is rebalancing its economy from export-driven to less-volatile domestic consumption driven economy. The paper looks at the impact of China slowdown on India through different channels. Even though India is usurping China as the fastest growing major economy in the world, Indian economy being a fifth of the Chinese economy and also less material intensive can hardly substitute for China as a global growth driver. China has emerged as the largest trading partner of India but India’s trade still remains less vulnerable to Chinese slowdown directly as India’s services exports account for as much as 50% of India’s overall exports (merchandise and services). On the other hand, China’s total FDI investment in India has been miniscule $1.2 billion till September 2015 and India’s infrastructure sector, with its massive investment needs, can be the natural destination for Chinese investments. India reaped the indirect benefit of lower commodity prices in terms of narrower CAD, softening inflation, lower interest rate, increased government fiscal bonanza, all of which contributed to greater macro-stability in India. It was also found that a 50bps decline in China’s growth rate is likely to lower India’s growth by 30bp in the short run.
Topic:
International Trade and Finance, Bilateral Relations, Economy, Economic growth, and Regional Integration
Political Geography:
China, South Asia, India, and Asia

97. Channelling household savings to productive uses through the capital markets

Author:
Geetima Das Krishna, Vardhana Pawaskar, and Ankit Bhardwaj
Publication Date:
11-2015
Content Type:
Working Paper
Institution:
Centre for Policy Research, India
Abstract:
Savings provides the means for investments. Typically, investments are primarily funded through domestic savings and the rest through foreign capital inflows. Domestic savings are from three sources -- households, private and public sector. Household savings form the largest part of total savings. As domestic savings contributes the most to capital formation, it can also be a limiting factor to investments. The paper deals with changing pattern of Household savings, its shift away from capital (financial) markets towards unproductive assets like gold and possibilities of channelization household savings to investment rather than speculative assets. The paper looks at the current policy incentives in terms of tax to boost capital market investment and whether it has served the purpose of long term capital formation. The current savings environment indicates a high proportion being in physical rather than financial assets. Within financial assets derivatives are preferred over the cash equity. We propose that an investment of incentive structure should support a pyramid where the small investors would hold maximum in the less risky assets and reduce the holdings as they move towards risky assets. Our paper is organized as, section (2) studies trends in current macro-economic scenario in terms of the savings; section (3), deals with, the capital formation and share of capital markets in terms of raising new capital. In section (4), we look at the current investment pattern in Indian capital markets and the incentives provides to boost trading in the equity and derivative products. Section (5) we give our proposal on the layered approach to investment architecture. Finally, section (6) concludes the paper.
Topic:
Finance, Economy, Capital Flows, and Investment
Political Geography:
South Asia, India, and Asia

98. Exclusion, Informality, and Predation in the Cities of Delhi

Author:
Cities of Delhi Team
Publication Date:
08-2015
Content Type:
Working Paper
Institution:
Centre for Policy Research, India
Abstract:
Delhi is India’s richest city and as the capital of the nation has long enjoyed favourable treatment from the Centre. As the home to the country’s national bureaucracies, it also benefits from a large base of secure, well-paid, government jobs. Over the last decade the city has grown at an average real rate of 10 percent, and has benefitted from a dramatic increase in large-scale infrastructure development. Yet, despite these advantages, Delhi is a deeply divided city marked by layers of social exclusion. In the modern imaginary, the city represents the promise of freedom and opportunity. It marks a social space that is less constrained by traditional identities and one in which greater social interaction and density support economic dynamism. If development must, as Amartya Sen has so influentially argued, be based on strengthening basic capabilities, then the city can surely be a privileged site of capability-enhancement. Indeed, the migrants who flood the city often come in search of better livelihoods, education, health, and basic services. But as any resident of Delhi knows, the quality of such services varies dramatically across neighbourhoods, and the part of the city one lives in significantly impacts one’s ability to take full advantage of what the city has to offer. The Cities of Delhi (CoD) project starts with the simple recognition that India’s capital is marked by different settlement types, defined by diverse degrees of formality, legality, and tenure, which taken together produce a highly differentiated pattern of access to basic services. This report provides an overview of the findings from CoD. It builds directly on the place, process, and institution reports available at citiesofdelhi.cprindia.org, but in no way substitutes for these reports, all of which stand on their own as original empirical contributions. This overview is instead a synthesis, an effort to tie together the findings from the reports, to paint a broad picture of patterns of unequal access to basic services in the city and to provide an analysis of how these patterns of inequality are linked to structures and practices of governance.
Topic:
Development, Urbanization, Inequality, Economy, and Capital Flows
Political Geography:
South Asia, India, and Asia

99. North Korea: The Myth of Maxed-Out Sanctions

Author:
Joshua Stanton
Publication Date:
01-2015
Content Type:
Journal Article
Journal:
Fletcher Security Review
Institution:
The Fletcher School, Tufts University
Abstract:
On December 19, 2014, President Obama publicly blamed North Korea for the cyberattack against Sony Pictures and for the subsequent cyberterrorism against the American people, and promised to "respond proportionally." Almost immediately thereafter, one could hear a familiar narrative repeated, typified by New York Times correspondent David Sanger, who wrote that "North Korea is under so many sanctions already that adding more seems futile." One could have heard similar arguments in 2006, after North Korea's first nuclear test, and in 2013, after its third nuclear test. A variation of this argument is that “Washington … can do little ... without the cooperation of China.” ​ For years, journalists have quoted “experts” who insisted that U.S. sanctions options against North Korea were exhausted and had failed as an instrument of policy. As a matter of both fact and law, however, that is false; it even suggests that these experts have not read and understood the sanctions authorities. Why does this view persist, then? Some scholars may accept and propagate it because they oppose sanctions as a matter of policy. Others have simply ceased to question a myth that has entered the received wisdom. A true understanding of the potential effectiveness of sanctions first requires an understanding of what these sanctions are, what they are not, and how they work. This article will first summarize the sanctions authorities – U.N. Security Council resolutions, and the U.S. sanctions that should be an important part of the effective enforcement of the measures that the U.N. Security Council has adopted. It will also explain the role of the Treasury Department in regulating the international financial system, and the power this gives the United States to isolate the North Korean government from that system. It will explain which U.S. and U.N. sanctions against North Korea have succeeded and failed, and why. Finally, it will explain what current U.S. national sanctions do, and what they do not do. Only after one understands how little the current sanctions do – and how much they could do – can one begin to understand how to strengthen them into an effective part of a coherent foreign policy... ​
Topic:
Science and Technology, United Nations, Sanctions, Cybersecurity, and Economy
Political Geography:
Asia, North Korea, North America, and United States of America

100. The Strategic Duel over Taiwan

Author:
Ian Easton
Publication Date:
09-2015
Content Type:
Journal Article
Journal:
Fletcher Security Review
Institution:
The Fletcher School, Tufts University
Abstract:
The United States and the People’s Republic of China (PRC) are firmly entrenched in what will be a long and intense strategic competition for dominance over the Pacific Rim. American strategists Andrew Marshall, Robert Kaplan, and Aaron Friedberg began foretelling of this great power struggle over a decade ago.[1]. They recognized before anyone else that there are strong forces underpinning the U.S.-China rivalry. The two countries’ political systems and national interests stand in fundamental opposition. This is why, despite Washington’s reluctance to officially admit it, strategic competition between the U.S. and the PRC is unavoidable. ​ The United States, while an imperfect democracy, is an inspiration to people everywhere who yearn for the freedom and dignity that comes from having a representative government, independent legal system, and market economy. In the PRC, on the other hand, power is monopolized by the Chinese Communist Party (CCP), a political organization that is directly responsible for more human suffering than possibly any other regime past or present, anywhere in the world.[2] Numerous State Department reports detail the past and continuing human rights violations occurring under the watch of the CCP.[3] ​ For all its much ballyhooed economic reforms, China’s economy is still largely controlled by massive state-owned corporations, making it a mercantilist country, not a capitalist one.[4] Much of Beijing’s economic power ultimately stems from its remarkable ability to lure foreign business elites with promises of access to its huge market. Once the hook is set, China pockets their investments, steals their intellectual property, and undercuts their market competitiveness.[5] ​ Yet it is not the PRC’s unsavory political or economic practices that will ensure sustained U.S.-China competition over the coming decades, although future American presidents, like Barack Obama, will undoubtedly be tempted to paper over ideological differences for expedience sake. Rather, Beijing’s insecure and aggressive nature is at the root of the problem. In recent years, China has stoked maritime tensions with Japan and the Philippines, both treaty allies of the United States; provoked border clashes with India, a democratic nation and American security partner; and enabled nuclear missile proliferation amongst its friends: North Korea, Pakistan, and Iran.[6] Track records tell a compelling story. The PRC’s track record indicates that a growing number of geostrategic issues could eventually result in a clash between the United States and China... ​
Topic:
Security, Military Strategy, Economy, and Grand Strategy
Political Geography:
China, Taiwan, Asia, and United States of America