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5192. Economic Issues Raised by Treatment of Takings Under NAFTA Chapter 11
- Author:
- Edward M. Graham
- Publication Date:
- 11-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This working paper examines, from an economic perspective, the treatment of takings (property rights) under NAFTA Chapter 11. To be more precise, the paper examines the treatment of takings as environmental groups fear might be established as the result of investor dispute settlement under this chapter; as of the date of this writing, most of the cases that have the potential to be precedent-setting have not been finally decided, albeit one—the Metalclad case—has been decided in a way that is unsettling to environmentalists. The author attempts to determine whether requiring public compensation of private investors for diminishment of value resulting from government regulatory action has the potential of achieving anything close to an “optimal” outcome from a societal cost-benefit point of view (defined below). This determination makes use of tools of economic analysis and, in particular, Coase's theorem regarding achieving optimal outcomes where negative externalities are present. The overall conclusion is that, although Coase's theorem can be invoked to argue that such an outcome can be achieved either via a “polluter pays” approach or a “public pays” (or “public must compensate”) approach, as a matter of practical application, the first approach is preferable to the second for a number of reasons, including government “fiscal illusion” and “moral hazard.”
- Topic:
- Economics and International Organization
- Political Geography:
- United States, Latin America, and North America
5193. Assessing Globalization's Critics: "Talkers Are No Good Doers???"
- Author:
- Kimberly Ann Elliott, Debayani Kar, and J. David Richardson
- Publication Date:
- 09-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper is about the critics of the “doers” of globalization. It describes who they are, where they came from, what they want, how economists, policymakers, and others might understand them better, and where globalization might head from here. Many critics are themselves strongly internationalist and want to see globalization proceed, but under different rules. Some, particularly the protesters in the streets, focus mainly on what is wrong with the world. But some of them put forward broad alternative visions and others offer detailed recommendations for alleviating the problems they see arising from status quo globalization. Most of them have roots in long-standing transnational advocacy efforts to protect human rights and the environment and reduce poverty around the world. What brings them together today is their shared concern that the process by which globalization's rules are being written and implemented is undermining democracy and failing to spread the benefits broadly. This paper sketches the key issues and concerns that motivate the critics in a way that is broadly representative and intelligible to economists. It finds more resonance for the critics' agenda in economics than they commonly recognize. And it attempts to capture the concerns of Southern as well as Northern critics and to analyze the issues that divide as well as bring them together. Finally, it evaluates those issues and alternative proposals on which even globalization enthusiasts and the critics might come together cooperatively.
- Topic:
- Economics, Globalization, and International Trade and Finance
5194. Toward A Sustainable FTAA: Does Latin America Meet The Necessary Financial Preconditions?
- Author:
- Liliana Rojas-Suarez
- Publication Date:
- 07-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper focuses on identifying preconditions that will ensure the sustainability of a Free Trade Area of the Americas (FTAA). It argues that the macro, micro, and political conditions advanced in the literature to measure a country's ability to compete internationally, while necessary, are not sufficient to ensure the success and permanence of a free trade agreement. Instead, two additional financial conditions are needed. The first is that each partner in the free trade area needs to have sustainable public debts as determined by the achievement of credible and sustainable structural fiscal balances. The second is that exchange rate regimes across trading partners should be compatible in the sense that adverse shocks in one country do not generate a policy dilemma in other partners between abandoning their exchange rate system or the free trade area.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- South America, Latin America, Central America, and Caribbean
5195. Home Bias, Transactions Costs, And Prospects For The Euro: A More Detailed Analysis
- Author:
- Catherine L. Mann and Ellen E. Meade
- Publication Date:
- 07-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. Our empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- United States and Europe
5196. Six Practical Views of Central Bank Transparency
- Author:
- Adam S. Posen
- Publication Date:
- 05-2002
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In the span of fifteen years, central bank transparency has gone from being highly controversial to motherhood and apple pie (one can insert analogous certitudes by country here). It is now an accepted broad goal to which all central banks pay at least lip service. Yet, like many other broad concepts in economic policy, such as “fiscal discipline” or “price stability,” what central bank transparency actually means remains rather open to debate. With the widespread adoption of inflation targeting, seen usually as an expression of increased central bank transparency, it is worthwhile to try to apply some clarity and rigor to this central banking concept du jour.
- Topic:
- Economics, Government, and International Trade and Finance
5197. 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
5198. 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
5199. Special Policy Forum Report: Prospects for Economic Reform in Turkey
- Author:
- Kemal Derviş
- Publication Date:
- 04-2002
- Content Type:
- Policy Brief
- Institution:
- The Washington Institute for Near East Policy
- Abstract:
- Turkey's recovery from the economic crisis of February 2001 has so far been very successful. Fundamental reforms have been undertaken and strict fiscal discipline has been implemented. Furthermore, this process is, to a large degree, irreversible. For the recovery to be truly successful, however, it is essential that Turkey's relations with the European Union (EU) be promoted and that foreign direct investment be encouraged.
- Topic:
- Security, Economics, and Religion
- Political Geography:
- Turkey and Middle East
5200. Special Policy Forum Report: Power to the People?
- Author:
- Ellen Laipson and Patrick Clawson
- Publication Date:
- 03-2002
- Content Type:
- Policy Brief
- Institution:
- The Washington Institute for Near East Policy
- Abstract:
- In the year 1000, the Middle East had a population of approximately 30 million people, and it remained around that level until 1800. Between 1800 and 1900, however, the figure grew by 75 percent, and then by another 565 percent during the twentieth century, bringing the population to 386 million, or nearly thirteen times its historically stable level. But this increase is coming to an end. In the year 2050, the population will be less than twice what it was in the year 2000, and it will stop increasing entirely by the late twenty-first century, when it will reach its maximum of approximately twice the level it was in the year 2000. In other words, the population increase over one thousand years is essentially concentrated in a 150-year period between 1875 and 2025. This anomalous period of population growth has been a time of tremendous social, political, and economic turmoil.
- Topic:
- Security, Economics, and Religion
- Political Geography:
- Middle East and Arabia