Currencies Aren't the Problem
Raghuram G. Rajan (Foreign Affairs) Mar/Apr 2011
The current debate over quantitative easing overlooks the important question of domestic economic strategy in both the developed and developing world. Put simply, consumers in industrial economies buy too much, and those in developing ones, too little.
Latin America: An End to Boom and Bust?
Finance and Development Mar 1, 2011
Prospects in the region, which has managed to sustain a decade of prosperity after a history of boom and bust cycles. Latin America has the potential to become an increasingly important global player. But boosting productivity and competitiveness remain key policy challenges and the fruits of success must be more broadly shared. Also, a consideration of the prospects for Brazil, inequality in Latin America, and how to raise productivity.
Capitalism for the Long Term
Dominic Barton (HBR) Mar 1, 2011
Business leaders face a choice: They can reform the system, or watch as the government exerts control. A call to action.
Two-Bits, Four-Bits, Six-Bits, a Dollar
Bill Gross (PIMCO) Mar 1, 2011
A successful handoff from public to private credit creation has yet to be accomplished, and it is that handoff that ultimately will determine the outlook for real growth and stability. Because quantitative easing has affected all risk spreads, the withdrawal of nearly $1.5 trillion in annualized check writing may have dramatic consequences. Who will buy Treasuries when the Fed doesn’t? The question really is at what yield, and what are the price repercussions if the adjustments are significant.
Global Imbalances without Tears
Kenneth Rogoff (Project Syndicate) Mar 1, 2011
Doctors have long known that it is not just how much you eat, but what you eat, that contributes to or diminishes your health. Likewise, economists have long noted that for countries gorging on capital inflows, there is a big difference between debt instruments and equity investments.
The West’s Punch Bowl Monetary Policy
Sylvester Eijffinger & Edin Mujagic (Project Syndicate) Mar 1, 2011
Choosing a short-term boost to economic growth and employment, rather than enforcing price stability, wrecked the world economy in the 1970’s and 1980’s. The outcome may not be much different this time around if Western central banks maintain their current monetary policies for much longer.
Regional integration in sub-Saharan Africa: Rethinking the foundations
Peter Draper (VoxEU) Mar 1, 2011
Regional integration in Africa is seen as a priority by many of the continent’s policymakers. This column argues against a formal EU-like structure and instead proposes an African model that is responsive to the economic and political reality of the region. It says that the model should be underpinned by a security regime and should prioritise trade and regulatory cooperation.
Why Official Bailouts Tend Not To Work: An Example Motivated by Greece 2010
Christophe P. Chamley and Brian Pinto (Economists' Voice) Mar 1, 2011
We use recent events in Greece to illustrate that official bailouts tend not to work when countries have fundamental fiscal (‘insolvency’) problems, and construct a two-period numerical example to explain why this should not come as a surprise.
Arab freedom is worth a short shock
Martin Wolf (FT) Mar 1, 2011
Optimism about the short-term economic effects depends on the continuation of the bad old bargain: repression as the price for stability in oil supply.
Sit with dictators but sup with a long spoon
Jeremy Greenstock (FT) Mar 1, 2011
Powers have to deal with other powers as they are; and undiluted righteousness can be expensive for globally connected and commercial nations.
Don’t blame luck when your models misfire
John Kay (FT) Mar 1, 2011
We will succeed in managing financial risk better only when we come to recognise the limitations of formal modelling.
Only higher taxes can curb Asian inflation
Frederic Neumann (FT) Mar 1, 2011
Monetary policy, in its usual form, no longer works. Raising interest rates simply draws in more capital.
Asia palm oil groups go back to future in Africa
Kevin Brown (FT) Mar 1, 2011
Blackguarded by the green movement and devoid of pricing power, the palm oil business has one thing going for it: the sparkling prospects of the liquid gold it extracts from millions of squat green trees.
Revolution in the Arab world: Is it time for a pan-Arab trade deal?
Jean-Pierre Chauffour (VoxEU) Mar 2, 2011
Political turmoil has swept across the Arab world. This column argues that the movement towards more open and representative societies could create the conditions for a big push toward greater trade integration within the region – and the rest of the world. A good place to start would be to complete the Pan-Arab Free Trade Agreement.
Do currency appreciations reduce imbalances? Half a century of evidence
Marcus Kappler, Helmut Reisen, Moritz Schularick & Edouard Turkisch (VoxEU) Mar 2, 2011
If China only allowed its currency to appreciate, the global economy would rebalance and stabilise – or so the argument goes. This column studies the historical record of large exchange-rate revaluations. It supports the idea that currency appreciations have an impact on the current account but argues that this can come at a cost – the reduction in exports risks putting the brakes on global growth.
In our own hands
Martin Hutchinson (AT) Mar 2, 2011
The overthrow of current Middle Eastern governments would drive up oil prices, probably steeply. But only the West's own governments and monetary authorities can bring a consequent collapse of Western economies and civilization.
The Chinese Mirror
Heizo Takenaka (Project Syndicate) Mar 2, 2011
As the world begins to grapple with the creation of a new economic order, the moderating role of a third party in conflicts between the US and China will be extremely important. It is a role that will fall to Japan for Asian-Pacific issues, but to European countries on global issues.
Get Ready for a Growth Supercycle
Ian Bremmer (WSJ) Mar 2, 2011
Emerging markets could propel a global boom comparable to the industrialization of the United States.
Europe must plan a reform, not a pact
Guy Verhofstadt, Jacques Delors and Romano Prodi (FT) Mar 2, 2011
The Franco-German proposal was based on an intergovernmental model of peer pressure that has proved ineffective.
Why the world needs virtuous autocrats
Robert Kaplan (FT) Mar 2, 2011
The moral differences between one dictator and another are as vast as those between dictators and democrats.
Central banks risk wrecking recovery
Stephen King (FT) Mar 2, 2011
If interest rates go up and a western recession follows thereafter, central bankers will have been the architects of their own monumental failure.
Deadlock on Trade Policy in Washington Hurts Developing Country Exporters
Bridges Weekly Trade News Digest Volume 15, Number 7 Mar 2, 2011
Roses from Colombia, tuna from Ecuador, and tyres from Indonesia. These are just some of the products that have become more expensive for US consumers in recent months, as two trade preference schemes were allowed to lapse amidst partisan bickering over trade policy in Washington.
WTO Doha Round: Indispensable or Irrelevant?
Bridges Weekly Trade News Digest Volume 15, Number 7 Mar 2, 2011
The Doha Round negotiations at the WTO: indispensable, or irrelevant? According to former EU trade commissioner Leon Brittan, the fate of the struggling multilateral trade talks is no less than the canary in the coalmine signalling whether the world’s governments might prove able to cooperate on more complex geopolitical and environmental challenges.
An insolvent partnership
Axel Merk (AT) Mar 3, 2011
The US dollar is commonly seen as a safe haven in troubled times. Yet with interest rates rising elsewhere, the eurozone getting a grip on its debt problems and the dollar printing press running overtime, the world can be in turmoil without the US currency being a beneficiary.
Deflation, debt, and economic stimulus
Richard Wood (VoxEU) Mar 3, 2011
The US, Japan, and Ireland are threatened by the spectres of deficient private demand, rising debt, and a tendency to deflation. This column questions current monetary policy directions, i.e. quantitative easing, and argues that printing money to directly finance fiscal stimulus may be a better option.
The Motorbike Economy
Daniel Henninger (WSJ) Mar 3, 2011
The Vietnamese are riding into the economic big league, atop millions of motorbikes.
The Euro Payoff: Germany's Economic Advantages from a Large and Diverse Eurozone
Adam S. Posen (Internationale Politik/PIIE) Mar 3, 2011
Being the anchor economy for a currency zone has been a boon for Germany over the last dozen years. Not just political good will, but coldhearted economic calculations should compel Berlin to step up for the euro. But Germany's preferred plan of imposing additional macro rules and austerity on troubled partners is not the way to a healthy, stable eurozone.
Five pointers for the Middle East
Philip Stephens (FT) Mar 3, 2011
Building the infrastructure of freedom and the rule of law will be a painstaking business. Signposts to help develop a framework of assistance.
Openness can help lift the curse of resources
George Soros (FT) Mar 3, 2011
The natural resources sector has potential to generate billions of dollars in revenues that can be used for poverty reduction and investment.
Don’t punish the banks that performed best
Jacques de Larosière (FT) Mar 3, 2011
The Basel III framework was designed to make the banking system more resilient. Perversely it may create new risks.
Return of cov-lites hints at more caution not madness
Gillian Tett (FT) Mar 3, 2011
Are the markets going mad – again? That is the question hanging in the air, after news that so-called 'cov-lites' are staging a return.
Huntington's Clash Revisited
David Brooks (NYT) Mar 3, 2011
What does the Clash of Civilizations thesis teach us about the changes sweeping the Arab world?
Oil and the economy: The 2011 oil shock
Economist Mar 3, 2011
More of a threat to the world economy than investors seem to think
Emerging-market giants: Tata sauce
Economist Mar 3, 2011
A new kind of global company is on the rise: diversified multinationals from emerging markets
A special report on property: Bricks and slaughter
Economist Mar 3, 2011
Property is widely seen as a safe asset. It is arguably the most dangerous of all, says Andrew Palmer
The EU’s Band-Aid on a Bullet Hole
Daniel Gros (Project Syndicate) Mar 4, 2011
Europe’s leaders have promised to devise by the end of this month a comprehensive package not only to end the euro crisis, but also to preserve the common currency's stability. Unfortunately, they are unlikely to succeed, because most of the package revealed so far addresses the symptoms of the crisis, not its underlying causes.
China's peg loses currency
Michael Pento (AT) Mar 4, 2011
As US Federal Reserve chairman Ben Bernanke makes it clear he intends to debase the dollar and drive up inflation, China's effective currency peg to the dollar has become more trouble than it's worth, particularly from Beijing's perspective.
Immigration and the welfare state: New evidence from the EU
Assaf Razin & Jackline Wahba (VoxEU) Mar 4, 2011
Do immigrants just move for the benefit systems? This column argues that the effect of the welfare state on immigration and its composition depends on whether the destination country's migration policy is “free” or “managed”, and on whether the source country is developed or developing.
Global: This Time Is Different
Joachim Fels, Manoj Pradhan & Spyros Andreopoulos (MS GEF) Mar 4, 2011
We think that the current oil shock is unlikely to harm growth much.
Russia: The Ruble - Freer and Stronger
Jacob Nell, Alina Slyusarchuk & James Lord (MS GEF) Mar 4, 2011
The CBR widened the intervention bands around the central ruble rate.
Tiger opportunity for Middle East
Hossein Askari (AT) Mar 5, 2011
Middle East governments now battling revolution squandered decades of easy wealth while allowing increasing poverty for their young populations. Yet they - or their successors - can turn their countries around to be the equivalent of Asia's tiger economies.
Collapse of the old oil order
Michael T Klare (AT) Mar 5, 2011
Whatever the outcome of present Middle East protests, they will transform the world of oil and bring an end to cheap petroleum. Even Saudi Arabia, so willing to turn taps to keep prices at levels the West deems acceptable, will not be able to continue bailing out consumers.
Are buybacks an efficient way to reduce sovereign debt?
Stijn Claessens & Giovanni Dell'Ariccia (VoxEU) Mar 5, 2011
Commentators have recently floated the possibility of debt buybacks as a way of reducing a country's debt, particularly in the crisis-ridden Eurozone. Are buybacks a good idea? This column argues that, while there could be some circumstances in which debt buybacks are efficient, theory and experiences suggest that buybacks are generally costly and inefficient, and in practice (concerted) debt exchanges have been preferred.
Stop obsessing about global imbalances
Uri Dadush & Vera Eidelman (VoxEU) Mar 6, 2011
Global imbalances and their effects on the global economy are much discussed. This column says that discussing global imbalances is popular because it is the easy way out. It says that policymakers should target the illness rather than the symptoms by reforming their domestic economies and focusing on sustainable growth.
Trichet’s real reasons for a rate rise
Wolfgang Münchau (FT) Mar 6, 2011
Inter-institutional wrangles are normal in Brussels politics, but this latest one is of a different quality. This is a significant development.
Financial rules must do more for developing countries
Vincenzo La Via (FT) Mar 6, 2011
Solutions for advanced nations with mature financial markets are not necessarily a good fit for emerging economies.
Targeting the Targeters
Brigitte Granville (Project Syndicate) Mar 7, 2011
In order to anchor inflation expectations effectively, inflation targets must be realistic. But that is far from the case these days for the Bank of England, and even for the European Central Bank, while US Federal Reserve officials are increasingly worried that inflation expectations could become unmoored.
The Arab Drama
Bernard Haykel (Project Syndicate) Mar 7, 2011
There is no single narrative that makes sense of the change now sweeping the Middle East. Regimes throughout the region, as well as the United States, European governments, and Al Qaeda and other Islamist groups, are all struggling to understand what comes next.
The Crisis of Microfinance
Shashi Tharoor (Project Syndicate) Mar 7, 2011
The recent ouster of the Nobel Prize-winning Bangladeshi economist Mohammed Yunus as Managing Director of the Grameen Bank, which blazed a trail for microfinance in developing countries, has thrown a harsh light on the crisis engulfing a business that was once seen as a harbinger of hope for millions. So, what went wrong?
The Mauritius Miracle
Joseph E. Stiglitz (Project Syndicate) Mar 7, 2011
The small island state of Mauritius has established a track record of democracy, strong social cohesion, and rapid economic growth since independence a half-century ago. The reasons behind the country's success should be borne in mind by politicians in the US and elsewhere as they fight their budget battles.
Mexico's Longest Haul
WSJ Mar 7, 2011
After 17 years, the U.S. may be ready to start trucking under Nafta.
A conservative plan for the US debt limit
Douglas Holtz-Eakin (FT) Mar 7, 2011
Failing to raise the debt limit courts international financial volatility at odds with pro-growth policies and a pledge to be efficient managers of government functions.
Our best plan for growth is to set our cities free
Edward Glaeser (FT) Mar 7, 2011
Monsters that lurk in the shadows of Wall St
Francesco Guerrera (FT) Mar 7, 2011
The real danger hiding in the financial system is ‘tail risk’ – the possibility that a hedge fund, or even an insurer, might become too big or too reckless.
Confluence of China?and?west lends vibe?to Hong Kong
Anthony Bolton (FT) Mar 7, 2011
Emerging markets will have to get used to structurally higher inflation, but Beijing's pragmatism will minimise risks of investment in the country.
When Energy Efficiency Sullies the Environment
John Tierney (NYT) Mar 7, 2011
For the sake of a cleaner planet, should Americans wear dirtier clothes?
The Euro's Debatable Future
Barry Eichengreen, Martin Feldstein, Pedro Solbes & Steve H. Hanke (WSJ) Mar 8, 2011
Where does the single currency go from here?
Running out of room: Fiscal space in advanced countries
Atish R Ghosh, Enrique G. Mendoza & Jonathan D Ostry (VoxEU) Mar 8, 2011
The fiscal challenges facing advanced economies today are unprecedented. In this column, the authors re-examine the issue of debt sustainability in a large group of advanced economies, pinning down the concepts of “debt limit” and “fiscal space”. They find that – based on the historical track record of adjustment – a number of countries have either very little or no additional fiscal space.
Do civil conflicts cost firms? Evidence from post-election Kenya
Christopher Ksoll, Rocco Macchiavello & Ameet Morjaria (VoxEU) Mar 8, 2011
As unrest continues in the Arab countries, many are asking about the economic costs. While the macro effect of civil conflicts is widely studied, little is known of the micro effects. This column presents evidence from the short-term violence following the 2007 election in Kenya. It finds that firms providing cut flowers to Western markets saw a significant rise in costs, largely due to the displacement of workers.
IMF Triggers Debate on Crisis Lessons
IMF Survey Mar 8, 2011
The IMF is encouraging a wholesale re-examination of macroeconomic policy principles in the wake of the global economic crisis, starting with a high profile conference at the IMF’s headquarters in Washington, D.C.
A Drawn Out Crisis Resolution for Europe
Jacob Funk Kirkegaard (PIIE) Mar 8, 2011
Unrest in the Middle East, particularly in Libya, has sent oil prices skyward, rattled the markets and cast a shadow over hopes of a recovery in Europe. Possibly because financial markets can focus on only one major problem at a time, however, the Middle East crisis has lifted some of the political and market pressure on European Union (EU) leaders to deal decisively, swiftly and comprehensively with the intertwined European sovereign debt and banking crises. Perhaps inevitably, the resolve of late 2010 among EU leaders to produce such a solution by their summit later this month is dissipating fast.
Why the eurozone will survive
Martin Wolf (FT) Mar 8, 2011
The eurozone is likely to survive, albeit not without further turbulence. In short, it has the will and the wherewithal to keep the euro experiment afloat.
Urgent steps to stop the climate door closing
Fatih Birol and Nicholas Stern (FT) Mar 8, 2011
Costly fossil fuel subsidies, amounting to $558bn worldwide in 2008, must go.
US-China affair is likely to result in mutual pain
John Plender (FT) Mar 8, 2011
China is, in effect, a neurotic trillionaire, stuck on a treadmill seeking to resist the structural tendency of emerging market currencies to appreciate.
India's engineers to lead export surge
Raja Murthy (AT) Mar 9, 2011
India aims to double its already fast-growing exports over the next three years, helped by free-trade agreements and a raft of measures to cut red tape. The engineering sector will be the most important driver, says Commerce and Industry Minister Jyotiraditya Scindia.
Hedging bans risk pushing up debt costs
Conrad Voldstad (FT) Mar 9, 2011
The European Parliament's new rules will do little to protect beleaguered issuers.
The EU must rethink Ireland’s deal
Peter Sutherland (FT) Mar 9, 2011
Loans required by states following breaches of the agreed limits on budget deficits must attract some penalty but not an unduly punitive sanction, as is the case now.
TRIPS Council: Members Debate Biodiversity, Access to Medicine
Bridges Weekly Trade News Digest, Volume 15, Number 8 Mar 9, 2011
WTO members last week debated how current global intellectual property rules affect biodiversity protection and access to medicine, but made little progress on either issue, both of which are priorities for developing countries.
WTO Doha Round: Despite Calls for Acceleration, Differences Persist
Bridges Weekly Trade News Digest, Volume 15, Number 8 Mar 9, 2011
WTO members need to step up their efforts to reach an agreement in the Doha Round of trade talks by the end of the year or else risk missing a key ‘window of opportunity’, senior trade diplomats said Tuesday. But their comments during an informal session of the Trade Negotiations Committee underscored that major differences of substance and perception continue to stand in the way of an accord.
Barry Eichengreen (Project Syndicate) Mar 9, 2011
With the world’s rich countries still hungover from the financial crisis, the global economy has come to depend on emerging markets to drive growth. But Chinese officials warn that their economy is poised to slow – and this time they are right.
Will Next Time Be Different?
Raghuram Rajan (Project Syndicate) Mar 9, 2011
Democracy tends to institutionalize moral hazard in sectors that are economically or politically important, such as finance or real estate, allowing them to privatize gains and socialize losses. But this does not mean that policymakers must repeat the same mistakes every time such sectors get into trouble.
Europe's Debt Crisis: The Most Difficult Decisions Are Ahead
Dan Steinbock (Globalist) Mar 9, 2011
Why is the euro area's debt crisis only beginning — and how can it be overcome?
A (Very) Brief History of Corruption
Bernard Wasow (Globalist) Mar 10, 2011
The trends in the prevalence of corruption the world has experienced in recent years.
Development in Reverse
Dani Rodrik (Project Syndicate) Mar 10, 2011
Developing countries' economies are a mish-mash, combining the productive with the unproductive, the First World with the Third. But why are some developing countries able to shift workers from low-productivity activities to higher-productivity sectors, whereas others have seen labor flowing in the opposite direction?
Making Industrial Policy Work
James Zhan (Project Syndicate) Mar 10, 2011
Industrial policy is back – or rather, back in fashion, as it never really went away, even in countries proclaiming adherence to free-market principles. But, for developing countries, the old dangers of IP continue to apply – and new challenges abound.
A Race to Hunger
Bjørn Lomborg (Project Syndicate) Mar 10, 2011
Spectators at February’s Daytona 500 road race in Florida were handed green flags to wave in celebration of the news that the stock cars now use gasoline with 15% corn-based ethanol. But the millions of people now threatened by hunger as a result of developed countries' biofuel policies are not cheering.
Systemic risk after the global crisis
Brenda González-Hermosillo & Heiko Hesse (VoxEU) Mar 10, 2011
Just how much systemic risk remains in the advanced economies? This column uses Markov-switching techniques to examine volatility in equity, interbank, sovereign credit-default swaps, and foreign-exchange markets. It finds that while overall systemic stress emanating from interbank spreads and foreign-exchange volatility has subsided, there are still pockets of systemic risk, particularly in sovereign credit default swaps and equity markets – and this is especially the case for Europe’s periphery.
Housing booms, capital inflows, and low interest rates
Filipa Sá, Pascal Towbin & Tomasz Wieladek (VoxEU) Mar 10, 2011
In much of the Western world, the decade prior to the global crisis witnessed soaring house prices. While the debate on its causes continues, this column finds that the property booms owed a significant part of their ferocity to large capital inflows and low interest rates.
China's economy: Bamboo capitalism
Economist Mar 10, 2011
China’s success owes more to its entrepreneurs than its bureaucrats. Time to bring them out of the shadows
Entrepreneurship in China: Let a million flowers bloom
Economist Mar 10, 2011
China is often held up as an object lesson in state-directed capitalism. Yet its economic dynamism owes much to those outside the government’s embrace
Lifting the Crushing Burden of Debt
Carmen M. Reinhart (PIIE) Mar 10, 2011
The march from financial crisis to high public indebtedness to sovereign default or restructuring is usually marked by episodes of drama, punctuated by periods of high volatility in financial markets, rising credit spreads, and rating downgrades. This historic pattern is unfolding in several European countries at present. That situation is far from resolved and remains a source of uncertainty for the United States and the rest of the world. However, the economic effects of high public indebtedness are not limited to turmoil in financial markets. Quite often, a build-up of public debt often does not trigger expectations of imminent sovereign default and the associated climb in funding costs. But in the background, a serious public debt overhang may cast a shadow on economic growth over the longer term, even when the sovereign's solvency is not called into question.
The Financial Crisis Is Over, but Where's the Fix?
NYT Mar 10, 2011
The economic recovery in most developed countries is stuttering at best, and governments are struggling with finances. It is time for remorse and second-guessing.
Europe’s pact is the first step to recovery
John Llewellyn and Peter Westaway (FT) Mar 10, 2011
The costs of abandoning the euro would be much greater than negotiating a tough second round of competitiveness reforms.
Where are food prices heading? Short-term drivers, trends and implications
Claire Schaffnit-Chatterjee (DB Research) Mar 10, 2011
Food prices are reaching record highs, which raises concerns about spending capacity, hunger, political turmoil and global growth. The current surge in food prices is due to the combination of short-term supply shocks and longer-term structural factors leading to a tight demand-supply balance. In this paper we review the main considerations regarding food price movements and include a discussion on the impact of speculation.
Latin America’s Commodity Windfall
Jose Luis Machinea (Project Syndicate) Mar 11, 2011
Latin America is experiencing an exceptional boom, owing to soaring income from its exports of natural resources. But is the region making the most this opportunity by using windfall revenues as effectively as possible?
A crisis mechanism for the euro: The European Stability Mechanism
Giancarlo Corsetti, Michael P. Devereux, John Hassler, Gilles Saint-Paul, Hans-Werner Sinn, Jan-Egbert Sturm & Xavier Vives (VoxEU) Mar 11, 2011
The EU’s Stability and Growth Pact stipulates that no member country can have a budget deficit exceeding 3% of GDP nor can it have public debt above 60% of GDP. In this column, authors from the European Economic Advisory Group ask what went wrong, denounce suggestions of Eurobonds, and propose a new three-stage crisis mechanism: the European Stability Mechanism.
Competition and cash crops in sub-Saharan Africa
Nicolas Depetris Chauvin & Guido Porto (VoxEU) Mar 11, 2011
Millions of people in sub-Saharan Africa rely on cash crops for their livelihoods . This column presents a new CEPR/World Bank book exploring the effects of increasing competition in these markets. It finds that while competition improves welfare for farmers on the whole, policymakers should still consider the potential winners and losers in each case.
Low-wage East meets high-quality West: New firm-level evidence from France
Julien Martin & Isabelle Méjean (VoxEU) Mar 11, 2011
With exports from low-wage countries like China on the rise, the question of what this means for trade and jobs in developed countries is a furious war of words. This column, using firm-level data for France between 1995 and 2005, shows that competition from low-wage markets actually boosts the sales of high-quality goods – but it concedes the benefits are not universal.
Global: The Great Policy Divide
Joachim Fels & Spyros Andreopoulos (MS GEF) Mar 11, 2011
A tougher ECB does not fundamentally alter our view of ample global liquidity and mounting global inflation pressures.
Europe's Banking Blindfolds
WSJ Mar 11, 2011
Did someone say sovereign debt risk?
Are the world’s megacities too big?
Klaus Desmet & Esteban Rossi-Hansberg (VoxEU) Mar 12, 2011
Are the world’s megacities becoming a sprawling, overfed, and uncontrollable mass that needs to be restrained for the good of society and the environment? This column suggests that policies aimed at reducing the dispersion in city sizes will hardly improve the wellbeing of the people who live there. If anything, in some developing countries, such as China, large cities may actually be too small.
Muddling through will not work this time
Wolfgang Münchau (FT) Mar 13, 2011
The agreement reached by EU leaders was a politically smart muddle. Unfortunately, you cannot muddle through a debt crisis.
Pact for the euro: Tough talk, soft conditions?
Daniel Gros (VoxEU) Mar 14, 2011
This weekend, EU leaders agreed to the outlines of a new mechanism to deal with Eurozone debt problems after the current mechanism expires in 2013. The mechanism is a continuation in the leaders’ preference for “tough talk and soft conditions”. This column argues that the package is merely the next step down the slippery slope of EU taxpayers sharing the burden with Greek taxpayers.
The Economic Consequences of the Arab Revolt
Nouriel Roubini (Project Syndicate) Mar 14, 2011
Unstable political transitions in the Middle East could lead to high levels of social disorder, organized violence, and/or civil war. And, given the current risk-sensitivity of oil prices, the economic pain could spread far beyond the region.
A Contrarian View on Japan: Seizing Opportunity from Tragedy
Marcus Noland (PIIE) Mar 14, 2011
The earthquake and tsunami that devastated the Tohoku region of northern Japan took place against a challenging economic backdrop for Japan. Before tragedy struck, the country was already facing a slowing economy, fiscal strain, and deflation. The costs of this disaster are still being counted, and the nuclear power plants represent a wildcard. Yet rebuilding will occur and if handled adroitly, offers some grounds for hope.
Dangerous Thoughts about the Financial Crisis at the IMF
Anders Åslund (PIIE) Mar 14, 2011
On March 7-8, the International Monetary Fund organized a major conference on macroeconomics in the wake of the global financial crisis. IMF chief economist Olivier Blanchard led the proceedings. This event drew prominent speakers at a time when the fund is engaging in a reconsideration of macroeconomic policies. What struck me, however, was the contrast between what was said at the session, particularly Blanchard's summary, and how differently I see the new reality and what should be IMF aims.
China must bridge the growth gap
Michael Pettis (FT) Mar 14, 2011
Rebalancing growth from investment to consumption will prove a difficult task.
Regulators taking blinkered approach to stress tests
Patrick Jenkins (FT) Mar 14, 2011
Regulators are repeating the mistake they made in the run-up to the financial crisis
How Japan’s economy will eventually rebound
Mohamed El-Erian (FT) Mar 14, 2011
Economic growth rate will fall in the immediate aftermath of the natural disasters before rising sharply due to reconstruction activities.
Japan will re-emerge from devastating tragedy
Peter Tasker (FT) Mar 14, 2011
Japan's markets could recover quickly from the toll taken by the earthquake.
Premier Says China Will Let Currency Appreciate Gradually
NYT Mar 14, 2011
Prime Minister Wen Jiabao also said at the end of this year's legislative session that fighting inflation was a priority, and that elections should eventually expand to higher governmental levels.
Why worry about real exchange rates? The missing link between Dutch disease and growth
Nicolas Magud & Sebastián Sosa (VoxEU) Mar 15, 2011
In the 1960s, the Netherlands discovered natural gas in the North Sea. Yet as its wealth increased, so did the value of its currency. Exports fell and the phrase “Dutch disease” was born. This column reviews the literature and finds no evidence that the Dutch disease actually reduces overall economic growth.
Intellectual property rights and FDI knowledge diffusion
Albert de Vaal & Roger Smeets (VoxEU) Mar 15, 2011
Proponents of strong intellectual property rights protection argue that it enhances incentives for innovation and knowledge transfer. Opponents, on the other hand, stress the reduction in knowledge spillovers. Using a sample of large, publicly traded firms from 22 developed countries, this column finds that stronger intellectual property rights have a positive and robust effect on backward knowledge diffusion from multinational firms.
Europe’s Surprisingly Bold Step Toward Solving Its Sovereign Debt Crisis
Jacob Funk Kirkegaard (PIIE) Mar 15, 2011
The outcome of the euro area meeting last week was far more substantive than expected, even if one takes into account that the expectations had been at rock bottom. Not only did European Union (EU) leaders demonstrate how they intend to prevent peripheral defaults, they also gave us an idea of their longer-term solutions for Europe’s economic problems and future integration.
Why we struggle with our roulette wheel world
John Kay (FT) Mar 15, 2011
At a recent talk someone asked me to identify the four or five ‘black swans’ most likely to materialise. He had missed the point.
Time for Asia to wage its own war on corruption
Kevin Brown (FT) Mar 15, 2011
The official corruption that blights much of Asia is coming under the spotlight as governments publicly commit themselves to a battle against bribery and fraud.
Japan can meet the earthquake test
Martin Wolf (FT) Mar 15, 2011
It is for the leaders to match the mettle of the people. If they are able to do so, out of a great disaster may yet come a rebirth.
How Japan's Earthquake Will Impact the Global Economy
Steve Rosenbush (II) Mar 15, 2011
As the crisis in Japan moved from natural disaster to potential nuclear meltdown, investors around the world weighed the mounting economic and financial uncertainty.
Japan: The Economic Consequences of Disaster
Peter Morici (Globalist) Mar 15, 2011
As the world grapples with the scale of human misery wrought by Japan's triple disaster, an examination of the tragedy's economic impact on Japan and the world as a whole.
Yes, There Will Be a U.S. Infrastructure Bank — But Will It Be Owned by China?
Stephan Richter (Globalist) Mar 15, 2011
Bringing a U.S. infrastructure bank to fruition ought to be a no-brainer — and yet it remains a highly contentious issue. A solution to the conundrum.
Westward Ho: Asians March Into Africa – Part I
Johan Lagerkvist (YaleGlobal) Mar 16, 2011
To fuel its own growth, China emerges as Africa's major trade partner.
Jobs and Structure in the Global Economy
Michael Spence & Sandile Hlatshwayo (Project Syndicate) Mar 16, 2011
All countries, including the successful emerging economies, have addressed issues of inclusiveness, distribution, and equity as part of the core of their growth and development strategies. Morally, pragmatically, and politically, that is the right course.
From Cairo to California
Kishore Mahbubani (Project Syndicate) Mar 16, 2011
Despite the fact that most leading East Asian policymakers were trained in American universities, none were seduced by Ronald Reagan’s belief that “government is the problem.” In their own ways, Egyptians and Americans must accept that if government is not part of the solution, no public good can be achieved.
Slow Progress in WTO Ag Talks as Easter Target Looms
Bridges Weekly Trade News Digest Volume 15, Number 9 Mar 16, 2011
Officials from a few WTO members are this week continuing to meet bilaterally to explore scope for possible trade-offs across negotiating areas in the troubled Doha Round trade negotiations. However, these discussions have so far failed to generate any sign of progress in the agriculture talks, as an Easter target date for revised draft texts fast approaches.
Appellate Body Reverses Ruling, Hands Victory to China over US in Trade Remedy Case
Bridges Weekly Trade News Digest Volume 15, Number 9 Mar 16, 2011
In an unexpected reversal of an earlier ruling, the WTO Appellate Body handed China a major victory in its WTO case against US anti-dumping and countervailing duties imposed on several types of Chinese steel pipes, off-road tyres and woven sacks.
The Japanese miracle is not over
David Pilling (FT) Mar 16, 2011
The grave faces of public officials cannot have looked much graver in 1945, after the nuclear bombs fell and Emperor Hirohito went on the radio to ask his countrymen to “endure the unendurable.”
Yen strength is likely to prove short-lived
Mansoor Mohi-uddin (FT) Mar 16, 2011
Why policymakers' reaction to the currency's strength will be more proactive.
Dead Parrot Trade Talks
Jagdish Bhagwati (Project Syndicate) Mar 17, 2011
The Doha Round of global trade talks recalls the classic Monty Python sketch in which a customer holds up a dead parrot in a cage while the shopkeeper insists that the parrot is only “resting.” Given the stakes for the global economy, the parrot must be revived.
Aftershocks from Japan
Stephen S. Roach (Project Syndicate) Mar 17, 2011
It is impossible at this point to gauge the full extent of the damage caused by the Japanese earthquake and tsunami with any degree of precision. But we can nonetheless begin to assess their potential impact on Japan, the rest of Asia, and other major economies around the world.
A credible economic order for the Eurozone?
Ramon Marimon (VoXEU) Mar 17, 2011
Europe’s history is littered with crises. This column argues that the latest Eurozone crisis is the latest in a long line out of which the region has to evolve. The problem, it says, is that the current package being discussed fails to draw a line under this crisis. While the proposal is reasonable, it is not credible.
Climate change and the world’s poorest
Thomas Hertel & Stephanie Rosch (VoXEU) Mar 17, 2011
Those who rely on agriculture for their livelihoods are among the most vulnerable to climate change – they also happen to be among the world’s poorest. This column argues that policymakers have a duty to help them adapt. It adds that the near-term poverty effects of climate-mitigation policies could even be more significant than climate change itself.
Curbing the credit cycle
David Aikman, Andrew G Haldane & Benjamin Nelson (VoXEU) Mar 17, 2011
Credit booms sow the seeds of subsequent credit crunches. This column argues that these have their source in cross-bank externalities. To internalise these cross-sectional spillovers, policy should operate “across the system”. It adds that this is the essence of macro-prudential policy, which, for the first time is about to be undertaken internationally.
Rising Food Prices May Be Here to Stay
IMF Survey Mar 17, 2011
Steady rises in the price of food since 2000 seem to be a trend, and not just the result of temporary factors, IMF economists caution in a Finance & Development magazine article. The IMF’s food price index is near a spike last hit in 2008.
Oil-hungry China needs energy security rethink
Trevor Houser (FT) Mar 17, 2011
Beijing’s best hope to stop rising oil prices is to end its policy of hoping for preferential access to foreign supplies.
China's inflation will alter face of its economy
Henny Sender (FT) Mar 17, 2011
Rising prices will do for the country what exchange rate appreciation might have done if it had been more willing to tolerate a rise in its currency value.
Natural disasters and growth
Economist Mar 17, 2011
The economic impact of natural disasters is often short-lived. Will this be the case in Japan?
Can Greece pull it off?
Giancarlo Corsetti, Michael P. Devereux, John Hassler, Gilles Saint-Paul, Hans-Werner Sinn, Jan-Egbert Sturm & Xavier Vives (VoxEU) Mar 18, 2011
Will the Greek rescue package be enough or is restructuring inevitable? In this column, members of the European Economic Advisory Group argue that even if the sovereign debt crisis is resolved, Greece must deal with its unsustainable current-account deficit. This requires an unenviable choice between internal and external depreciation and a government strong enough to take on the country’s rife tax evasion.
Do we need big banks?
Asli Demirgüç-Kunt & Harry Huizinga (VoxEU) Mar 18, 2011
Today's big banks are enormous. By 2008, 12 banks worldwide had liabilities exceeding $1 trillion. This column, using data on banks from 80 countries over the years 1991-2009, provides new evidence on how large banks differ in terms of their risk and return outcomes and investigates how market perceptions of bank risk are affected by bank size. It concludes that policies should reward bank managers for keeping their banks safe rather than for making them big.
Valuing insurers' liabilities during crises: What EU policymakers should not do
Jon Danielsson & Con Keating (VoxEU) Mar 18, 2011
In crises, insurance companies' asset values may fall significantly without a corresponding drop in their liabilities. European insurers have argued that their liabilities should be discounted by a higher rate during crises, lest regulations force them to raise more capital at exactly the wrong time. This column argues that that would be the wrong approach to the problem.
Westward Ho: Asians March Into Africa – Part II
Loro Horta (YaleGlobal) Mar 18, 2011
China, India and Brazil target Mozambique for energy and strategic reasons.
Gold, China, and Facebook: Detecting market bubbles
Nin-Hai Tseng (Fortune) Mar 18, 2011
It's not always so difficult to know when an asset is in a bubble. The real challenge is determining when it will pop.
A Macro Trinity Grips as the Impossible Trinity Ebbs
Manoj Pradhan (MS GEF) Mar 18, 2011
EM policy-makers have to choose whether to use interest rates or exchange rates to deal with inflation, or to allow higher inflation.
Mapping the two-way risks in exchange-traded platforms
Venkatachalam Shunmugam (VoxEU) Mar 19, 2011
The exchange-traded derivatives market has been growing rapidly, particularly in the decade preceding the global crisis. This column discusses the various policies available for mitigating the downside risks and argues that the dynamic nature of the market calls for the continuous evolution of regulation and regulatory tools.
Mega-Banks and the Next Financial Crisis
Paul Singer (WSJ) Mar 19, 2011
This hedge-fund manager recognized the risks of subprime mortgages and bet against them. Now he warns that monetary policy could cripple American banks again.
On shaky ground
Robert J. Samuelson (WP) Mar 20, 2011
Why Europe’s debt crisis may hurt global stability more than Japan’s tragedies.
‘Phantom giants’ will not save the eurozone
Wolfgang Münchau (FT) Mar 20, 2011
The European Council’s crisis resolution strategies have always seemed impressive until you look close up.
George Soros (Project Syndicate) Mar 21, 2011
With the entire burden of adjustment being shifted to the eurozone's debtor countries, the next step in European integration must be clearly acknowledged alongside implementation of the EU’s crisis-resolution mechanism. Otherwise, deficit countries will have no reason to hope that they can escape their predicament.
Emerging markets: New challenges after the global crisis
M. Ayhan Kose & Eswar Prasad (VoxEU) Mar 21, 2011
Emerging market economies proved surprisingly resilient during the global crisis, but some of them weathered the crisis better than others. This column argues that there are useful lessons to be learned from their experiences, and that these lessons have implications for securing emerging markets’ long-term growth prospects and responsibilities for global economic and financial stability.
A Trade Win for China
WSJ Mar 21, 2011
A ruling against Washington is good for the U.S. and good for world trade.
How Germany can avoid a two-speed Europe
George Soros (FT) Mar 21, 2011
The eurozone rescue plan needs two fundamental changes that would create a level playing field for deficit countries and help them escape their debt predicament.
The Bank of Japan averts a financial earthquake
Sebastian Mallaby (FT) Mar 21, 2011
However popular it has become to beat up central banks, Japan’s tragedy underlines their huge advantages.
Japan can rebuild on new economic foundations
Robert Pozen (FT) Mar 21, 2011
The terrible disasters that have hit Japan could sow the seeds of victory over previous chronic problems.
World Near Tipping Point?
Mohamed El-Erian (PIMCO) Mar 21, 2011
Much of the potency of policy responses has been used up in the successful efforts since 2008 to avoid global depression. The longer the persistence of supply disruptions, the greater the risk of core inflation increasing. Questions about the end of quantitative easing in the U.S. pose a challenge for policymakers.
Inflation concerns are simplistic and overblown
Valentijn van Nieuwenhuijzen (FT) Mar 21, 2011
Let's hope greater 'scientific' logic returns to the debate because without this many wrong decisions are being made, causing damage to economies and financial markets.
The Euro Is Back, Hotter Than a Latte
Steve Rosenbush (II) Mar 21, 2011
During times of crisis, investors turn to safe havens. This time around, the recently maligned euro is holding its value amid rising risk in the currency market.
Greasing the Brave New Market's Skids
Esther Dyson (Project Syndicate) Mar 22, 2011
With the emergence of online sites like Groupon and its many clones, merchants are likely to face much stiffer competition and erosion of their brands. But, as the market becomes more efficient, that same trend is likely to affect Groupon itself.
Robert J. Shiller (Project Syndicate) Mar 22, 2011
Forecasting the next speculative bubble is a bit like predicting who will be running the government two elections from now. But some places appear a little more likely than others to give rise to bubbles, and right now one of those places is farmland.
The Dark Underbelly of Finance
Luigi Zingales (Project Syndicate) Mar 22, 2011
The insider-trading trial of Raj Rajaratnam, a billionaire hedge-fund manager, has now begun. It is likely to provide an especially lurid exposé of the financial world's ambient corruption.
The benefits of being too big to fail and how to regulate them
Santiago Carbó-Valverde, Edward J Kane & Francisco Rodríguez Fernández (VoxEU) Mar 22, 2011
The problem of banks being too big to fail haunts discussions of regulation. This column provides new evidence on the implicit support provided to banks deemed too-difficult-to-fail and too-difficult-to-unwind in Europe and the US. It finds that regulators could be doing a much better job.
Learning vs. stealing: India’s productivity growth and market shares
Ann Harrison, Leslie Martin & Shanthi Nataraj (VoxEU) Mar 22, 2011
It is broadly agreed that trade liberalisation can increase productivity. The question is how. Earlier literature emphasises the role of firms “learning” to be more productive, whereas recent studies suggest that more productive firms are “stealing” market share from less productive ones, thus raising overall productivity. Presenting evidence from India’s trade liberalisation since 1991, this column finds evidence for both but argues that learning outweighs stealing.
This isn't your grandfather's global trade collapse
Peter A.G. van Bergeijk (VoxEU) Mar 22, 2011
The recent global crisis was accompanied by the Great Trade Collapse – the sharpest and deepest fall in world trade since the Second World War. While the subject has received much attention on this site, this column argues that scholars have not invested enough in comparing it to the previous world trade collapse of the 1930s. It does so, highlighting the importance of country-specific variables that have been neglected.
How China should rule the world
Martin Wolf (FT) Mar 22, 2011
As China grows, its impact on the world expands exponentially. It must reconcile the imperatives of its rapid development with the need to take full account of its impact.
How to avoid a global food price crisis
Tom Vilsack (FT) Mar 22, 2011
G20 countries that have yet to make a contribution to the World Bank’s global agriculture and food security programme could make one in 2011 to increase agricultural productivity.
Global supply chain’s vulnerability exposed
Kevin Brown (FT) Mar 22, 2011
Manufacturers are reviewing their sourcing and supply strategies. But the focus on dealing with the immediate pain is obscuring a bigger challenge for multinationals.
Middle East Oil Premium: ‘Event Risk Is Building’
Steve Rosenbush (II) Mar 22, 2011
The rise in the price of oil due to the crisis in Libya depends on a range of factors, from global economic growth to the crisis in Japan, which will lessen reliance on nuclear energy and boost demand for oil, coal and natural gas. All of those factors – and the upheaval in the Middle East – will bear watching.
Europe’s Default in Credibility
Adam Lerrick (TIE) Mar 23, 2011
The spread between Greece’s and Germany’s five-year cost of funds went from 8 percent in 1998, to 0.5 percent when Greece joined the euro in 2001, and then to 0.2 percent from 2002 to 2008. This convergence was artificial and became precarious when debt levels in Greece, Italy, Spain, and elsewhere soared. AEI visiting scholar Adam Lerrick writes that the euro area must decide how far it is willing to go to save its reputation.
The future of macroeconomic policy: Nine tentative conclusions
Olivier Blanchard (VoxEU) Mar 23, 2011
The global economic crisis has taught us to question our most cherished beliefs about the way we conduct macroeconomic policy. In this column, IMF chief economist Olivier Blanchard lays out his thoughts, arguing that we are far from a new Washington Consensus. Exploration is the order of the day.
The risk in carry trades
Lukas Menkhoff, Lucio Sarno, Maik Schmeling & Andreas Schrimpf (VoxEU) Mar 23, 2011
The carry trade – borrowing in currencies with low interest rates and investing in currencies with high interest rates – has been a surprising hit for decades. This column provides empirical evidence suggesting that the mysteriously high returns this generates can actually be explained as compensation for the volatility risk undertaken.
Murky protectionism: How big an issue?
Lucian Cernat & Marlene Rosemarie Madsen (VoxEU) Mar 23, 2011
Compared to recent headline-grabbing events, dealing with “behind-the-border barriers” and keeping protectionist tendencies at bay might seem to be small potatoes. This column argues that the “murky protectionism” that affects €100 billion of trade will have profound implications for Europe and the rest of the world, and as such is worthy of attention.
PIMCO Cyclical Outlook: U.S. Economy, Global Inflation Risks
Saumil Parikh (PIMCO) Mar 23, 2011
PIMCO continues to foresee a multi-speed global recovery over the next few years. The U.S. is experiencing a cyclical economic rebound, but its strong durability is uncertain. Several countries in Europe face headwinds to growth over our cyclical horizon. Japan’s growth rate will likely fall in the near term, but reconstruction activities should stimulate growth over time. We expect real economic growth in key emerging economies to remain at a solid rate during 2011, but lower than 2010.
The Japanese Currency Intervention
Robert P. Murphy (Mises Daily) Mar 23, 2011
After the catastrophic earthquake, the tsunami, and the nuclear-reactor scares, the Japanese currency ironically strengthened quite sharply. In response, the Bank of Japan and other major central banks last week launched a coordinated "intervention" into the currency markets in order to intentionally weaken the yen. In this article I'll explain why the yen strengthened in the first place, and the problems with the central-bank maneuvers.
Rising Oil Prices Highlight Need for Diversification
IMF Survey Mar 23, 2011
World oil prices are back above $100 a barrel, more than double levels two years ago, but increased diversification of energy supplies has given many economies greater resilience to price fluctuations. However, countries remain vulnerable to supply disruptions and extreme oil price volatility.
Food Prices: Leaked UN Report Urges G-20 Action on Farm Trade
Bridges Weekly Trade News Digest Volume 15, Number 10 Mar 23, 2011
A confidential draft report from leading international agencies has urged G-20 governments “immediately to strengthen” global rules on agricultural import and export restrictions as well as subsidies that distort production, discourage supply or constrain international trade, ahead of a meeting of senior officials from the G-20 group of major economies in Paris this week.
Canadian Access to Medicines Bill Under Threat
Bridges Weekly Trade News Digest Volume 15, Number 10 Mar 23, 2011
The fate of legislation seeking to make it easier for Canada to export affordable generic copies of patented drugs to poor nations hangs in the balance, as the ruling Conservative party leadership in the country’s unelected Senate stalls debate on it only days before parliament may be dissolved for an election.
Walker: No Developments Yet In WTO Ag Talks
Bridges Weekly Trade News Digest Volume 15, Number 10 Mar 23, 2011
The chair of the WTO’s farm trade negotiations warned delegates last week that there have been no developments in the talks thus far that would enable him to table a revised draft negotiating text on agriculture by Easter.
Equity bull rally is just pausing for breath
Laszlo Birinyi (FT) Mar 23, 2011
The relationship between the stock market and the economy is tangential and the current bull run will take some stopping.
Let Them Eat Bread
Annia Ciezadlo (Foreign Affairs) Mar 23, 2011
For years, Arab dictators used food subsidies -- and cheap bread -- to keep their subjects quiet. But when prices rose, the very thing that regimes used to ensure obedience became a symbol and a source of revolution.
Grameen vs. Bangladesh
Jagdish Bhagwati (Project Syndicate) Mar 24, 2011
In Bangladesh's feud between Prime Minister Sheikh Hasina and Mohammed Yunus, the founder of the microloan-making Grameen Bank, Yunus, with help from the US, is being portrayed as a victim of political persecution. But the truth is considerably more complicated.
Capital controls: A meta-analysis approach
Nicolas Magud, Carmen M Reinhart & Kenneth Rogoff (VoxEU) Mar 24, 2011
Capital controls are back on the table. But the existing literature offers conflicting and sometimes confusing insights. This column provides a meta-analysis of 37 empirical studies with the aim of exposing some common ground. It finds that capital controls on inflows make monetary policy more independent, alter the composition of capital flows, reduce real-exchange-rate pressures, but they do not reduce the volume of net flows.
US monetary policy and the saving glut
Heleen Mees (VoxEU) Mar 24, 2011
Is US easy monetary policy in the early 2000s to blame for the global saving glut? This column argues that the Federal Reserve’s policy triggered the refinancing boom and ensuing spending spree, which spurred economic growth and savings in China. The prolonged decline in long-term interest rates in the mid-2000s is largely to blame for the housing boom in the US.
Have Chinese innovators (and banks) finally grown-up?
Aoife Hanley, Wan-Hsin Liu & Andrea Vaona (VoxEU) Mar 24, 2011
A decade ago economic theory might have suggested that Chinese innovation would be “piggybacking” on the West, taking advantage of the widely available machines and equipment imported from those economies. But using data for 2001 to 2008, this column finds that while foreign investment may once have fuelled technological advancement, it has lost ground to domestic financing channelled within a stronger and ever-improving Chinese financial system.
Quality, not quantity
Economist Mar 24, 2011
Why small doses of vitamins could make a huge difference to the world’s health.
Why do African banks lend so little?
Svetlana Andrianova, Badi H Baltagi, Panicos Demetriades & David Fielding (VoXEU) Mar 25, 2011
International donors provide large amounts of financial capital to Africa in the form of aid and grants, but there are also large financial flows in the opposite direction. Many African banks invest large sums abroad and lend relatively little to local businesses. This column explains that this is because many banks suffer from a shortage of information about the creditworthiness of some of their customers.
How preferential is world trade?
Theresa Carpenter & Andreas Lendle (VoxEU) Mar 25, 2011
How much of world trade is preferential? This column uses tariff data covering around 90% of world trade in 2008 to show that only 16.3% of world trade is eligible for preferences. It shows that preferences reduce the global trade-weighted tariff from 3% to 2%.
Japan must dip into its rainy day fund
Carmen and Vincent Reinhart (FT) Mar 24, 2011
Tokyo has a war chest at its disposal: the authorities have been carefully stockpiling foreign reserves for years.
Vix volumes rise could drive investor trends
Gillian Tett (FT) Mar 24, 2011
As global investors reel from the latest string of upheavals, trading in the 'fear gauge' has exploded as investors try to speculate on volatility or protect themselves.
Banks' dodgy assets: Taking out the trash
Economist Mar 24, 2011
The lingering toxicity of banks' balance-sheets.
Measuring hunger: Stomach staples
Economist Mar 24, 2011
People's spending choices are a good way to assess levels of hunger.
The Search for a New Global Equilibrium: Waiting for Constantine
Alexander Mirtchev and Norman A. Bailey (Globalist) Mar 24, 2011
In the wake of the global economic crisis, the world is trying to chart an economic path to the future and find a "new normal." Inflation as a factor of global economic security has the innate capacity to upend carefully laid plans and further upset the equilibrium.
Let Japan Be Land of the Rising Yen
Geoffrey Wood (WSJ) Mar 25, 2011
The G-7's intervention threatens to thwart the recovery.
Arab awakening, violence, and future prospects: Some historical lessons
Matteo Cervellati, Piergiuseppe Fortunato & Uwe Sunde (VoxEU) Mar 26, 2011
The mass movement for democracy that has led to the exile of Ben Ali in Tunisia paved the way to a new awakening and raised many hopes in North Africa and the Middle East. This column reports on recent research on the historical experiences of countries that democratised during the “third wave”, to shed some light on the prospects for the future of the Arab region.
A grand bargain that cannot end the crisis
Wolfgang Münchau (FT) Mar 27, 2011
The really bad news is that the political systems of eurozone members are not prepared for what is about to hit them.
Oil-spill economics: How Ghana can succeed
Thorvaldur Gylfason (VoxEU) Mar 27, 2011
Ghana is about to become a major oil producer. The country’s newfound oil is expected to bring in many billions of dollars, changing the face of its economy. Ghana is the first African country where a major oil discovery is greeted by a well-functioning, albeit young, democracy. This column outlines how it can avoid the resource curse and take full advantage of this historic opportunity.
India’s Corruption Curse
Jaswant Singh (Project Syndicate) Mar 28, 2011
India has had a functioning democratic order since before 1947, and its economy weathered the recent global economic crisis when most others faltered. But a combination of factors has raised serious concerns about the threat that corruption poses to the very fabric of the Indian state.
Japan could use a dose of rising bond yields
Tadashi Nakamae (FT) Mar 28, 2011
With consumers becoming cautious, it is in the country's interests that money should flow to the private sector rather than the government.
Preparing the Next Steps
Anne Bagamery (NYT) Mar 28, 2011
Investing is a matter of strategy and tactics, and a changing world demands that investors revise their plans from time to time.
China’s Five-Year Plan and Global Interest Rates
Martin Feldstein (Project Syndicate) Mar 29, 2011
The key feature of China's new five-year plan is to shift official policy from maximizing GDP growth toward raising consumption and average workers’ standard of living. Although this change is driven by Chinese domestic considerations, it could have a significant impact on global capital flows and interest rates.
Learning to Float
Yu Yongding (Project Syndicate) Mar 29, 2011
The economic and welfare costs of China’s exchange-rate policy are too high. It is time for China to consider allowing the renminbi to float freely, while reserving the right to intervene when it must, and tighten the management of cross-border capital flows.
The ‘grand bargain’ is just a start
Martin Wolf (FT) Mar 29, 2011
Huge challenges remain ahead for the eurozone. It would be easier to believe they will be overcome if everybody confessed to their part in the mess.
Crisis management and resolution policies: Early lessons from the financial crisis
Stijn Claessens & Ceyla Pazarbasioglu (VoxEU) Mar 30, 2011
The comparisons between the global financial crisis and past episodes have been many, but this column argues that policymakers should look again, and closer. It says that without restructuring financial institutions’ balance sheets and their operations, as well as their assets, the economic recovery will suffer – and the seeds will be sown for the next crisis.
Healthy People, Healthy Cities, Healthy Economies
Pedro Malan (Project Syndicate) Mar 30, 2011
The four largest emerging-market economies are forecast to overtake the G-7 in combined size by 2030, with today’s emerging-market economies representing more than half the global economy and an even larger share of the world’s population by 2050. But will emerging-market cities be healthy enough to drive rapid economic growth?
The Hard Realities of the Need for More Oil
Martin Sieff (Globalist) Mar 30, 2011
While the world isn't about to run out of oil any time in the foreseeable future, Martin Sieff warns that oil prices are going to stay high and climb higher. The American public had better get used to it.
When the networks bubble over
John Gapper (FT) Mar 30, 2011
As long as social networks are pulling in millions of new members, as are both Facebook and Twitter at the moment, they have great revenue potential. But such companies also tend to atrophy rapidly when users turn to the next new thing. Late-stage investors should pause for thought.
ECB cannot tailor monetary policy for individual countries
Jürgen Stark (FT) Mar 30, 2011
All eurozone members need to implement long overdue structural economic and financial reforms, enhance their competitiveness and rapidly restore sustainable public finances.
With Easter Looming, WTO Members Acknowledge “Huge Gaps” on Doha
Bridges Weekly Trade News Digest, Volume 15, Number 11 Mar 30, 2011
As Easter approaches, trade negotiators’ thoughts turn to resurrection. Not of the ecclesiastical variety so much as in terms of reviving the long-struggling Doha Round of global trade negotiations. But resurrections are rare events, and recent attempts by WTO members to bridge divisions ahead of an Easter deadline have served primarily to underline how wide those differences are.
Impasse in Bilaterals Throws WTO Ag Talks into Disarray
Bridges Weekly Trade News Digest, Volume 15, Number 11 Mar 30, 2011
Agriculture negotiations at the WTO have been thrown into disarray following inconclusive bilateral consultations involving the US and China and India, with the width of gaps revealed responsible for the impasse reached in discussions among the ‘G-11' group of key countries, sources say.
The Eurozone’s Coming Inflation Divide
Raphael A. Auer (Project Syndicate) Mar 31, 2011
The risk that rising inflation in emerging Asia could spill over into Europe will pit the ECB's inflation hawks against those in favor of ensuring as fast a return to full employment as possible. But what may cause even greater dissension is a renewed clash of national interests as inflation rates within the eurozone diverge.
The Arab Young and Restless
Jeffrey D. Sachs (Project Syndicate) Mar 31, 2011
Many factors underlay the ongoing upheavals in the Middle East: decades of corrupt and authoritarian rule, increasingly literate and digitally-connected societies, and skyrocketing world food prices. But the region's youth unemployment crisis might be the most important cause – and the gravest challenge for reformers.
Internal devaluations in the Eurozone: A mismeasured and misguided argument
Jesus Felipe & Utsav Kumar (VoxEU) Mar 31, 2011
The problem with Greece, Ireland, Italy, Portugal, and Spain is that they are uncompetitive and need to internally devalue – or so the argument goes. This column challenges this conclusion by pointing out that the measure used to back it up – unit labour costs – is flawed and misguided. Europe’s periphery lack of competitiveness is related to the types of products they export and not to the fact that their labour is expensive.
International liquidity provision during the financial crisis: A view from Switzerland
Raphael Auer & Sébastien Kraenzlin (VoxEU) Mar 31, 2011
Banks across the globe have a high balance-sheet exposure to foreign currencies. During the panic of the global financial crisis, the private supply of cross-border liquidity came to a halt, requiring government action. This column documents the unmet demand for cross-border liquidity for the case of the Swiss Franc and describes the countermeasures that were adopted by the Swiss authorities.
A prudential regulatory issue at the heart of Solvency II
Jon Danielsson, Frank de Jong, Roger Laeven, Christian Laux, Enrico Perotti & Mario Wüthrich (VoxEU) Mar 31, 2011
A delicate regulatory question is under consideration on the capital (reserve) requirements at the heart of Solvency II (the insurance industry equivalent of Basel III), which is scheduled to come into effect by 2013. This decision will have implications for both regulation of insurers and for macroprudential stability. The six authors of this article were invited to discuss the issues and concluded that more public scrutiny over this important question is urgently needed.
The best alternative to a new global currency
Joseph E. Stiglitz (FT) Mar 31, 2011
The global role of special drawing rights should be increased, both through new issues and a bigger role in IMF lending.
G20 version 2.0 will appease the sceptics
Daniel Price (FT) Mar 31, 2011
The group has evolved, with its focus shifting to longer-term macroeconomic governance where it is likely to achieve incremental, rather than seismic results.
Portugal will follow Greece and Ireland to failure
Desmond Lachman (FT) Mar 31, 2011
The IMF and EU will prescribe Portugal the same savage fiscal retrenchment that failed dismally in Greece and Ireland.
Don't expect capital flows out of Japan
Henny Sender (FT) Mar 31, 2011
The coming months will test how much the world depends on the country for goods and to what extent neighbouring economies will be able to take advantage of disruptions.