An Economic Model for Asia
NYT Nov 1, 2014
With exports dropping, China and other Asian nations should stimulate domestic demand.
Japan Rolls The Dice: A Report From Tokyo
Kenneth Courtis (Globalist) Nov 1, 2014
On the global consequences of a large economy refusing to reform itself.
Home prices since 1870
Katharina Knoll, Moritz Schularick and Thomas Steger (VoxEU) Nov 1, 2014
House price fluctuations take centre stage in recent macroeconomic debates, but little is known about their long-run evolution. This column presents new house price indices for 14 advanced economies since 1870. Real house prices display a pronounced hockey-stick pattern over the past 140 years. They stayed constant from the 19th to the mid-20th century, but rose strongly in the second half of the 20th century. Sharply increasing land prices, not construction costs, were the key driver of this trend.
China’s Imperial President
Elizabeth C. Economy (FA) Nov 1, 2014
Chinese President Xi Jinping has articulated a simple but powerful vision: the rejuvenation of the Chinese nation. It is a patriotic call to arms, drawing inspiration from the glories of China’s imperial past and the ideals of its socialist present to promote political unity at home and influence abroad. After just two years in office, Xi has advanced himself as a transformative leader, adopting an agenda that proposes to reform, if not revolutionize, political and economic relations not only within China but also with the rest of the world.
Misrule of the Few
Pavlos Eleftheriadis (FA) Nov 1, 2014
How the oligarchs ruined Greece.
Richard N. Haass (FA) Nov 1, 2014
How to respond to a disordered World.
The Strategic Logic of Trade
Michael B. Froman (FA) Nov 1, 2014
New rules of the road for the global market.
Central bankers are caught in their own trap
Martin Sandbu (FT) Nov 2, 2014
Their power to change expectations relies on their power to make them real.
Give debt the credit it deserves
Nigel Dodd (FT) Nov 2, 2014
Funds should be available to those who need them most.
How to read the Dow Jones ups and downs
Mohamed El-Erian (FT) Nov 2, 2014
Three possible explanations have differing economic and market implications.
South Korea: Sparks fly over the chaebol
Simon Mundy (FT) Nov 2, 2014
Investors have trained their focus on the unchallenged family control and complex structures of the country’s largest companies.
The Ultimate Global Antipoverty Program
Douglas A. Irwin (WSJ) Nov 2, 2014
Extreme poverty fell to 15% in 2011, from 36% in 1990. Credit goes to the spread of capitalism.
The Run on the Ruble
WSJ Nov 2, 2014
Sanctions and a strong dollar create currency woes for Putin.
U.S. Sugar Policy: Sweet for a Few, Sour for Most
Burleigh Leonard (WSJ) Nov 3, 2014
New restrictions on Mexican sugar imports undermine the government’s negotiating position in free trade talks.
Europe’s chronic ailment
Robert J. Samuelson (WP) Nov 2, 2014
The continent’s stagnation could give way to something worse.
What's Wealth If You Can't Count It?
Mark Buchanan (Bloomberg View) Nov 2, 2014
Nations need to do a better job of measuring their wealth.
Europe's Crazy Finance Tax
Bloomberg View Nov 2, 2014
Wrangling among the 11 euro-region nations planning to tax financial transactions is further evidence, if any were needed, that the levy is a bad idea that should be abandoned.
The economics of Asian geo-political stability
Paul Hubbard (East Asia Forum) Nov 2, 2014
What can economics tell you about the geo-political challenges in Asia?
Government debt and the term premium: New results from old data
Jagjit Chadha (VoxEU) Nov 2, 2014
The impact of the stock and maturity of government debt on longer-term bond yields matters for monetary policy. This column assesses the magnitude and relative importance of overall bond supply and maturity effects on longer-term US Treasury interest rates using data from 1976 to 2008. Both factors have a significant impact on both forwards and term premia, but maturity of public debt appears to matter more. The results have implications for exit from unconventional policies, and also for the links between monetary and fiscal policy and debt management.
Cracks in the Brics start to show
Gideon Rachman (FT) Nov 3, 2014
A shared feeling that the west has run things for too long masks deep divergences in world.
India needs a trade deal with itself
Victor Mallet (FT) Nov 3, 2014
Moving freight around is a slow process thanks to bureaucratic jams.
Rebuilding confidence in Europe’s banks
Martin Arnold (FT) Nov 3, 2014
The ECB is likely to repeat the stress tests every year and it will learn from its early mistakes.
Norway: Braced for a new wave of investment
Richard Milne (FT) Nov 3, 2014
Politicians are discussing big changes to Oslo’s $860bn sovereign wealth fund that would see it pull out of fossil fuels.
South Korea’s Confused Growth Plan
WSJ Nov 3, 2014
How President Park Geun-hye and Finance Minister Choi Kyung-hwan can save their country from the Japan trap.
Bringing Commodities Regulation to Bitcoin
Mark Wetjen (WSJ) Nov 3, 2014
There are several trading platforms planning to list derivatives contracts for the virtual currency.
Will a Republican Senate Be Good for Trade?
Gary Clyde Hufbauer (PIIE) Nov 3, 2014
If voters give the GOP control of the Senate on November 4, as many polls suggest, the prospects of approving Trade Promotion Authority (TPA, or fast track), the Trans-Pacific Partnership (TPP), and the Trans-Atlantic Trade and Investment Partnership (TTIP) are likely to improve. There are four reasons for this assessment.
The End of the Fed Stimulus Program: A Reality Check
Krista Schwarz (K@W) Nov 3, 2014
While economic recovery will be slow and steady, Fed chair Janet Yellen must keep conditions accommodative to maintain low long-term interest rates.
Bad Energy. Good Energy. Choose Your Side.
Noah Smith (Bloomberg View) Nov 3, 2014
Fossil fuel made the modern world possible, but future progress will depend on developing alternative sources of energy.
Good and Bad of the Strong Stock Recovery
Mohamed A. El-Erian (Bloomberg View) Nov 3, 2014
Investor exuberance shouldn't distract attention from the need for improved fundamentals to justify the existing prices.
The Draghi Put on Trial
Gita Gopinath (Project Syndicate) Nov 3, 2014
The European Court of Justice will rule soon on the legality of the European Central Bank's "outright monetary transactions" scheme to finance crisis-stricken eurozone countries. But, instead of asking whether the ECB’s mandate allows it to act as lender of last resort, EU leaders should be making the case for why it should.
Europe’s Energy Essentials
Ana Palacio (Project Syndicate) Nov 3, 2014
As global developments challenge European values, welfare, and security, EU leaders must focus on building a new energy system that ensures a secure supply, competitive pricing, and ecological sustainability. The good news is that a framework to facilitate this initiative is already emerging.
Latin America’s Climate Vanguard
Ricardo Lagos (Project Syndicate) Nov 3, 2014
Latin American countries can take the lead on framing a new climate change agreement at the UN's upcoming climate conference in Lima. Indeed, by enacting laws that reduce greenhouse-gas emissions while encouraging economic growth, the region can set an example for the rest of the world.
China’s Repressed SMEs
Yu Yongding (Project Syndicate) Nov 3, 2014
Financial repression – government policies that lead to low or negative real interest rates, with the implicit goal of generating cheap financing for public spending – has long been a key feature of Chinese economic policy. But, with funding costs for businesses trending up, this needs to change.
Celebrity Central Bankers
Kenneth Rogoff (Project Syndicate) Nov 3, 2014
Major central banks’ growth and inflation forecasts in the years since the financial crisis have consistently overestimated both growth and inflation – and by wide margins. So why do the comments of major economies’ central bankers command outsize attention?
Monetary policy and long-term trends
Charles A.E. Goodhart and Philipp Erfurth (VoxEU) Nov 3, 2014
There has been a long-term downward trend in labour’s share of national income, depressing both demand and inflation, and thus prompting ever more expansionary monetary policies. This column argues that, while understandable in a short-term business cycle context, this has exacerbated longer-term trends, increasing inequality and financial distortions. Perhaps the most fundamental problem has been over-reliance on debt finance. The authors propose policies to raise the share of equity finance in housing markets; such reforms could be extended to other sectors of the economy.
Fixing Europe in the short and long run: A proposal
Luigi Guiso and Massimo Morelli (VoxEU) Nov 3, 2014
Eurozone countries need to stop the stagnation and improve their management of future crises. In this column, the authors argue that both issues should be addressed simultaneously. To achieve this goal, they propose the creation of a European Federal Institute. This Institute would coordinate short-run, antirecession measures, and implement steps towards a federal budget that would fix the European institutional design in the long-run.
Lower Oil Prices Carry Geopolitical Consequences
Stratfor Nov 3, 2014
Since mid-June, the price of Brent crude oil has fallen by nearly 25 percent -- going from a high of $115 to about $87 a barrel -- and structural factors are causing concern among global oil producers that oil prices will remain near current levels through at least the end of 2015. This concern has caused several investment banks to slash their oil price outlooks for the immediate future. Stratfor believes that oil supplies will stay high as energy production in North America increases and OPEC countries remain hesitant or unable to cut production significantly. Moreover, in the short term, the Chinese economic slowdown and stagnant European economy will limit the potential for growth in oil demand. These factors could make it harder for global oil prices to rebound to their previous levels.
Warnings from Japan for the eurozone
Martin Wolf (FT) Nov 4, 2014
Europe has been unwilling to address the structural excess savings of creditor countries.
Second-richest man was poorer than us
John Kay (FT) Nov 4, 2014
I would rather have antibiotics than gold plate, and I suspect Rothschild would have felt the same.
Economic transformation is key to a free Myanmar
Thant Myint-U (FT) Nov 4, 2014
Foreign governments can help by promoting trade and investment.
Philippines tycoons top outbound M&A action
Jeremy Grant (FT) Nov 4, 2014
Trend is helping to focus investor attention on 10-member Asean bloc.
US investors read between the lines
James Mackintosh (FT) Nov 4, 2014
Bond and equity markets are telling different stories.
Barroso: ‘Not everything I did was right’
Peter Spiegel (FT) Nov 4, 2014
On his final day, the former European Commission president explains his actions during two terms.
Japan Creates World's Biggest Bond Bubble
William Pesek (Bloomberg View) Nov 4, 2014
What happens when a central bank buys up an entire bond market? We're about to find out as Bank of Japan Governor Haruhiko Kuroda corners Japan's.
Reality Might Topple a Beloved Economic Theory
Noah Smith (Bloomberg View) Nov 4, 2014
The easy money of quantitative easing is often seen as a way to prevent deflation and recession, but it might cause both.
The Asian Paradox
Yoon Young-kwan (Project Syndicate) Nov 4, 2014
Uncertainty about whether Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe will even speak to each other at this month's APEC summit highlights the grim reality of Asian relations today. The “Asian century” is being thwarted by a paradox: economic interdependence has done nothing to alleviate strategic mistrust.
Poland’s New Golden Age
Günter Verheugen (Project Syndicate) Nov 4, 2014
Though the fall of the Iron Curtain in 1989 did not bring about the perpetual peace and prosperity that some imagined, it did set in motion some true success stories. One of the most impressive is Poland’s rise as a political and economic heavyweight in Europe.
The Urban Village
Carlo Ratti and Matthew Claudel (Project Syndicate) Nov 4, 2014
Metropolises like London and New York, with their multicultural populations, multinational corporations, and multitude of talented individuals, are appealing largely because of their complex, bustling nature. But is urban life actually governed by a few fundamental laws?
Traveling Through Multiple Europes
Adriano Bosoni (Stratfor) Nov 4, 2014
Europe is overcrowded with people and with nations. Six decades ago, the need to suppress the dangerous forces of nationalism led to the unprecedented political, economic and social experiment now known as the European Union. The hundreds of thousands of EU citizens working across the Continent and the lack of border controls between member states show that the experiment has been successful in many ways. However, rising nationalism, pervasively high unemployment and a growing sense of frustration with governing elites also highlight the serious limitations of the European project. Over the past 12 months, I have traveled extensively throughout Europe, observing firsthand how the global economic crisis is reawakening dormant trends along the Continent's traditional fault lines.
Demography and economics: Look past the past
Philipp Erfurth and Charles A.E. Goodhart (VoxEU) Nov 4, 2014
Most of the world is now at the point where the support ratio is becoming adverse, and the growth of the global workforce is slowing. This column argues that these changes will have profound and negative effects on economic growth. This implies that negative real interest rates are not the new normal, but rather an extreme artefact of a series of trends, several of which are coming to an end. By 2025, real interest rates should have returned to their historical equilibrium value of around 2.5–3%.
Robert McNally and Michael Levi (FA) Nov 4, 2014
Why fluctuating oil prices are here to stay.
Why innovation matters to investors
Ewen Cameron Watt (FT) Nov 5, 2014
Technological change can erode competitive advantage.
Why Is Ukraine So Poor?
Anders Åslund (PIIE) Nov 5, 2014
The first question Russians usually pose when discussing Ukraine's economy is: Why are they so poor? The question is to the point. Ukraine's economy has persistently underperformed quite spectacularly because of pervasive corruption.
My Two Big Worries About the World Bank
Nancy Birdsall (Globalist) Nov 5, 2014
Is the World Bank becoming irrelevant?
Backlash Against the Big Boys in Korea
William Pesek (Bloomberg View) Nov 5, 2014
Investors have rebelled against the clubby ways of at least one major South Korean chaebol. President Park Geun Hye should seize the moment to push more radical reforms.
Europe's Shrinking Conglomerates
Mark Gilbert (Bloomberg View) Nov 5, 2014
Europe's biggest conglomerates are discarding units that don't make enough money or don't fit with with the business strategy. it might just be the start of a second industrial revolution.
A Crazy Idea About Italy
Jim O'Neill (Bloomberg View) Nov 5, 2014
Maybe it's time to discipline Germany for letting Europe's lack of inflation get out of control.
ECB May Be Forced to Do More With Less
Mohamed A. El-Erian (Bloomberg View) Nov 5, 2014
Unfortunately, the ECB's instruments, on their own, are ill equipped to deal with what holds back growth -- be it poor competitiveness, inadequate aggregate demand or residual pockets of excessive indebtedness.
Will the New Congress Bring Economic Renewal?
Mohamed A. El-Erian (Bloomberg View) Nov 5, 2014
The markets hope a Democratic president and Republican Congress can replicate the successes of the Clinton era. They may be too optimistic.
ECB Needs Japanese Lessons
Mark Gilbert (Bloomberg View) Nov 5, 2014
As Europe slides closer to deflation, the ECB should heed both the historical experience and the current efforts of the Bank of Japan about how and how not to resuscitate growth.
Quantitative Easing for the People
John Muellbauer (Project Syndicate) Nov 5, 2014
It is now a near certainty that, by the end of this year, falling energy and commodity prices will push annual inflation in the eurozone below zero – well under the European Central Bank’s target of near 2%. Rather than continue to depend on misguided conventional thinking, the ECB must pursue the right form of quantitative easing.
A Growth Pact for America
Glenn Hubbard (Project Syndicate) Nov 5, 2014
America, once again, will have a divided government, with the Democrats holding the White House, and the Republicans controlling both houses of Congress. But that does not necessarily mean that the final two years of Barack Obama’s presidency need to be defined by stalemate and mutual recrimination.
The impact of the Fed’s exit on India
Kaushik Basu, Barry Eichengreen and Poonam Gupta (VoxEU) Nov 5, 2014
India was among the hardest hit by the Fed’s ‘taper talks’. This column argues that this impact was large for two reasons. First, India received huge capital flows before 2013. This had made it a convenient target for investors seeking to rebalance away from emerging markets. Second, macroeconomic conditions had worsened, which rendered the economy vulnerable. The measures adopted in response were ineffective in stabilising the financial markets. Implementing a medium-term framework that limits vulnerabilities and restricts spillovers could be more successful.
Immigration and public finances
VoxEU Nov 5, 2014
Data on social attitudes show that the perceived burden of immigration on a nation’s public finances is one of the strongest economic concerns associated with hostility to immigration. Yet recent official reports suggest an important positive role for immigration in the long-run health of public finances. This column argues that there can be no general conclusions applicable in all circumstances about whether immigration is favourable or unfavourable for public finances. But evidence is emerging on particular cases through studies of immigrant composition and use of services, and the effects of immigration on native outcomes.
Policy uncertainty spillovers to emerging markets: Evidence from capital flows
Dennis Reinhardt, Cameron McLoughlin and Ludovic Gauvin (VoxEU) Nov 5, 2014
In the aftermath of the Global Crisis, policymakers and academics alike discussed how uncertainty surrounding macroeconomic policymaking has impacted domestic investment. At the same time, concerns regarding the spillover impact of monetary policy in advanced economies on emerging market economies featured strongly in the international policy debate. This column draws the two debates together, and examines how policy uncertainty in advanced economies has spilled over to emerging markets via portfolio capital flows. It finds remarkable differences in the spillover effects of EU vs. US policy uncertainty.
Trichet had to get tough with Dublin
Peter Doyle (FT) Nov 6, 2014
If France or Italy defies an ECB ultimatum, the eurozone could again be in crisis.
Peña Nieto tries to rewrite Mexico’s script
Jude Webber (FT) Nov 6, 2014
The president is seeking to change the nation’s course on law and order.
Fed has built a thorny central bank divide
Ousmène Mandeng (FT) Nov 6, 2014
Lack of access to Fed’s dollar liquidity will result in further volatility.
Gold price bears take charge of bullion
Henny Sanderson (FT) Nov 6, 2014
Chinese buyers, stung by last year’s price moves, remain sidelined.
Junk bond rebound follows end of QE
Vivianne Rodrigues (FT) Nov 6, 2014
As the Federal Reserve wraps up its latest round of quantitative easing, one unlikely asset class is benefiting from the end of easy money: junk bonds.
China and Japan: Eyes on a compromise
Demetri Sevastopulo and Jamil Anderlini (FT) Nov 6, 2014
Relations are at a 40 year low but, with the leaders set to meet, can they do anything to ease tensions?
Trade Deals in Focus as Asia-Pacific Economic Leaders' Week Begins
Bridges, Volume 18, Number 37 Nov 6, 2014
Leaders from 21 Asia-Pacific countries are set to arrive in Beijing, China in the coming days for a highly-anticipated summit, with trade expected to be one of the top items on the agenda. Issues to watch, observers say, include a potential breakthrough in the WTO's stalled talks on expanding an agreement in technology trade, and a push by China to advance discussions on a future regional trade zone.
WTO Members Mull Alternative Scenarios as Impasse Continues
Bridges, Volume 18, Number 37 Nov 6, 2014
Efforts to resolve the WTO impasse continued in Geneva this week, with multiple sources saying that a formal solution does not appear to have been finalised yet among the membership, despite continued discussions.
UN Climate Report Calls for Zero Emissions by End of Century
Bridges, Volume 18, Number 37 Nov 6, 2014
Delegates from 195 nations on Sunday signed off on a UN climate report calling for a 40 to 70 percent drop in emissions in the next forty years relative to 2010 levels, with a move to zero by the end of the century, in order to avoid the far-ranging and disastrous consequences of climate change.
Diplomatic Conference to Revise Lisbon Agreement Set as WIPO Members Spar over Participation
Bridges, Volume 18, Number 37 Nov 6, 2014
Parties to the Lisbon Agreement protecting "appellations of origin" are now set to hold a diplomatic conference next May at the World Intellectual Property Organization's (WIPO) headquarters in Geneva, Switzerland. Last week’s decision confirming such a conference, however, fuelled heated debate over whether countries not party to the treaty should be allowed to vote on revisions adding geographical indications to its scope, given the impact these changes could have on their own commercial and trading interests.
LDCs Encourage WTO Members to Design More Effective Preferential Rules of Origin
Bridges, Volume 18, Number 37 Nov 6, 2014
The Least Developed Countries (LDCs) Group at the WTO presented a report to the multilateral organisation's Committee on Rules of Origin (CRO) on 30 October, calling for a more effective design of preferential rules of origin. The discussions are part of the work mandated by trade ministers at their last WTO ministerial conference in Bali, Indonesia in this area.
The 2014 EU-Wide Bank Stress Test Lacks Credibility
Morris Goldstein (PIIE) Nov 6, 2014
On October 26, 2014, the European Central Bank (ECB) and the European Banking Authority (EBA) released the results of the latest EU-wide stress test and the accompanying asset quality review (AQR). The 2014 stress test encompasses four key findings: (1) the aggregate capital shortfall for the 123 banks participating in the test is €24.6 billion; (2) only 24 of the 123 banks are undercapitalized, as indicated by their inability to meet transitional common equity tier 1 capital ratios of 5.5 and 8.0 percent in the baseline and adverse scenarios, respectively; (3) the undercapitalized banks are all in Italy, Greece, and Cyprus; and (4) the largest banks in France and Germany have ample capital.
The Inclusion Imperative
Mahmoud Mohieldin and Maria Beatriz Orlando (Project Syndicate) Nov 6, 2014
In developing the post-2015 development agenda, world leaders must recognize that the progress that has been made in recent years has been uneven. In fact, the same groups – such as indigenous peoples, religious or sexual minorities, and the disabled – have consistently been excluded from progress and prosperity.
China’s Questionable Economic Power
Joseph S. Nye (Project Syndicate) Nov 6, 2014
The World Bank recently announced that China’s economy will surpass that of the US this year, measured according to purchasing power parity. But this is far from a holistic depiction of China's global economic standing.
Measuring the competitiveness of China’s processed exports
Willem Thorbecke (VoxEU) Nov 6, 2014
Foreign reserve accumulation by China and other east Asian countries has been a controversial way to boost exports. This column argues that it is not even in their own national interests. The policy has been ineffective in maintaining China’s ordinary trade surplus, while its processing trade surplus continues to rely on devaluation in countries further up the supply chain. Foreign reserve divestment would increase purchasing power in east Asian countries, free up government revenue, and be innocuous to export competition if properly coordinated.
The return of the Cold Trade War?
Peter A.G. van Bergeijk (VoxEU) Nov 6, 2014
A quarter of a century ago, the Iron Curtain and Berlin Wall were demolished. This was one of the most visible consequences of the fall of communism. In the decades before 1989 political conflict had shaped the world trade pattern. Against the background of political tensions in the Ukraine, this column investigates the vulnerability of the world trade system.
Why Oil Prices May Shoot Back Up
Leonid Bershidsky (Bloomberg View) Nov 7, 2014
Price forecasts from the Organization of Petroleum Exporting Countries have never been particularly reliable, so it's easy do dismiss the latest one -- a
Waiting for the European Central Bank
NYT Nov 7, 2014
The steps the E.C.B. seems to have in mind will not sufficiently bolster the eurozone economy.
World Bank’s grievous omission
Philip Alston (WP) Nov 7, 2014
Human rights aren’t part of the bank’s vocabulary — but they should be.
It's a Bad Time to Be a Saver in Europe
Mark Gilbert (Bloomberg View) Nov 7, 2014
It's a strange world when economic frugality is punished while fiscal profligacy gets rewarded, yet negative interest rates mean that's what's happening in the euro zone.
The New Frontiers of Loyalty
Mark Malloch Brown (Project Syndicate) Nov 7, 2014
This is a tricky time to be a state, and an even trickier time to be a citizen. The nation-state, the classic provider of security and basic wellbeing in exchange for citizens’ loyalty, is under threat – both at home and as the fundamental unit of international affairs.
In Praise of Global Imbalances
Sanjeev Sanyal (Project Syndicate) Nov 7, 2014
As China shifts from being the world’s workshop to its main financier, only the US has the capacity to absorb China's savings. The resulting imbalances should be welcomed as a spur to global growth – just as they have been in the past.
The Economics of Inclusion
Ricardo Hausmann (Project Syndicate) Nov 7, 2014
Any strategy for inclusive economic growth must empower people by including them in the networks that make them productive. Inclusiveness thus should be seen not as a restriction on growth to make it morally palatable, but as a strategy to enhance it.
Eastern Europe’s 25 Years of Transition
David Lipton (Project Syndicate) Nov 7, 2014
A quarter-century ago, Central and Eastern Europe embarked upon a historic transformation, from authoritarian communism to democratic capitalism. With memories of the old system already beginning to fade, it seems fitting to look back at the region’s achievements, review the lessons learned, and examine the challenges ahead.
Dilma's Smoke, Modi's Mirrors
Nicholas Spiro (FP) Nov 7, 2014
From India to Brazil to Indonesia, reform in emerging markets is going to be a lot harder than investors want to believe.
Systemic price mis-measurement: Rethinking PPP
Jessie Handbury and David E. Weinstein (VoxEU) Nov 7, 2014
It’s a common perception that big cities are expensive. This column argues that most of the variation in prices across cities can be attributed to flaws in the conventional indexes. One problem with the standard methodology is that it compares prices of similar but not identical goods. A second issue is that most price indexes do not adjust for the availability of goods across locations. Correcting for these two problems, the authors find that grocery prices are actually lower in large cities.
Green policies to promote Eurozone growth
Jean Pisani-Ferry (VoxEU) Nov 7, 2014
A triple-dip recession in the Eurozone is now a distinct possibility. This column argues that additional monetary stimulus is unlikely to be effective, that the scope for further fiscal stimulus is limited, and that some structural reforms may actually hurt growth in the short run by adding to disinflationary pressures in a liquidity trap. The author advocates using tax incentives and tighter regulations to encourage firms to replace environmentally inefficient capital.
A Strategy for Rich Countries: Absorb More Immigrants
Tyler Cowen (NYT) Nov 8, 2014
If developed economies are to keep thriving, they’ll need more people. Two paths to that goal are immigration reform and family-friendly working conditions.
Emerging markets: The dodgiest duo in the suspect six
Economist Nov 8, 2014
As emerging economies hit hard times, Brazil and Russia look particularly weak.
APEC at the Apex
Kevin Rudd (Project Syndicate) Nov 8, 2014
The significance of the upcoming APEC Summit in Beijing consists not so much in what is on the agenda as in what transpires on the sidelines. Meetings between Chinese President Xi Jinping and US President Barack Obama; as well as Xi’s meetings with Japanese Prime Minister Shinzo Abe loom especially large.
The zero lower bound has not been very severe
Eric T Swanson (VoxEU) Nov 8, 2014
In December 2008, the Fed lowered the federal funds rate to essentially zero and has kept it there since then. This column argues that, contrary to traditional macroeconomic thinking, monetary policy has not been severely constrained by the zero bound until mid-2011. The results imply that the Fed could have done more to ease monetary policy between 2009 and 2011. These findings could also help explain why the fiscal stimulus package adopted in 2009 did not bring the expected success.
The euro is in greater peril than ever
Wolfgang Münchau (FT) Nov 9, 2014
The eurozone has no mechanism to defend itself against a drawn-out depression.
‘American Power after the Financial Crisis’, by Jonathan Kirshner
Gideon Rachman (FT) Nov 9, 2014
The fire of the crisis was extinguished at great cost, but ‘the firetrap remained’.
Currency wars fail to spark global growth
Komal Sri Kumar (FT) Nov 9, 2014
Policy makers have relied too much on QE rather than structural reform.
The Fed’s bond buying enigma
Robert J. Samuelson (WP) Nov 9, 2014
Deciphering whether “quantitative easing” helped.
What’s the score on Japan’s Abenomics
Hugh Patrick (EAF) Nov 9, 2014
Abenomics has successfully restored Japanese confidence, but the initial exuberant optimism has waned. Yet, those who say it is a failure are judging prematurely.
Influencing household inflation expectations
Alberto Cavallo, Guillermo Crucas and Ricardo Perez-Truglia (VoxEU) Nov 9, 2014
Although central banks have a natural desire to influence household inflation expectations, there is no consensus on how these expectations are formed or the best ways to influence them. This column presents evidence from a series of survey experiments conducted in a low-inflation context (the US) and a high-inflation context (Argentina). The authors find that dispersion in household expectations can be explained by the cost of acquiring and interpreting inflation statistics, and by the use of inaccurate memories about price changes of specific products. They also provide recommendations for central bank communication strategies.
The policy of money printing and rates
Adair Turner (FT) Nov 10, 2014
No technical reasons exist for rejecting this, only the fear of breaking a taboo.
China’s economy and a surfeit of stimulus
Joe Zhang (FT) Nov 10, 2014
The central bank’s efforts exacerbate overcapacity.
October’s market jitters are just a taste
Henny Sender (FT) Nov 10, 2014
Investors face further unpredictability as liquidity dries up.
How to Increase Trade between China and the United States
Sean Miner (Seattle Times/PIIE) Nov 10, 2014
Even among supporters of the United States' economic integration with the world, China is rarely seen as a model trading partner. Chinese imports are at an all-time high, but China is routinely criticized for allegedly flooding the United States with cheap goods, paying low wages, unfairly subsidizing its industries, manipulating its currency and stealing intellectual property—all while putting up its own barriers to US-made goods and services.
China: Hiding Your Strength and Biding Your Time
Kenneth Courtis (Globalist) Nov 10, 2014
APEC Summit reflections on China’s impressive policy and reform path.
On Alan Greenspan's claim that gold is a better currency than the dollar
John Aziz (Pieria) Nov 10, 2014
All currencies are fiat currencies.
Best Immigration Policy Is More Immigration
Noah Smith (Bloomberg View) Nov 10, 2014
My default attitude toward immigration -- more is better.
Who Benefits From a Floating Ruble?
Leonid Bershidsky (Bloomberg View) Nov 10, 2014
Allowing the ruble to float freely is the best tool the Russian Central Bank has to stop speculative attacks on the currency. But, as is often the case with Russia under President Vladimir Putin, it may also favor corruption.
Money Buys Happiness Until It Doesn't
Barry Ritholtz (Bloomberg View) Nov 10, 2014
It looks as if you can buy happiness, after all. At least, in limited amounts, and up to a point.
How Close Is Russia to Financial Crisis?
Mohamed A. El-Erian (Bloomberg View) Nov 10, 2014
As the central bank of Russia appears to be losing control of its currency market, the global financial media is warning about a possible financial crisis there.
Bondholders Vote on Catalan Independence
Mark Gilbert (Bloomberg View) Nov 10, 2014
Now that 81 percent of Catalonian voters have expressed their preference for independence from Spain, the Spanish government's refusal to negotiate with the separatist movement has become unsustainable -- and risks driving even more people into the independence movement.
Europe's Banking Addicts
Mark Gilbert (Bloomberg View) Nov 10, 2014
European companies are overly reliant on banks to meet their funding needs, hobbling efforts to resuscitate the economy as banks shrink their lending.
Asia's Biggest Economic Challenges
Bloomberg View Nov 10, 2014
When he travels to Asia this week, U.S. President Barack Obama will find himself in unfamiliar territory: not Asia, which he visited just last year, but amid leaders who enjoy popular mandates, negligible political opposition or both.
Europe’s Dog in the Nighttime
Daniel Gros (Project Syndicate) Nov 10, 2014
As Sherlock Holmes understood, a dog that does not bark in the nighttime usually goes unnoticed. In Europe’s case, the EU’s fiscal rules are at issue, and the Commission – in principle the EU’s watchdog – should bark loudly when they are flouted.
Germany’s Secret Credit Addiction
Adair Turner (Project Syndicate) Nov 10, 2014
With Germany's exports and industrial production contracting, its unsustainable credit-fueled expansion is coming to an end. The problem is that orthodox economics and conventional policy have nothing to offer except more of the private-sector leverage that got us into trouble in the first place.
A Plutocrats Summit?
Wayne Swan (Project Syndicate) Nov 10, 2014
With just days to go until its summit in Brisbane, the G-20 is ignoring the main long-term threats to the global economy. For example, the Australian government’s refusal to discuss inclusive growth strongly suggests that the summit will offer no substantive policies to reduce inequality.
Ebola and Inequality
Joseph E. Stiglitz (Project Syndicate) Nov 10, 2014
The Ebola crisis reminds us, once again, of the downside of globalization. And, though governments may not do a perfect job in addressing such crises, one of the reasons that they have not done as well as we would hope is that we have underfunded the relevant agencies at the national and global level.
The Return of the Dollar
Mohamed A. El-Erian (Project Syndicate) Nov 10, 2014
The recent dollar rally, the result of genuine economic progress and divergent policy developments, could contribute to the “rebalancing” that has long eluded the global economy. But that outcome is far from guaranteed.
Does Slower Growth Imply Lower Interest Rates?
Sylvain Leduc and Glenn D. Rudebusch (FRBSF Economic Letter) Nov 10, 2014
Over the past two years, both monetary and fiscal policy projections have been based on the view that declines in the long-run potential growth rate of the economy will in turn push down interest rates. In contrast, examination of private-sector professional forecasts and historical data provides little evidence of such a linkage. This suggests a greater risk that future interest rates may be higher than expected.
Battle of the Asia-Pacific FTAs
Jayant Menon (VoxEU) Nov 10, 2014
With WTO trade talks on the brink of failure (again), global trade governance is being decided elsewhere. This column argues that China and the US are pushing competing visions for free trade in Asia-Pacific. The US-led Trans-Pacific Partnership, TPP, could be challenged by a China-led ‘Beijing Road Map’ that may be announced at this week’s APEC summit. Neither vision is an end-game but merely one more stroke on an ugly picture of trade agreements characterised by an unsustainable amount of disorder and incoherence.
Don't Ask How to Feed the 9 Billion
Mark Bittman (NYT) Nov 11, 2014
The solution isn't to produce more food, it's to eliminate poverty.
The policy of money printing and rates
Adair Turner (FT) Nov 11, 2014
No technical reasons exist for rejecting this, only the fear of breaking a taboo.
Eurozone stagnation is inevitable
John Plender (FT) Nov 11, 2014
QE to have limited potency and there is little in monetary locker.
Gold miners priced for near-death
James Mackintosh (FT) Nov 11, 2014
Prices have plunged so far that shares are worth the same amount of gold as they were in 2008.
Europe has irrational fears over trade
Katinka Barysch (FT) Nov 11, 2014
For many, TTIP serves as a pressure valve for expressing other suspicions.
China anti-corruption push spurs outflows
Henny Sender (FT) Nov 11, 2014
Companies are accelerating investments abroad as deals become vehicle for money leaving China.
China’s ‘Marshall Plan’
WSJ Nov 11, 2014
Xi Jinping bids to take leadership away from the U.S.
Time for the BRICs to become BRICKs?
Brian Caplen (The Banker) Nov 11, 2014
Kazakhstan's economy is closely tied to that of three of the four BRIC economies – Russia, China and India – so is it time to start calling them the BRICKs?
European Companies Aren't Selling Enough Stuff
Mark Gilbert (Bloomberg View) Nov 11, 2014
As Europe's governments debate whether increased austerity or a dash for growth would best resuscitate the economy, it's clear that euro-zone companies aren't achieving anything like the sales growth of their U.S. counterparts.
Ethics and Infrastructure
Yannos Papantoniou (Project Syndicate) Nov 11, 2014
Many high-profile economists now favor revising the eurozone’s fiscal rules to allow for public investment aimed at accelerating economic recovery, arguing that record-low interest rates would make increased capital spending by governments tantamount to the proverbial "free lunch." So why do German officials refuse to get on board?
Europe’s Ukrainian Road to Normality
Erik Berglöf (Project Syndicate) Nov 11, 2014
As Europe celebrates the 25th anniversary of the fall of the Berlin Wall, dark clouds are again descending on the continent. Recalling what prompted the events of 1989, and focusing on the main source of regional tension today, may help Europe find a way out of its current malaise.
The Bonfire of the Subsidies
Kevin Watkins (Project Syndicate) Nov 11, 2014
The number of chances that the world will have to address climate change is dwindling. One of them comes with this week’s G-20 summit in Brisbane, Australia, where leaders of the world’s advanced and major emerging economies can signal serious intent by cutting the fossil-fuel subsidies that fuel global warming.
The Road from the Brisbane G-20 Summit
Various (Brookings) Nov 11, 2014
Regional perspectives on issues that will shape policy debates long after this weekend’s G-20 summit in Brisbane.
World War I: Why the Allies won
Stephen Broadberry (VoxEU) Nov 11, 2014
In the massive circumstances of total war, economic factors play the deciding role. Historians emphasise size in explaining the outcome of WWI, but this column argues that quality mattered as well as quantity. Developed countries mobilised resources in disproportion to their economic size – the level of development acted as a multiplier. With their large peasant sectors, the Central Powers could not maintain agricultural output as wartime mobilisation redirected resources from farming. The resulting urban famine undermined the supply chain behind the war effort.
What caused the Eurozone’s Crisis?
Philippe Martin and Thomas Philippon (VoxEU) Nov 11, 2014
Economists disagree over the origin of the Eurozone Crisis. This column uses a quantitative framework to sort through the various channels and policy impacts. It argues that fiscal and macroprudential policies are complements, not substitutes. Prudent fiscal policy is helpful but cannot by itself undo private leverage booms. Both prudent fiscal policies and macroprudential policies are required to stabilise the economy and make the Eurozone a viable monetary union.
Obama Aims to Lift the Global Economy, and Maybe Himself
Jonathan Weisman (NYT) Nov 12, 2014
Mr. Obama will arrive at an international economic meeting in Australia hoping to press European and Asian leaders to get their economies moving again — and perhaps buoy his own presidency.
Japan actions risk igniting currency war
Diana Choyleva (FT) Nov 12, 2014
Devaluation is becoming a habit in an economy that has lost its edge.
Scandal that taints whole forex market
Philip Augar (FT) Nov 12, 2014
Compliance departments are being properly intrusive
A plan for fixing the next crisis
John Gapper (FT) Nov 12, 2014
In a serious crunch, it would be every bank regulator for itself.
Italy’s Post-it premier hopes reforms stick
James Politi (FT) Nov 12, 2014
A stalling economy could thwart Renzi’s efforts to tackle the decades-old problems that beset the country.
The Wolves of Forex
WSJ Nov 12, 2014
Foul-mouthed traders aren’t the biggest manipulators of currency markets.
A new Berlin Wall
Charles Lane (WP) Nov 12, 2014
Germany’s rigidity threatens to destabilize the world economy.
A stock-market bubble?
Robert J. Samuelson (WP) Nov 12, 2014
If there is one, don’t blame the Fed’s bond-buying program.
Banks Manipulated Foreign Exchange in Ways You Can't Teach
Matt Levine (Bloomberg View) Nov 12, 2014
The way you push an FX fixing up is, you buy a lot at the fixing, or sell a lot, or do neither. One of those should work. Maybe.
Cambodia's debt prompts warning
Vann Vichar (AT) Nov 12, 2014
Cambodian Prime Minister Hun Sen has secured a pledge from China of hundreds of millions of dollars in loans for development programs. An opposition party lawmaker, concerned about rising debt to China, says improved tax collection would be a better alternative.
A Breakthrough for Global Trade?
Bloomberg View Nov 12, 2014
The economic benefits of the China-U.S. trade deal are clear to both countries, and it may also help revive global trade talks.
Put Currency Cheats on Trial
Mark Gilbert (Bloomberg View) Nov 12, 2014
The currency-rigging scandal that saw five banks fined $3.3 billion today has also prompted the Bank of England to dismiss its chief trader in the market.
IMF Governance Reform: Unfinished Business for the 113th Congress
Edwin M. Truman (PIIE) Nov 12, 2014
US senators and representatives return to Washington on November 12 to complete the urgent unfinished business of the 113th Congress. They have a lot unfinished, and very high on that list for both the administration and the Congress should be approval of the 2010 International Monetary Fund (IMF) governance reform package.
Ukraine’s Debt Dilemma
Barry Eichengreen and Domenico Lombardi (Project Syndicate) Nov 12, 2014
Ukraine’s short-term liquidity problems will test its ability to meet its debt obligations, which is both unfortunate and avoidable. Indeed, Ukraine’s struggles highlight the need for an agreed framework to resolve sovereign-debt problems and govern IMF lending.
China’s New World Order
Lee Jong-Wha (Project Syndicate) Nov 12, 2014
After decades of participating in international economic institutions, China is beginning to use its clout to reshape global governance, beginning with the establishment of the Asian Infrastructure Investment Bank. But, given deep mistrust between China, its regional neighbors, and the US, its success is far from guaranteed.
Banking crises and sovereign defaults in emerging markets
Irina Balteanu and Aitor Erce (VoxEU) Nov 12, 2014
The feedback loop between banking crises and sovereign debt crises has been at the heart of recent problems in the Eurozone. This column presents stylised facts on the mechanisms through which banking and sovereign crises combine and become ‘twin’ crises. The results point to systematic differences not only between ‘single’ and ‘twin’ crises, but also between different types of ‘twin’ episodes. The timing of ‘twin’ crises – which crisis comes first – is important for understanding their drivers, transmission channels, and economic consequences.
On the recent slowdown in global trade
Emine Boz, Matthieu Bussière and Clément Marsilli (VoxEU) Nov 12, 2014
The past three years have witnessed a slowdown in global trade. This column shows that the slowdown was particularly pronounced in advanced economies, especially the Eurozone. In a panel of 18 OECD economies, most of the slowdown can be explained by cyclical factors. However, structural factors – global value chains and especially protectionism – may have played a role too.
Contagion in the European sovereign debt crisis
Brent Glover and Seth Richards-Shubik (VoxEU) Nov 12, 2014
Understanding the probability and magnitude of financial contagion is essential for policymaking. This column applies a framework for modelling financial contagion to data on the cross-holding and credit risk of sovereign debt in Europe. Credit markets perceived little risk of contagion from these spillovers following a sovereign default. It is important for policy to assess other possible channels for contagion that could generate even bigger losses.
Penalise banks but use the money well
Gillian Tett (FT) Nov 13, 2014
One lesson from the financial crisis is that opacity has a nasty habit of breeding abuse.
Prepare for the worst on productivity
Martin Wolf (FT) Nov 13, 2014
The poor performance poses challenges to politicians, policy makers and business.
G20 is forum for world economy impotence
Chris Giles (FT) Nov 13, 2014
Flourishes on international diplomacy are tarnished.
Bargain hunting among oil producers
James Mackintosh (FT) Nov 13, 2014
Investors thinking about buying oil shares after their fall should be wary.
Hopes for eurozone bank lending misguided
Erik Nielsen (FT) Nov 13, 2014
Austerity policies have been administered in unprecedented doses.
Regulation: Banks count the risks and rewards
Martin Arnold and Sam Fleming (FT) Nov 13, 2014
Crackdown on money laundering and terrorist funding hits flow of cash to developing world.
Hopes for eurozone bank lending misguided
Erik Nielsen (FT) Nov 13, 2014
Austerity policies have been administered in unprecedented doses.
The Factory to the World Needs a Hand
Thomas Fuller (NYT) Nov 13, 2014
For more than a decade, China and its neighbors have seemingly lived by a tacit agreement: Trade more, play down disputes and enjoy the rising wealth. But wariness and fragility are setting in.
Fostering Growth With Greater Economic Cooperation
Sonia Kolesnikov-Jessop (NYT) Nov 13, 2014
Takehiko Nakao, president of the Asian Development Bank, explains how the Group of 20, which is meeting in Australia this weekend, can bolster economies and fight corruption.
China’s growing clout
Fareed Zakaria (WP) Nov 13, 2014
The nation is trying to redraw the international system in Asia.
The G-20 Doesn't Need a Growth Target
William Pesek (Bloomberg View) Nov 13, 2014
World leaders gathering for the G-20 summit in Brisbane should be focused on improving the quality, not the quantity of GDP growth.
Putin Is the Biggest Gold Bug
Leonid Bershidsky (Bloomberg View) Nov 13, 2014
Russia's central bank is buying more gold than any other as President Vladimir Putin seeks independence from a global financial system dominated by the West.
Mexico’s Growth Problem
Dani Rodrik (Project Syndicate) Nov 13, 2014
When Mexico signed the North American Free Trade Agreement more than 20 years ago, the hope was that the economy would be swept forward by a rising wave of globalization. By many measures, that hope has been amply fulfilled, except where it counts most over the long term: overall productivity and economic growth.
How the G-20 Should End Too-Big-to-Fail
Bloomberg View Nov 13, 2014
Global regulators' approach to ending big bank bailouts is more complicated than it needs to be.
Who Will Pay for China's Bust?
Mark Whitehouse (Bloomberg View) Nov 13, 2014
A Chinese credit bust might affect the global financial system after all.
The Global Trade Disorder: New GTA data
Simon J Evenett (VoxEU) Nov 13, 2014
The retreat to protectionism since the Global Financial Crisis has been more severe than previously imagined. Peak protectionism was believed to have passed in 2009. With evidence from the latest Global Trade Alert report, this column shows that since 2012 protectionist measures by G20 countries have exceeded the 2009 peak – which has also been revised upwards. Despite committing to liberalisation, G20 countries have a substantially worse record of protectionism than the next ten largest trading countries.
Sticky information and expectations of forecasters
Jonas Dovern, Ulrich Fritsche, Prakash Loungani and Natalia Tamirisa (VoxEU) Nov 13, 2014
Forecasts of many macroeconomic variables tend to be serially correlated, which is inconsistent with rational expectations. This column presents new evidence from a two-decade panel of individual forecasts from 36 different nations. While there is evidence of sluggish behaviour in average forecasts, individual forecasts are revised quite often. Sticky information theory might not be an adequate description of the expectations formation of forecasters.
Bankers’ bonuses and performance sensitivity
Matthias Efing, Harald Hau, Patrick Kampkötter and Johannes Steinbrecher (VoxEU) Nov 13, 2014
Bankers’ bonuses are increasingly regulated but we know little about how they affect risk-taking and value-creation. Based on payroll data from 1.2 million bank employee-years in Austria, Germany, and Switzerland, this column finds evidence that bonuses affect both profits and risk-taking. Policy thus needs to strike a balance and acknowledge the limited regulatory capacity to determine optimal incentives. Higher capital requirements and shareholder empowerment might outperform simple bonus regulations.
Is Germany ready to lead?
Anne Applebaum (WP) Nov 14, 2014
In Germany, support for a “greater world role” is higher than it used to be, but still not overwhelming.
The fix is in
Carol Osler (Pieria) Nov 14, 2014
How banks allegedly rigged the $5.3bn foreign exchange market.
China's too-big-to-fail advantage
Brian Caplen (The Banker) Nov 14, 2014
As G20 leaders discuss proposals regarding banks' total loss-absorbing capacity in Brisbane, the advantages held in this regard by China's big state lenders are as stark as ever.
Europe's Sluggish Growth Is a Global Threat
Mohamed A. El-Erian (Bloomberg View) Nov 14, 2014
Today's growth numbers were an improvement, but they still are far too weak.
Europe's Bonds Are Unyielding
Mark Gilbert (Bloomberg View) Nov 14, 2014
Corporate bond yields in Europe are so low that it's hard to see how more cheap cash from the ECB can arouse the region's animal spirits.
The Population Challenge
Bjørn Lomborg (Project Syndicate) Nov 14, 2014
The world is facing two major demographic problems: As the world population swells, fueled by developing countries, developed countries are struggling to cope with shrinking and aging workforces. Fortunately, objective fact-based analysis has enabled economists to identify cost-effective solutions to the global population challenge.
Europe’s Franco-German Dream Team
Kemal Dervis (Project Syndicate) Nov 14, 2014
Europe’s economic struggles are taking their toll, reflected in the hopelessness and extremism that increasingly characterize European politics. A forthcoming reform proposal, produced by the highly respected economists Jean Pisani-Ferry and Henrik Enderlein, could be the first step toward turning the situation around.
Emissions Reduction by the Numbers
Jeffrey Frankel (Project Syndicate) Nov 14, 2014
The US and China have announced a bilateral deal that would cut both countries’ greenhouse-gas emissions significantly over the next 20 years. But how can we determine whether the US and Chinese targets – and those proposed by other countries – are fair?
Hard to Hit Two Targets at Once: The ECB ABS Asset Purchase Programme
Felix Blomenkamp (PIMCO) Nov 14, 2014
We believe that reviving the asset-backed securities (ABS) market is a better near-term goal, and the primary target of the European Central Bank's (ECB) buying programme should be the new issuance market. Sizeable purchases by the ECB in the European ABS market carry the possible risks of crowding out established investors and suppressing interest in this asset class. By not crowding out existing investors while making the asset class more attractive to issuers and investors alike, the ECB has an opportunity to reach its ultimate goal to spur lending.
Bangladesh: Asia's New Energy Superpower?
Jack Detsch (Diplomat) Nov 14, 2014
After a favorable UN settlement in June, Bangladesh stumbled upon a wealth of energy. Will investors buy in?
A safe asset for Eurozone QE: A proposal
Luis Garicano and Lucrezia Reichlin (VoxEU) Nov 14, 2014
The ECB seems to be edging towards QE, but faces a quandary on what to buy. This proposal suggests that the ECB buy ‘Safe Market Bonds’. These would be synthetic bonds formed by the senior tranches of EZ national bonds combined in GDP-weighted proportions. The ECB would merely announce the features of the synthetic bonds it will purchase. The market would create the bonds in response to this announcement, thus avoiding new EZ-level institutions or funds.
Warning Signs From Commodity Prices
NYT Nov 15, 2014
Lower-priced fuels and metals are providing a windfall - and a cause for worry.
High marginal tax rates on the top 1%
Fabian Kindermann and Dirk Krueger (VoxEU) Nov 15, 2014
Optimal tax rates for the rich are a perennial source of controversy. This column argues that high marginal tax rates on the top 1% of earners can make so[CS1] ciety as a whole better off. Not knowing whether they would ever make it into the top 1%, but understanding it is very unlikely, households especially at younger ages would happily accept a life that is somewhat better most of the time and significantly worse in the rare event they rise to the top 1%.
Globalisation and the rise of the robots
Dalia Marin (VoxEU) Nov 15, 2014
Recent advances in artificial intelligence could affect manufacturing and the labour markets in a number of ways. This column explores two of them. First, it finds no confirmation that machines have decreased the cost of labour and brought manufacturing back to rich countries. Second, it argues that machines could replace highly skilled workers rather than increase the demand for their labour. Technology and skills are thus substitutes not complements.
Economics of Germany’s parallel universe
Wolfgang Munchau (FT) Nov 16, 2014
The Council of Economic Experts says nothing about investment. It wants Merkel to be tougher.
Hedge fund rules make financial system fragile
Sebastian Mallaby (FT) Nov 16, 2014
Charging 2 per cent to hold assets when returns are low is wrong.
WTO fails to mask its structural problems
Shawn Donnan (FT) Nov 16, 2014
Members need to discuss reforms that will avoid paralysis.
China’s New Old Financial Capital
WSJ Nov 16, 2014
A stock-exchange deal shows Hong Kong’s advantage over Shanghai.
Mexico’s Rule of Law Crisis
Mary O’Grady (WSJ) Nov 16, 2014
The fate of 43 missing university students and corruption allegations test President Peña Nieto’s pledge to transform the country.
Who’s Afraid of a Little Deflation?
John Cochrane (WSJ) Nov 16, 2014
A sudden drop wouldn’t be good, but a steady annual decline of, say, 2%? Worries about that are overblown.
In India, Growth Breeds Waste
Jerry Pinto (NYT) Nov 17, 2014
Indians are getting dirtier as they get richer, but cleaning up is still someone else's job.
TTIP is about regulatory coherence
Lionel Fontagné and Sébastien Jean (VoxEU) Nov 16, 2014
The TransAtlantic Trade and Investment Partnership (TTIP) has become a full-blown political issue as the two largest economic entities in the world are negotiating a deep integration agreement, going beyond what has been done previously in any agreement except the EU’s Single Market. This column estimates that a phasing-out of tariffs accompanied by a 25% cut in the trade restrictiveness of non-tariff measures would increase trade in goods and services between the two regions by 50%.
Europe cannot afford to dance around debt
Barry Eichengreen (FT) Nov 17, 2014
No country can run huge surpluses without inciting taxpayer revolt.
Smoke and errors – Fed transparency and bank supervision
Tom Braithwaite (FT) Nov 17, 2014
Critics of US central bank suggest more scrutiny is needed.
Don’t fear the dollar’s ‘orderly rise’
Stephanie Flanders (FT) Nov 17, 2014
Major trends tend to linger and the US currency has further headroom.
Capex as a guide for investing
Stephen Foley (FT) Nov 17, 2014
Capital expenditure is a sign of confidence in future growth.
Bonds: anatomy of a market meltdown
Tracy Alloway and Michael MacKenzie (FT) Nov 17, 2014
Fall in Treasury bond yields has left investors asking if world’s safe haven needs shoring up.
America’s bank bailouts worked
Pepper Culpepper (WP) Nov 17, 2014
American voters think that they got a raw deal from the bailout of the financial sector. In fact they did well, thanks to U.S. regulators' ability to bully big U.S. banks into accepting help they didn't want.
International investment in Europe: A canary in the coal mine?
Michael Gestrin (OECD Insight) Nov 17, 2014
A look at whether declines in the EU’s flows of foreign direct investment (FDI) simply reflect a particularly severe FDI cycle or whether there might also be structural factors involved.
Mexico’s Economy Shows Steady Growth Fueled by Key Reforms
IMF Survey Nov 17, 2014
Major reforms in the energy, telecommunications, education, and financial sectors have been designed to unlock potential growth in Mexico.
Japan's Warning to the World
Bloomberg View Nov 17, 2014
The U.S. and Europe must act to avoid a similarly damaging stagnation.
What to Make of the G-20
Mohamed A. El-Erian (Bloomberg View) Nov 17, 2014
The G-20 and other summits cost a lot and produce little. Their benefit? They give cover to bilateral deals, such as the U.S.-China climate pact.
A Brief History of the Wealth Gap
Barry Ritholtz (Bloomberg View) Nov 17, 2014
Wealth, public policy and economic inequality developed along two very different paths in Europe and the U.S.
A Witch Hunt in Finance Won't Create a Safer World
Mark Gilbert (Bloomberg View) Nov 17, 2014
If almost everyone within a financial institution is deemed responsible for risk-taking, then no one really carries the can.
Reforming China’s Commanding Heights
Michael Spence (Project Syndicate) Nov 17, 2014
The problem with China's economy is not the volume of state-owned assets, but their concentration in a few companies and industries, which poses risks to economic performance. So the logical solution is not to privatize, but to diversify the state's holdings over time.
The future of Cocos
Martijn Boermans, Sinziana Petrescu and Razvan Vlahu (VoxEU) Nov 17, 2014
Contingent convertible capital instruments – also known as CoCos – have grown in popularity since the financial crisis. This column suggests that the search for yield and the tightening of capital requirements have resulted in a new wave of Coco issuances. While many of their features and risks remain unclear, Cocos may act as a buffer that makes banks more resilient in times of crisis.
Jonathan Woetzel and Jeongmin Seong (FA) Nov 17, 2014
China's next economic miracle.
Stop Trying to Save the World
Michael Hobbes (New Republic) Nov 17, 2014
Big ideas are destroying international development.
The curse of weak global demand
Martin Wolf (FT) Nov 18, 2014
Feeble economic performance has occurred despite the most aggressive monetary policies.
China’s can-do versus Congress gridlock
Tom Mitchell (FT) Nov 18, 2014
What is wanted is a trade agreement with a dress code, not ‘a tuxedo with flip-flops’.
Beware unpleasant surprise in forecasting
James Mackintosh (FT) Nov 18, 2014
Median long-run rate prediction is down from 4% last December to 3.75%
ECB inflation target lacks credibility
Andrew Balls (FT) Nov 18, 2014
Japan shows costs of acting too late on deflation risk.
Asia Pushes Hard for Clean Energy
Beth Gardiner (NYT) Nov 18, 2014
More than $250 billion a year will pour into renewable energy generation, two-thirds of Asia’s power investment, but the use of fossil fuels is also growing.
Europe Must Pay Heed to Japan's New Slide
Mohamed A. El-Erian (Bloomberg View) Nov 18, 2014
Shinzo Abe's "three arrows" plan loses its aim as the Japanese economy officially sinks into recession.
Islamic State's Currency Is So 7th Century
Stephen Mihm (Bloomberg View) Nov 18, 2014
Breaking out of the “satanic usury-based global economic system” is easier said than done.
Japan Needs to Think Different
William Pesek (Bloomberg View) Nov 18, 2014
Billions in government bond-buying haven't shocked the Japanese economy into life. Here's a better idea: Pay citizens to shop.
The Burden of a Stronger Dollar
Mark Gilbert (Bloomberg View) Nov 18, 2014
As the world wrestles with a faltering economic recovery, the dollar shows that the U.S. is doing more than its fair share.
Creativity, Corporatism, and Crowds
Robert J. Shiller (Project Syndicate) Nov 18, 2014
Ultimately, economic progress depends not on saving and the accumulation of capital, but on creativity. That is why fear of “secular stagnation” in today’s advanced economies has many wondering how creativity can be spurred.
Investing in Happy Endings
Lucy P. Marcus (Project Syndicate) Nov 18, 2014
Public and private investment in the real economy has been under attack since the 2008 financial crisis. In difficult economic times, it may seem logical to cut investments that yield results only in the long term; in fact, it is deeply irrational.
The Next Trade Breakthroughs
Michael J. Boskin (Project Syndicate) Nov 18, 2014
Though the global economy is slowing, three important opportunities for growth from trade liberalization are being neglected. The lesson of the North American Free Trade Agreement (NAFTA), which celebrates its 20th birthday this year, is that such opportunities should not be missed.
What goes up comes down – even China
David Pilling (FT) Nov 19, 2014
Regression to mean could spell trouble for Asian powerhouses.
Japan bond bets: high risk but low cost
James Mackintosh (FT) Nov 19, 2014
If Abenomics works and inflation accelerates, yields should pick up.
Richard Milne (FT) Nov 19, 2014
Swedish experience puts the Riksbank at the fore on crisis-fighting measures.
What the Inequality Warriors Really Want
John H. Cochrane (WSJ) Nov 19, 2014
Confiscating wealth is ultimately about political power. Koch brothers, no. Public-employee unions, yes.
Dial D for Development
Brian Keeley (OECD Insight) Nov 19, 2014
Not much good has come from the Ebola crisis, save this: It has raised awareness of the fact that we already have a weapon in our hands that could help fight such epidemics – our mobile phones.
Piketty, Right or Wrong? The Global Wealth Game
Daniel Stelter (Globalist) Nov 19, 2014
How can it be that wealth grows faster than income for a sustained period of time?
Ukraine: How It Can Combat Corruption
Anders Aslund (PIIE) Nov 19, 2014
Ukraine needs all the international support it can get to fight its imminent financial crisis and internal corruption, and the United States has a major interest in Ukraine's success.
Double Win for the Trade Liberalization in Bali
Cathleen Cimino (PIIE) Nov 19, 2014
Two recent developments have the trade world buzzing and for good reason: the US-China agreement on tariff liberalization as part of the expanded Information Technology Agreement (ITA) and the US-India resolution to the impasse over the Trade Facilitation Agreement (TFA). These two agreements, along with the Trade in Services Agreement (TISA) under negotiation by 22 countries, would be genuine accomplishments for the World Trade Organization (WTO) at a time when the post-Bali trade agenda has stalled, throwing its relevance as a negotiating forum into doubt.
Growth Isn't God in Indonesia
William Pesek (Bloomberg View) Nov 19, 2014
Indonesia's Joko Widodo is laying out an ambitious program not just to create wealth, but to spread it around.
Fed and Markets More Co-Dependent Than Ever
Mohamed A. El-Erian (Bloomberg View) Nov 19, 2014
The central bankers are watching investors' backs, protecting them from economic sore points. In return, the Fed gets a macroeconomic policy.
GDP Counts in War and Peace
Noah Smith (Bloomberg View) Nov 19, 2014
The size of an economy may not capture individual well-being, but it says a lot about a nation's ability to fight and win wars.
Why Japan’s 8% Tax Mauled Economy as Europe Tolerates 20%
Simon Kennedy (Businessweek) Nov 19, 2014
Japanese Prime Minister Shinzo Abe is discovering that haste makes waste.
India’s Economic Hotspots
Anu Madgavkar and Rakesh Mohan (Project Syndicate) Nov 19, 2014
India’s strong overall growth prospects conceal a patchwork of opportunities within states, districts, cities, and even towns. Investors looking for the best returns should consider these lesser-known economic clusters.
Growth, inequality, and social welfare
David Dollar, Tatjana Kleineberg and Aart Kraay (VoxEU) Nov 19, 2014
Concerns about inequality are at the forefront of many policy debates. While inequality has increased in many countries over the past few decades, in others it has decreased. This column uses data from 117 countries over the past four decades to investigate the importance of such changes in inequality, as well as of overall economic growth. Whereas inequality changes in most countries have been small, differences in overall growth performance have been large. Policymakers should therefore be careful not to undermine growth in the quest for greater equality.
What does the market think? A general approach to inferring market expectations from futures prices
Christiane Baumeister and Lutz Kilian (VoxEU) Nov 19, 2014
Futures prices are a potentially valuable source of information about market expectations of asset prices. This column discusses a general approach to recovering this expectation when there is no agreement on the nature of the time-varying risk premium contained in futures prices. The authors illustrate this approach by tackling the long-standing problem of how to recover the market expectation of the price of crude oil.
India’s Modi joins great power game
Philip Stephens (FT) Nov 20, 2014
PM has disappointed at home but been energetic and assertive internationally.
Another day, another eurozone let-down
James Mackintosh (FT) Nov 20, 2014
If anyone is surprised by latest set of disappointing data, they have not been paying.
No need for radical asset mix adjustment
David Rosenberg (FT) Nov 20, 2014
US pullback was a correction, not a harbinger of recession and bear market.
Japan’s stimulus plan is not courageous but foolhardy
William White (FT) Nov 20, 2014
It carries risks that could seriously affect the global economy.
With Bad Economic News for Japan, Abe’s Magic Seems to Evaporate
Martin Fackler (NYT) Nov 20, 2014
Prime Minister Shinzo Abe’s stimulus program faces opposition from a powerful ministry, while some economists say it doesn’t go far enough in restructuring the economy.
How the ‘Reserve’ Dollar Harms America
WSJ Nov 20, 2014
Ending the greenback’s reserve-currency role will raise savings and make U.S. companies more competitive.
America’s inherent advantages
Fareed Zakaria (WP) Nov 20, 2014
Why this country is faring better than many other major world economies.
WTO Talks Begin on US-India Breakthrough
Bridges, Volume 18, Number 39 Nov 20, 2014
Trade negotiators in Geneva are set to meet today to begin WTO consultations aimed at "multilateralising" a US-India deal on farm subsidy rules and advancing the implementation of a separate pact aimed at easing customs procedures, officials have said.
G-20 Leaders Unveil National Growth Strategies, Eyeing US$2 Trillion Boost
Bridges, Volume 18, Number 39 Nov 20, 2014
This past weekend, leaders from the G-20 coalition of major advanced and emerging economies unveiled a collection of "national growth plans" which combined, they say, will yield a 2.1 percent in growth over the group’s GDP above current trajectories by 2018, and a 0.5 percent increase for non-G-20 members.
Green Climate Fund in the Spotlight at G-20 Leaders' Meet
Bridges, Volume 18, Number 39 Nov 20, 2014
US President Barack Obama and Japanese Prime Minister Shinzo Abe on Saturday pledged US$3 billion and US$1.5 billion respectively to a multilateral fund geared towards helping developing economies scale up low-carbon growth models.
Australia, China Finish Trade Talks
Bridges, Volume 18, Number 39 Nov 20, 2014
Australia and China finished their negotiations for a bilateral trade pact on Monday, in a move that has been welcomed as a "historic" achievement by officials from both sides.
Are Russia's Usable Reserves Running Dangerously Low?
Anders Åslund (PIIE) Nov 20, 2014
Russia is heading toward a serious financial squeeze next year, despite the confident statements of President Vladimir Putin. The official figures accounting for Russia's international reserves show a dramatic decline in international reserves, but an examination of the numbers reveals that the situation is far worse than the Kremlin says, raising serious questions about the sustainability of Russian reserves in the future.
What is the social impact of the World Bank’s support to regulatory reform? Don’t ask the Bank
Bretton Woods Project Nov 20, 2014
World Bank Group’s Independent Evaluation Group highlights that the Bank's support to business regulation reforms fails to capture the social impact of regulatory reform.
South Africa: Cry, the Beloved Country
Ellis Mnyandu (Globalist) Nov 20, 2014
What took South Africa from 1994 to 2014 will not take South Africa to 2034.
Will Retirees Bankrupt Brazil?
Mac Margolis (Bloomberg View) Nov 20, 2014
The choice: make changes now, or rob the kids to tend Grandpa.
Japan Should Be More German
William Pesek (Bloomberg View) Nov 20, 2014
Everyone's worried about Europe looking like Japan. In fact, Japan should be aiming to look more like Germany.
The Fed’s Culture War
Mark Roe (Project Syndicate) Nov 20, 2014
At a recent closed-door conference, Federal Reserve Governor Daniel Tarullo and Federal Reserve Bank of New York President William Dudley used their bully pulpit to do something unexpected. Instead of focusing on the banks, the officials discussed the bankers themselves.
Africa’s Latest False Choice
Mahamoud Ali Youssouf (Project Syndicate) Nov 20, 2014
The idea that Africa must choose between two competing blocs – Chinese and the Western – has become a favorite of Western think tanks and journalists, who warn of a new “Great Game,” with foreign powers once again carving up the continent and making off with its riches. But African governments and businesses take a more nuanced view.
Africa’s Failure to Industrialize: Bad Luck or Bad Policy?
John Page (Brookings) Nov 20, 2014
Is Africa’s failure to industrialize over the past 25 years since the first Africa Industrialization Day is due to bad policy or bad luck?
Currency carry trades are not what you think
Rui Cartaxo Mano and Tarek Hassan (VoxEU) Nov 20, 2014
A common view in international finance is that currency trades make money because high-interest-rate currencies tend to appreciate. This column argues that this view is flawed, suggesting that currency risk premia may be much simpler than previously thought. The carry trade has little to do with the appreciation of the currency, but instead exploits persistent differentials in interest rates across countries. It is thus important to understand why some currencies have persistently higher interest rates than others.
Matthew Goodman and Ely Ratner (FA) Nov 20, 2014
And what the United States should do next.
Early Results Are Disappointing in Japan’s Economic Program
Floyd Norris (NYT) Nov 21, 2014
With the nation’s economy again in recession, Japan’s prime minister has called an election for next month.
A game plan for humanity
Bjorn Lomborg (WP) Nov 21, 2014
With too many priorities, the U.N. risks succeeding at none.
What a Ukrainian Financial Meltdown Might Look Like
Anders Åslund (PIIE) Nov 21, 2014
On top of all its other problems, Ukraine is at risk of a financial meltdown. A question remains, however: What form would it take? Presumably it would be reminiscent of the Russian financial crash of August 1998—with default, high inflation, a frozen banking system, falling output, and panic. The three critical factors at play in the country today are shrinking international reserves, a falling exchange rate, and a collapsing banking system.
Why Europe Needs to Put Privatization Back on the Agenda
Wolfgang Schüssel (Globalist) Nov 21, 2014
Privatized firms neither need to accommodate politicians' wishes nor maintain unproductive jobs and factories.
Markets Love Central-Bank Gifts
Mohamed A. El-Erian (Bloomberg View) Nov 21, 2014
Financial markets reacted positively to news that China's central bank would cut interest rates, and with good reason -- at least for the time being.
Give Greece a Chance
Bloomberg View Nov 21, 2014
The sooner Europe's leaders recognize the need to forgive Greece's debt, the better their chances of heading off disaster.
Germany’s Four Neins
Marcel Fratzscher (Project Syndicate) Nov 21, 2014
Germany’s stance toward Europe has become one of refusal and rejection: No to a more active fiscal policy for distressed eurozone countries; no to a European investment agenda to boost demand; no to anything but a domestic budget surplus; and, most ominously, no to the European Central Bank. On all four counts, Germany is wrong.
China’s New Global Leadership
Jeffrey D. Sachs (Project Syndicate) Nov 21, 2014
The biggest economic news of the year came almost without notice: China has overtaken the US as the world’s largest economy. And, while China’s geopolitical status is rising rapidly, alongside its economic might, the US continues to squander its global leadership.
Toward a Robust, Durable Global Financial System
Tim Adams (IIF) Nov 21, 2014
The G20's reform mandate has fostered a transformation in financial services. Today, the industry is far more resilient. But this is not the end of reform efforts. Technical work remains to be completed on important parts of the agenda, as does full implementation
The butterfly defect: How to manage systemic risk
Ian Goldin (VoxEU) Nov 21, 2014
Global hyperconnectivity and increased system integration have led to vast benefits in terms of income, education, innovation and technology. Yet globalisation has also created serious concerns about how local events can so easily cascade over national borders to become crises that affect everyone. This Vox Talk discusses the widening gap between systemic risks and their effective management. Goldin argues that the new dynamics and complexities of globalisation are endemic and will potentially destabilise our societies unless they are addressed immediately and more effectively.
Benchmarking the AQR: A tale of two leverage ratios
Viral Acharya and Sascha Steffen (VoxEU) Nov 21, 2014
The ECB estimated that Eurozone banks would face a capital shortfall of €25 billion in a severe crisis. Earlier work by the authors estimated the shortfall to be 30 times higher. This column argues that this striking divergence can be explained by the ECB’s reliance on static risk-weights.
The economics of secession
Andrés Rodríguez-Pose and Marko Stermšek (VoxEU) Nov 21, 2014
One frequently used argument in favour of secession is that there are economic benefits from independence. However, whether or not this is the case remains largely unexplored. This column addresses this question by examining the economic implications of secession in the case of the former Yugoslavia. The authors find that independence had no favourable economic impact. The way secession was achieved, however, mattered. Whereas secession without real conflict did not leave any noticeable economic impact, violent secession has, by contrast, led to a significant destruction of wealth.
The shared supplier effect: How foreign firms benefit domestic firms
Hiau Looi Kee (VoxEU) Nov 21, 2014
The conventional thinking about foreign direct investment is that it may create jobs but also take away market opportunities from domestic firms. This column suggests another spillover to consider. If foreign firms require higher quality inputs, domestic firms who share suppliers with foreign firms gain access to better local inputs. It then argues that this spillover effect can explain a third of the productivity gains within Bangladeshi firms during 1999-2003.
Immigration: Drain on Resources or Source of Growth?
Globalist Nov 22, 2014
What is the effect of immigration on national budgets? What is the effect on economic growth?
An innovative public sector?
Hannah Kitchen (OECD Insight) Nov 22, 2014
For some of you that might sound like an oxymoron, but leave stereotypes at the door and learn about innovation in the public sector.
The People’s Bank of China: Covert operations
Economist Nov 22, 2014
China’s central bank is wary of easing monetary policy, but that is what the economy needs.
Schumpeter: The tyranny of the long term
Ecoomist Nov 22, 2014
Let’s not get carried away in bashing short-termism.
China’s Monetary-Policy Surprise
Stephen S. Roach (Project Syndicate) Nov 22, 2014
In economic policy, as in most other areas, actions speak louder than words. By cutting its policy benchmark interest rates, the People’s Bank of China has underscored the tactical focus of Chinese government’s stabilization policy: it aims to set a floor of around 7% on GDP growth.
Rethinking China’s state-owned enterprises
Yukon Huang (FT) Nov 23, 2014
For Beijing’s reforms to work, domestic and foreign private interests must play a bigger role.
Radical left is right about Europe’s debt
Wolfgang Münchau (FT) Nov 23, 2014
It is logically inconsistent for the eurozone to enter secular stagnation and not restructure.
We risk turning UK into new eurozone
Alistair Darling (FT) Nov 23, 2014
We must make sure that reform is coherent and we understand its consequences.
Instability risk on rise despite G20 hope
David Riley (FT) Nov 23, 2014
Regulatory-driven reduction in market liquidity is risk for real economy.
Oil markets: A new chapter for Opec?
Anjli Raval and Neil Hume (FT) Nov 23, 2014
After enjoying years of stability, the producers’ cartel is facing a prolonged stretch of lower prices.
What Big Economies Got Right, or Wrong, After Crisis
Jon Hilsenrath (WSJ) Nov 23, 2014
Why the U.S. and U.K. Have Fared Better Than Japan and Europe.
China flexes its muscles at APEC with the revival of FTAAP
Mireya Solís (EAF) Nov 23, 2014
The 2014 APEC leaders’ summit witnessed a string of successes in Chinese trade diplomacy. Key among these successes was the endorsement of China’s signature trade initiative as APEC host: the realisation sooner rather than later of a Free Trade Area of the Asia Pacific (FTAAP).
Why Countries Wage Currency Wars
A. Gary Shilling (Bloomberg View) Nov 23, 2014
The U.S. dollar has been on a tear this year, partly because other economies are deliberately cheapening their currencies to get a leg up.
Matthew Goodman and Ely Ratner (FA) Nov 23, 2014
And what the United States should do next.
China, Russia and the Sinatra doctrine
Gideon Rachman (FT) Nov 24, 2014
Beijing and Moscow are pushing for a reordering of world affairs based on ‘spheres of influence’.
The risk culture makes the difference
Simon Samuels (FT) Nov 24, 2014
The focus on making banks ‘safe’ by holding more capital is unrealistic.
Instability risk on rise despite G20 hope
David Riley (FT) Nov 24, 2014
Regulatory-driven reduction in market liquidity is risk for real economy.
Rise of bond funds holds liquidity puzzle
Tracy Alloway (FT) Nov 24, 2014
Even with global mutual bond fund assets at $7.3tn, problems persist in the market.
ECB in quandary on asset purchase schemes
James Mackintosh (FT) Nov 24, 2014
Buying gold might be ECB’s most politically acceptable form of large-scale quantitative easing.
American bulls in charge
John Authers (FT) Nov 24, 2014
Prospect of higher rates has not deterred US equity investors but there are signs of complacency.
The Unsettling Mystery of Productivity
Alan Blinder (WSJ) Nov 24, 2014
Since 2010 U.S. productivity has grown at a miserable rate. And no one, not even the Fed, seems to understand why.
The Pacific Alliance and Mercosur: Narrowing the Gap?
Barbara Kotschwar (PIIE) Nov 24, 2014
On November 24, 2014, Chile's president, Michele Bachelet, will host a meeting between the Pacific Alliance and Mercosur trading blocs. The aim of the meeting is to explore ways to increase trade ties between the blocs.
China's Property Market Set for Correction, Not Collapse
Kent Troutman (PIIE) Nov 24, 2014
The real estate sector in China has been called the most important in the world. It accounts for over 16 percent of China's GDP and is the largest source of marginal global demand for commodities. To put it in context, investment in Chinese residential real estate in 2013 was nearly equal to the combined total economic output of Hong Kong, Singapore, and Taiwan.
The digital structural change in the financial sector
Thomas-Frank Dapp (DB Research) Nov 24, 2014
The forces driving digital structural change are complex, and “predatory competition” is certainly an inadequate description of all the effects it is having on established sectors and structures in their entirety. That is why other aspects are making a fundamental contribution to the change. These include the exponentially rising volume of data, the penetration of web-based devices, popular familiarity with the internet, network effects and economies of scale, broadband expansion, the potential for automation and standardisation, the readiness to adapt and the flexibility of established providers, changes in demand and consumption patterns as well as stricter regulatory measures.
Commodity Exporters Like Cheaper Currencies
A. Gary Shilling (Bloomberg View) Nov 24, 2014
Major commodity exporters are deliberately pushing down their currencies as commodity prices drop and economic growth stalls.
Slow Train to Shanghai
William Pesek (Bloomberg View) Nov 24, 2014
Why aren't foreign investors barreling into the Shanghai stock market? Let us count the reasons.
Stimulus With Chinese Characteristics
Bloomberg View Nov 24, 2014
China's central bank startled investors last week with an unexpected cut in its benchmark interest rates. The move, modest as it was, confirms that China's policy makers are willing to innovate, albeit cautiously.
The Oil Price Crash: Who Dunnit?
Kenneth Courtis (Globalist) Nov 24, 2014
Observations on the latest Saudi-American geo-strategic drone.
The Federal Reserve’s Escape from New York
Simon Johnson (Project Syndicate) Nov 24, 2014
The US Federal Reserve System is the world’s most important central bank, issuing decisions that reverberate through global markets and affect millions of lives. Yet its governance structure is of another age – antiquated, increasingly problematic, and urgently in need of sensible reform.
Europe’s German Ball and Chain
Daniel Gros (Project Syndicate) Nov 24, 2014
In 2012, when a financial storm engulfed the eurozone, it was Germany that kept the European ship off the shoals of financial disaster. But Europe's anchor has become a brake, hindering forward movement.
Why Summits Matter
Gareth Evans (Project Syndicate) Nov 24, 2014
It is easy to be skeptical about the kind of meetings that a small army of global and regional leaders swept through this month. But November's three summits – the APEC summit in Beijing, the East Asian Summit in Naypyidaw, and the G-20 meeting in Brisbane – should have the skeptics eating their words.
Sustainable Development Economics
Jeffrey D. Sachs (Project Syndicate) Nov 24, 2014
Free-market and Keynesian approaches dominate today’s economic debates. Yet neither approach is delivering good results, underscoring the need for a new Sustainable Development Economics, with governments promoting new types of investments.
Monetary Policy When the Spyglass Is Smudged
Early Elias, Helen Irvin, and Òscar Jordá (FRBSF) Nov 24, 2014
An accurate measure of economic slack is key to properly calibrating monetary policy. Two traditional gauges of slack have become harder to interpret since the Great Recession: the gap between output and its potential level, and the deviation of the unemployment rate from its natural rate. As a consequence, conventional policy rules based on these measures of slack generate wide-ranging policy rate recommendations. This variability highlights one of the challenges policymakers currently face.
Radical cures for unusual economic ills
Martin Wolf (FT) Nov 25, 2014
The crisis left a grim legacy, and the answers are likely to be
Capitalists sold the mills and bought the future
John Kay (FT) Nov 25, 2014
If capital is indeed back as Piketty says, it is in a different way.
Cheap crude can oil the wheels of reform
Michael Levi (FT) Nov 25, 2014
Market volatility creates opportunities for smart policy.
No point betting against a strong dollar
John Plender (FT) Nov 25, 2014
Look to US Treasuries instead for a contrarian opportunity.
Fed’s game of pretend must end soon
Tad Rivelle (FT) Nov 25, 2014
Rate rise delay will make inevitable deleveraging more painful.
In Moscow, a Financial District in Name Only
Andrew E. Kramer (NYT) Nov 25, 2014
Moscow City was envisioned as a hub of emerging market finance, but Russia's recent sanctions and economic troubles have kept buildings largely empty.
A Golden Opportunity for Switzerland
Thorsten Polleit (Mises Daily) Nov 25, 2014
The referendum on the Swiss Gold Initiative will take place on November 30. If the Swiss put the Initiative into practice, the world will realize that there are alternatives to today’s unbacked paper money madness. In that sense, a successful Initiative could be a game changer for the better, for Switzerland and also for many other countries in this world.
Japan Vs. China: Oil and a Tale of Two Countries
Kenneth Courtis (Globalist) Nov 25, 2014
How the oil price drop has very different effects on China and Japan.
The Tortoise and the ECB
Harley Bassman (PIMCO) Nov 25, 2014
It is curious that the ECB continues to slumber while the eurozone's trading partners move steadily ahead. While not a certainty, it seems highly unlikely that the ECB will indefinitely allow its main trading partners to competitively devalue versus the euro. And since there is no reason to reinvent the wheel, Europe's policymakers will likely unveil a familiar-looking and expansive QE policy designed to accelerate asset velocity and, in turn, reflate their equity market. A sharp poke of QE "infinity" was enough to send the S&P up 45% through November 17. Similarly in Japan, the Abenomics version of QE "infinity" has sent the NKY up 70%. Run, rabbit, run.
Japan Is Running Out of Options
William Pesek (Bloomberg View) Nov 25, 2014
Dissent within the Bank of Japan is growing. That means more volatility ahead.
U.S. (Mostly) Wins With Strong Dollar
A. Gary Shilling (Bloomberg View) Nov 25, 2014
The dollar is stronger against the euro, yen and many other currencies, and it could remain so for a long time. This is mostly good news for the U.S. economy.
Inequality and the Internet
J. Bradford DeLong (Project Syndicate) Nov 25, 2014
Today, nearly every resident of a developed country can easily afford a smartphone, thereby gaining inexpensive access to a universe of human knowledge that, until a generation ago, only the richest could afford. Is it possible that conventional measures of inequality and income vastly underestimate just how good we have it?
Education in the Second Machine Age
Dalia Marin (Project Syndicate) Nov 25, 2014
Until the 1980s, about 70% of income went to labor income and 30% to capital income. But, since then, the share of income going to labor has declined in all rich countries, and research indicates that half of this decline is the result of cheaper information technology – allowing firms to replace workers with computers.
Something to Smile About
Chris Patten (Project Syndicate) Nov 25, 2014
P.J. O’Rourke had a point when he argued that the best thing about living in the twenty-first century, rather than in some “golden age” of the past, is modern dentistry. At a time when the world is plagued by conflict and tragedy, healthy teeth are a reminder, however mundane, of economic progress and human happiness.
Productivity, pricing power, and exports
Atsuyuki Kato (VoxEU) Nov 25, 2014
A large literature shows the importance of firm heterogeneity in determining trade patterns. This column discusses policy implementation issues related to the ‘new new trade theory’. The nature of an export good – be it consumption or production oriented – influences the importance of firm productivity in the export decision. The relationship between productivity and markups also varies across industries; pro-export policies must take account of this, lest they exacerbate distortion.
Labour shares, inequality, and the relative price of capital
Loukas Karabarbounis and Brent Neiman (VoxEU) Nov 25, 2014
The share of compensation to labour in gross value added has declined in recent decades for most countries and industries around the world. Recent work has also used the share of compensation to labour in net value added as a proxy for inequality. This column discusses that gross and net labour shares have declined together for most countries since 1975 – an outcome consistent with the worldwide decline in the relative price of investment goods.
Cheap energy is the new cheap labour
John Gapper (FT) Nov 26, 2014
For companies wondering where to locate, the world has turned upside down.
Post-crisis, the nation state strikes back
Mark Mazower (FT) Nov 26, 2014
Putin’s muscle-flexing shows the role of states in matters of war and peace.
Singapore tests its success
Jeremy Grant (FT) Nov 26, 2014
Party founded by Lee Kuan Yew is seeking to keep the economic miracle alive but faces challenges.
Levine on Wall Street: Harbingers and Currencies
Matt Levine (Bloomberg View) Nov 26, 2014
Also some M&A law, some prepaid variable share forwards, and the one (former) member of the Cohen family who still manages outside money.
Even Bond Investors Don't Like a Bully
William Pesek (Bloomberg View) Nov 26, 2014
If China wants to attract international bond investors, it'll make to make nice with its neighbors.
The Two Colombias
Andrés Velasco (Project Syndicate) Nov 26, 2014
There are two Colombias: one of rapid economic growth and innovative social policies, and another of guerrilla warfare, poverty, and human-rights violations. The good news is that the modern Colombia, characterized by peace and progress, is winning.
Abe’s Safe Bet
Yuriko Koike (Project Syndicate) Nov 26, 2014
Observers worldwide are scratching their heads at Japanese Prime Minister Shinzo Abe’s decision to risk his extensive reform agenda by calling a snap general election two years early. But, while Abe may be known for his boldness, he is no reckless gambler; he knows that he needs a strong mandate to achieve his reform goals.
The Geopolitical Impact of Cheap Oil
Martin Feldstein (Project Syndicate) Nov 26, 2014
If the price of oil, which has fallen more than 25% in the past five months, remains at its current level, it will have important implications for many countries around the world, some good and some bad. If it falls further, as seems likely, the geopolitical consequences could be dramatic.
Social Choice and Social Welfare
Amartya Sen (Project Syndicate) Nov 26, 2014
Human beings have always lived in groups, and their individual lives have invariably depended on group decisions. But, given the daunting challenges of group choice, owing to the divergent interests and concerns of the group’s members, how should collective decision-making be carried out?
World shocks and the UK economy
Shiv Chowla, Lucia Quaglietti and Lukasz Rachel (VoxEU) Nov 26, 2014
The importance of world shocks for the UK economy has been demonstrated by the events since 2007. This column suggests that world shocks are likely to have driven around two-thirds of the shortfall in output since 2007. Trade linkages are an important channel for the transmission of world shocks to the UK, but financial linkages and spillovers through uncertainty are likely to account for the majority of the impact.
The role of bank guarantees in international trade
Tim Schmidt-Eisenlohr and Friederike Niepmann (VoxEU) Nov 26, 2014
To reduce the risk of international commerce banks offer specific trade finance products, the most prominent being letters of credit. This column employs US banking data to show that reductions in the supply of such trade finance have considerable effects on the levels and patterns of exports, especially to small and poor countries and during times of financial distress.
Central banks not equals in investor love
Ralph Atkins (FT) Nov 27, 2014
QE by ECB and BoJ may not win heart of financial markets.
Dangerous sparks in the parched bond market
Gillian Tett (FT) Nov 27, 2014
Liquidity risk prompts a push for transparency and electronic trading.
Europe Inc: Light amid the gloom
Sarah Gordon (FT) Nov 27, 2014
Lower energy costs and a fall in the euro have given a reason to be optimistic, and deal making is picking up.
WTO Members Sign off on Food Stocks, Trade Facilitation Decisions
Bridges, Volume 18, Number 40 Nov 27, 2014
WTO members signed off on Thursday on a set of decisions that together resolve a months-long impasse over the implementation of the "Bali Package," which was agreed last December. The news, officials say, could also help re-energise talks at the global trade club, which have languished in the wake of the deadlock.
Whatever happened to the Brics economies?
Andrew Walker (BBC) Nov 27, 2014
Remember the Brics - Brazil, Russia, India, China and South Africa, the nations that were set to reshape the world economy?
Reports of Thailand's Revival Are Greatly Exaggerated
Bloomberg View Nov 27, 2014
Signs of an economic rebound in Thailand don't resolve the deep structural problems that continue to afflict its politics and economy.
India's Two-Speed Economy
Dhiraj Nayyar (Bloomberg View) Nov 27, 2014
A third of India's population is racing far ahead of the rest, posing risks to the country's unity and stability.
The Next Phase of China’s Financial Deepening
Andrew Sheng and Xia Geng (Project Syndicate) Nov 27, 2014
Financial deepening in China is not simply a matter of reducing financial repression. In order to enable the corporate sector to manage the transition to a modern knowledge-based economy, China must also rebalance the financial system by carrying out a shift from bank and short-term funding toward equity and long-term bonds.
Global Solutions for Globalization’s Problems
Ian Goldin (Project Syndicate) Nov 27, 2014
The world has simultaneously benefited from globalization and failed to manage the inherent complications resulting from the increased integration of our societies, our economies, and the infrastructure of modern life. As a result, we have become dangerously exposed to systemic risks that transcend borders.
The Olympic Games and Asia’s Rise
Susan Brownell (YaleGlobal) Nov 27, 2014
More Olympics games are hosted by cities beyond the West, and multinationals appreciate the expanded reach
Causes of the G7 fixed investment doldrums
Kristina Morkunaite and Felix Huefner (VoxEU) Nov 27, 2014
The post-Crisis G7 economies have suffered weak business investment despite record low interest rates and the favourable financial positions of corporates. Some consider this the ‘new normal’ arising from secular, supply-side forces that have contributed to declining potential growth rates. This column argues that structural factors alone are not sufficient to explain the current weakness in investment rates. There is thus room for positive surprise if companies realise the pent-up investment demand.
Free Fall in Oil Price Underscores Shift Away From OPEC
Clifford Krauss (NYT) Nov 28, 2014
The inability or unwillingness of OPEC to curb production showed that it was no longer the dominating force behind global fuel supplies and prices.
Global Weakness, America’s Problem
NYT Nov 28, 2014
The United States is not immune to the economic malaise abroad.
Oil Prices Are Plunging. Here’s Who Wins and Who Loses.
Neil Irwin (NYT) Nov 28, 2014
OPEC’s decision not to cut back production helps drivers and airline passengers, and will have ripple effects throughout the world economy.
Europe’s Plea to Be Forgotten
Holman Jenkins (WSJ) Nov 28, 2014
Germany and France are the world’s No. 4 and 5 economies. Name a web success created by either.
Dag Detter and Stefan Fölster (FA) Nov 28, 2014
How countries can capitalize on public wealth.
Is Europe Too Rigid to Survive?
Mark Buchanan (Bloomberg View) Nov 28, 2014
Too many Europeans feel that integration is being forced upon them. They may be right.
Liquidity and foreign asset management challenges for Latin American countries
Joshua Aizenman and Daniel Riera-Crichton (VoxEU) Nov 28, 2014
The growing importance of sovereign wealth funds and the diffusion of inflation targeting have impacted the adjustment of Latin American Countries to terms of trade and financial shocks. This column shows that sovereign welfare funds provide another margin of stabilisation. This role is of greater relevance for inflation targeting countries and during periods of heightened volatility. Inflation targeting regimes relegate the goal of real exchange rate stabilisation and counter-cyclical fiscal policy to its sovereign wealth fund via a fiscal rule.
Development and foreign aid: A historical perspective
Sebastian Edwards (VoxEU) Nov 28, 2014
The effectiveness of official development aid is the subject of heated debate. This column argues that aid affects recipient economies in extremely complex ways and through multiple and changing channels. Moreover, this is a two-way relationship – realities in recipient countries affect the actions of aid agencies. This relationship is so intricate and time-dependent that it is not amenable to being captured by cross-country or panel regressions. Even sophisticated specifications with multiple breakpoints and nonlinearities are unlikely to explain the inner workings of the aid–performance connection.
Ukraine: Coalition Agreement and Looming Financial Crisis
Daron Acemoglu, Anders Åslund, Oleh Havrylyshyn, and Basil Kalymon (PIIE/Kyiv Post) Nov 29, 2014
The coalition agreement signed on November 21 by the five participating political parties is an essential step toward the creation of a new government for Ukraine that could undertake the reforms that are so critically needed.
Where others fear to tread
Economist Nov 29, 2014
The controversial strategy of a bargain-hunting bond trader.
Make in India! But Can India Make It?
Jean-Pierre Lehmann (Globalist) Nov 29, 2014
If India persists in chaotic governance and social injustice, it is not just India that will suffer.
Good for the rich, bad for the poor
Branko Milanovic and Roy van der Weide (VoxEU) Nov 29, 2014
A breakthrough in understanding the link between growth and inequality came from ‘unpacking’ inequality – looking at inequality measures for different segments of the population rather than just an aggregate measure. This column presents novel research that also ‘unpacks’ growth, investigating the impact of inequality on growth for different groups across the income distribution. Inequality toward the lower end of the distribution hinders growth for the poor, but not for the rich.
Juncker fund will not revive the eurozone
Wolfgang Munchau (FT) Nov 30, 2014
I have no problems with structural finance if applied to a social purpose. My objections are practical.
Oil will test Putin’s resource nationalism
Kirill Rogov (FT) Nov 30, 2014
A transition to totalitarian rule depends on an economy that is not deteriorating too quickly.
The Pope is wrong about Europe
Richard Vinen (FT) Nov 30, 2014
The very success of the continent accounts for a feeling of political drift.
A fear of a deflationary spiral for China
Josh Noble and Gabriel Wildau (FT) Nov 30, 2014
Falling prices for manufacturers plagued by overcapacity present a problem for Beijing’s policy makers.
Being Bad Europeans
Paul Krugman (NYT) Nov 30, 2014
Whose irresponsible behavior is at the core of the region's slow-motion disaster?
The Global Shakeout From Plunging Oil
Daniel Yergin (WSJ) Nov 30, 2014
New supply—rather than demand—is dominating the market, and OPEC has been caught by surprise.
Echoes from the 1920s
Robert J. Samuelson (WP) Nov 30, 2014
Could we be undermining our recoveries?
Private not state firms are China’s growth engine
Nicholas R. Lardy (PIIE/EAF) Nov 30, 2014
Virtually every dimension of China’s economic success over the past three-and-a-half decades can be attributed largely to the rise of markets and private businesses.
ECB Should Fire Up Its Helicopters
Clive Crook (Bloomberg View) Nov 30, 2014
Deflation in the euro area is a clear and present danger. More aggressive QE is needed, the sooner the better.
India's Climate Change Opportunity
Bloomberg View Nov 30, 2014
India should consider this week's climate talks in Lima a chance to set itself on a healthier path for economic growth.
The Rising Costs of US Income Inequality
Laura Tyson (Project Syndicate) Nov 30, 2014
Although the economic costs of income inequality are substantial, the political costs may prove to be the most damaging and dangerous. Indeed, in the US, income inequality has risen to levels that threaten not only the economy’s growth, but also the health of its democracy.
A European Plan for France and Germany
Henrik Enderlein and Jean Pisani-Ferry (Project Syndicate) Nov 30, 2014
With European growth barely visible, and dangerously low inflation causing real interest rates to rise, the weight of public and private debt has grown very heavy, and another lost decade may be at hand. France and Germany – which largely drove European integration for more than six decades – must not resign themselves to this fate.
Good governance and wellbeing
John Helliwell, Haifang Huang, Shawn Grover and Shun Wang (VoxEU) Nov 30, 2014
Evaluations of wellbeing complement and encompass established measures of economic progress. This column presents findings on the way governance affects wellbeing. The results indicate that people are more satisfied with their lives in countries with better governance quality. Confidence and trust in public institutions play an important role in this finding. Additional benefits to wellbeing arise when nations are able to better weather economic and other crises.