News & Commentary:

January 2014 Archives


2014 outlook: Sugar high Financial Times Subscription Required
Tracy Alloway and Michael Mackenzie (FT) Jan 1, 2014
While many see the resurgent demand for riskier loans and bonds as an effect of a nascent US recovery, ‘credit Cassandras’ say it is a sign of frothy markets.

Central bankers must embrace glasnost Financial Times Subscription Required
Julian Callow (FT) Jan 1, 2014
Forward guidance seems likely to stay a core part of central banks’ tool kits; it is seen as an extension of effective communication, contributing to reduced uncertainty.

How South Korea Rides Out Emerging-Markets Turmoil
A. Gary Shilling (Bloomberg) Jan 1, 2014
South Korea is one of the few emerging markets to weather the recent storms. This stability is the legacy of 60 years of forced industrialization imposed by authoritarian governments and tightly controlled monetary and fiscal policies.

The Global Economy in 2014: An Uneven Recovery
Uri Dadush (Globalist) Jan 1, 2014
The global economy should improve in 2014 — but not everybody will be a winner.

The Aid Debate Is Over Recommended!
William Easterly (Reason) Jan 1, 2014
The failure of Jeffrey Sachs' Millennium Villages.

What could happen in China in 2014? Recommended!
Gordon Orr (McKinsey) Jan 1, 2014
The year ahead could see companies focus on driving productivity, CIOs becoming a hot commodity, shopping malls going bankrupt, and European soccer clubs finally investing in Chinese ones.

The Shape of Things to Come: Hot Markets to Watch Foreign Affairs Subscription Required
Gideon Rose and Jonathan Tepperman (FA) Jan 1, 2014
The U.S. economy is grinding along, China is slowing, and Europe is stagnant. But the good news in the global economy is that a whole new crop of green shoots is springing up.

The Ever-Emerging Markets Foreign Affairs Subscription Required
Ruchir Sharma (FA) Jan 1, 2014
Why economic forecasts fail.

Cotton, the Social Fabric
Giorgio Riello (History Today) Jan 1, 2014
Cotton textiles have played a major role in the evolution of global economies.

The Challenge of a Lifetime Adobe Acrobat Required
John H. Makin (TIE) Jan 1, 2014
The new Fed Chair will surely have her hands full.

Is Regulation, or the Lack Thereof, Risking a Second Great Financial Crisis? Adobe Acrobat Required
Various (TIE) Jan 1, 2014
Is the lack of effective financial market regulation exposing the United States and the world to a second crisis? Or does the threat of the Volcker Rule and the overall uncertainty of U.S. financial market regulation have the potential to dramatically reduce market liquidity?

Europe must rebuild faith in democracy Financial Times Subscription Required
Tony Barber (FT) Jan 2, 2014
Underlying everything is voters’ frustration that they exert less influence than ever over the decisions of elites at home and in Brussels.

2014 outlook: Market melt-up
John Authers (FT) Jan 2, 2014
American stocks may be overpriced and profit margins at a record high but even bears believe that the rally still has room to run.

Joining the New Trade Club
NYT Jan 2, 2014
Three Asian nations seek help in modernizing their economies.

Attacking the New Normal of Secular Stagnation
George R. Tyler (Globalist) Jan 2, 2014
Instead of accepting secular stagnation, the United States must boost the minimum wage like its peers.

China’s Runaway Train Is Running Out of Track
Patrick Chovanec (Bloomberg) Jan 2, 2014
China's runaway train is running out of track. Bad debt key to understanding why Beijing has too much money, yet not enough.

South Korea’s Realignment to Consumer-Led Growth
A. Gary Shilling (Bloomberg) Jan 2, 2014
After the 1997-1998 Asian financial crisis, South Korean leaders realized the country’s heavy dependence on exports made it vulnerable to international shocks. To spur domestic spending, the government granted tax breaks to credit-card users.

If You Think Innovation Is Dead, Meet the Hydra
Mark Buchanan (Bloomberg) Jan 2, 2014
Is the process of discovery hitting a dead end? Are there ever fewer paradigm-shifting revelations to be had? These questions speak more to the poverty of our imagination than to our grasp of reality.

Sympathy for the Migrant
Kofi A. Annan (Project Syndicate) Jan 2, 2014
Wealthy states and regions face the dilemma of designing border controls that reflect not only the needs and demands of their populations, but also their responsibility to those seeking to enter their territory. But states that tighten their borders merely encourage desperate people to take greater risks to cross them.

Free Trade Forever
Richard S. Grossman (Project Syndicate) Jan 2, 2014
Representatives from the WTO’s 159 member countries recently agreed on the first multilateral trade deal in nearly two decades. While the Trade Facilitation Agreement did not address the most pressing issues, it remains an important milestone, as it reflects a broader trend toward global trade liberalization.

The World Economy’s Shifting Challenges
George Soros (Project Syndicate) Jan 2, 2014
As 2013 comes to a close, efforts to revive growth in the world’s most influential economies are exerting competing pressures on the global economy. Perhaps not surprisingly, while Europe and the US will continue to play an important global role, developments in Asia will determine the worldwide outlook in 2014 and beyond.

An economic theory model for amending the Treaty of Lisbon
Kaushik Basu & Joseph Stiglitz (VoxEU) Jan 2, 2014
The Eurozone crisis exposed weaknesses in the Eurozone’s design. This column – by Nobelist Joe Stiglitz and World Bank Chief Economist Kaushik Basu – argues that the Eurozone’s financial architecture can be improved by amending the Treaty of Lisbon to permit appropriately structured cross-country liability for sovereign debt incurred by EZ members.

Don't Worry, Germany: Export All the BMWs You Want!
Uwe Bott (Globalist) Jan 3, 2014
A pathway to reducing Germany’s current account surplus.

The Bewildered Kingdom
Mai Yamani (Project Syndicate) Jan 3, 2014
To the relief of the Saudi royals, the Arab Spring did not lead to the creation of functioning democracies in Tunisia, Egypt, Yemen, Bahrain, Libya, or Syria. Still, these countries' popular uprisings did fundamentally undermine the pillars of the old regional system with which the Kingdom was so comfortable.

The Pope Is Right: Inequality Is Unjust
Christopher Robichaud (Bloomberg) Jan 3, 2014
Lant Pritchett, a colleague of mine at the Harvard Kennedy School, recently took the pope to task in a column for Bloomberg View. He said that the pope’s preoccupation with inequality promotes the sin of envy and that inequality, in itself, is of no great account: “Poverty matters; injustice matters. Mere inequality is beside the point.”

Why optimism may be bad news Economist Subscription Required
Economist Jan 4, 2014
Good news about global growth risks pushing interest rates up and politicians' appetite for reform down.

Is China's Progress Inexorable?
Cesar Chelala (Globalist) Jan 4, 2014
Will the health consequences of modernization end the giant strides of the Chinese dragon?

Allowing governments to limit successors’ debt
Hans Gersbach (VoxEU) Jan 4, 2014
Democratic governments tend to accumulate excessive debt. This column proposes a new rule – the ‘Catenarian Fiscal Discipline’ – which allows a fiscally disciplined incumbent to limit the debt-making of the next officeholder. This way, fiscal discipline today can lead to fiscal discipline in the future. Such a rule would require that we broaden our notion of representative democracy by recognising the fact that a current government already has various implicit ways of limiting what its elected successors can do.

Stick With South Korea in 2014
A. Gary Shilling (Bloomberg) Jan 5, 2014
Consider what would happen if the totalitarian regime in North Korea collapsed and that vastly underdeveloped country of 25 million was absorbed by South Korea, with its 50 million highly motivated and industrious citizens.

US must avoid secular stagnation Financial Times Subscription Required
Lawrence Summers (FT) Jan 5, 2014
We must end the disastrous trend towards ever less government spending and take this chance to renew and build up our infrastructure.

What 2014 holds for euro crisis watchers Financial Times Subscription Required
Wolfgang Munchau (FT) Jan 5, 2014
This is the year when the emphasis shifts from the policy choices of eurozone leaders to their consequences and what they mean for people.

Obama challenge on selling trade deals to resurgent left Financial Times Subscription Required
James Politi (FT) Jan 5, 2014
President must persuade labour, environmental and consumer groups that trade deals benefit workers as well as multinationals.

Shale boom leaves investors underwhelmed Financial Times Subscription Required
Ed Crooks (FT) Jan 5, 2014
Refinements that made revolution possible have delivered more benefits to consumers than to producers or shareholders.

Should Investors Love the Dollar? Wall Street Journal Subscription Required
WSJ Jan 5, 2014
Snow buries New York, parts of Canada are colder than Mars and global manufacturing heats up.

Nafta at 20: A Model for Trade Policy
Mary O'Grady (WSJ) Jan 6, 2014
Opponents of the 1993 agreement have been proven definitively wrong.

The Fear of “L”
Kaushik Basu (Project Syndicate) Jan 5, 2014
For the last few years, economists have been running through the alphabet to describe the shape of the long-awaited recovery – starting with an optimistic V, proceeding to a more downbeat U, and ending up at a despairing W. But now a deeper anxiety is beginning to stalk the profession: the fear of an L-shaped non-recovery.

The Emerging World’s Vaccine Pioneers
Bill Gates (Project Syndicate) Jan 5, 2014
One of the most exciting – and often overlooked – developments in the global push to immunize all children is the growing role of emerging-country vaccine suppliers. Countries like Brazil, China, and India are using their experience and technical capacity to help other countries replicate their own progress in preventing disease.

The Great Malaise Drags On
Joseph E. Stiglitz (Project Syndicate) Jan 5, 2014
Maybe the global economy will perform a little better in 2014 than it did in 2013, or maybe not. Seen in the broader context of the continuing Great Malaise, both years will come to be regarded as a time of wasted opportunities.

Why current accounts fell post-crisis
Joshua Aizenman, Yothin Jinjarak & Nancy P. Marion (VoxEU) Jan 5, 2014
Before the financial crisis, the world economy was characterised by large and growing current account imbalances. Since the onset of the crisis, the current account imbalances of the US and China have decreased to half their pre-crisis levels. This column highlights the implications of the reduction in the current account surplus for China, and gives policy recommendations. A restructuring of the economy is needed, and reversing of policies that depress consumption and prevent real appreciation.

Capital flows: Powered down Financial Times Subscription Required
Ralph Atkins and Keith Fray (FT) Jan 6, 2014
Cross-border funding relative to economic output is far below its 2007 peak, but with uncertain effects about which economists are divided.

Markets can shore up the global economy Financial Times Subscription Required
Henri de Castries and Eric Chaney (FT) Jan 6, 2014
To avoid a chaotic transition, the eurozone and China must do their homework; the US should stay on track and help preserve a sustainable order.

A New Year, Another Too Rosy Euro Forecast Wall Street Journal Subscription Required
Desmond Lachman (WSJ) Jan 6, 2014
Unemployment in the EU will remain stuck at close to 12% until the end of 2015.

Europe’s Prospects Looked Better in 1930s
Nicholas Crafts (Bloomberg) Jan 6, 2014
Recent growth in the euro area has tracked the experience of much of Europe in the 1930s all too closely. Unless policies change, this stagnation is likely to persist. In some ways, the euro area’s prospects are more challenging than the parallel with the Great Depression suggests. If only things were as bad as in the 1930s -- how’s that for a thought to put matters in perspective?

Japan’s Coming “Wage Surprise”
Shinzo Abe (Project Syndicate) Jan 6, 2014
The year 2013 saw the Japanese economy turn the corner on two decades of stagnation. And the future will become even brighter, owing to an emerging consensus that long-term recovery cannot be achieved without a concerted effort to increase workers' wages and bonuses.

Europe’s Lessons for China’s Reformers
Daniel Gros (Project Syndicate) Jan 6, 2014
While China’s opening to the outside world has enabled it to achieve astonishing economic progress over the last three decades, the country might now have reached a level of income at which the problem is no longer “too little market.” On the contrary, some of China’s key problems today require more government intervention.

Foreign-Aid Follies
Kenneth Rogoff (Project Syndicate) Jan 6, 2014
The huge gap between the world’s richest and poorest countries remains one of the great moral dilemmas for the West. It also poses one of the toughest questions for development economics: Do we really know how to help countries overcome poverty?

The Global Economy in 2014
Klaus Schwab (Project Syndicate) Jan 6, 2014
At the dawn of a new year, the world is in the midst of several epic transitions. Economic growth patterns, the geopolitical landscape, the social contract that binds people together, and our planet’s ecosystem are all undergoing radical, simultaneous transformations, generating anxiety and, in many places, turmoil.

China’s Three Challenges in 2014
Minxin Pei (Project Syndicate) Jan 6, 2014
We will soon find out whether Chinese President Xi Jinping’s politically conservative course is intended to facilitate his pro-market economic reforms. Having spent 2013 formulating his agenda, this year Xi will have to demonstrate that he is as capable of applying power as he is at accumulating it.

The return of dynastic wealth Financial Times Subscription Required
Robin Harding (FT) Jan 7, 2014
In any society that is willing to tolerate redistribution via estate duties and inheritance taxes, falling growth is a reason to increase them.

Silicon Valley no longer reigns supreme Financial Times Subscription Required
Niklas Zennström (FT) Jan 7, 2014
In the war of the technology hubs, it is no longer where you come from but where you are going that counts and the only goal can be global success.

China’s interest rates are too high Financial Times Subscription Required
Yukon Huang (FT) Jan 7, 2014
The property bubble is actually largely the result of capital controls and distorted equity and land markets.

Oil and gas: A new frontier Financial Times Subscription Required
Lucy Hornby and Ed Crooks (FT) Jan 7, 2014
Western energy companies are flocking to China to help unlock and reap the rewards of what could be the world’s largest shale reserves.

This Time, the UN Can’t Let Africa Fail
Lewis Mudge (Bloomberg) Jan 7, 2014
Until recently, thousands of people escaping violence in the Central African Republic at least could find refuge in the capital, Bangui. I was one of them. I had been in the northern town of Bouca where a massacre of civilians sheltering in a church compound was narrowly averted by the arrival of African Union troops. And so I was grateful, days later, to reach the relative safety of Bangui.

Age of Disruption
Dominic Barton (Project Syndicate) Jan 7, 2014
The year 2013 moved the world further into the Digital Age – a global epoch of changes whose likely impact on the world economy will be 2-3 times greater than that of the Industrial Revolution. Indeed, some 90% of the world’s total data were created in the past two years.

NAFTA and the Future of Canada, Mexico and the United States
Marc Lanthemann (Stratfor) Jan 7, 2014
The 20th anniversary of NAFTA's implementation on Jan. 1 has revived some of the perennial arguments that have surrounded the bloc since its inception. The general consensus has been that the trade deal was a mixed bag, a generally positive yet disappointing economic experiment.

The New Inequality
Harold James (Project Syndicate) Jan 7, 2014
The conventional wisdom now holds that policymakers' response to the 2008 financial crisis enabled the world to escape a repeat of the Great Depression. But measured inequality has surged since the crisis, owing largely to the very measures that are so often lauded for preventing another catastrophe.

Power Without Purpose
Nina L. Khrushcheva (Project Syndicate) Jan 7, 2014
Russia is no longer an economic power (oil reserves notwithstanding), nor is it a match for the US, or even China, in international affairs. But it is far from clear what Russia wants to become: a reinvented empire, a new autocracy, a “sovereign” democracy, or perhaps something else.

The Great Malaise Drags On
Joseph E. Stiglitz (Project Syndicate) Jan 7, 2014
Economics is often called the dismal science, and for the last half-decade it has come by its reputation honestly in the advanced economies. Unfortunately, the year ahead will bring little relief.

Scotching the Eurozone
Brigitte Granville (Project Syndicate) Jan 7, 2014
Conventional wisdom suggests that Scottish independence is possible, albeit not very likely, while any country’s departure from the eurozone is fanciful. But the monetary decisions that a newly sovereign Scotland would have to make are at least as likely to be faced by some eurozone countries over the next couple of years.

Britain Fights Back
George Osborne (Project Syndicate) Jan 7, 2014
As the global economy recovers from the Great Recession, the question facing advanced economies is this: How can they deliver sustainable growth and rising prosperity for their citizens in the post-recession world? The United Kingdom remains determined to answer that question convincingly.

The ghost of Deauville
Ashoka Mody (VoxEU) Jan 7, 2014
On 19 October 2010, Angela Merkel and Nicolas Sarkozy agreed that in future, sovereign bailouts from the European Stability Mechanism would require that losses be imposed on private creditors. This agreement was blamed for the increase in sovereign spreads in late 2010 and early 2011. This column discusses recent research on the market reaction to the surprise announcement at Deauville. With the exception of Greece, the rise in spreads was within the range of variability established in the previous 20 days.

The next sudden stop
Sebnem Kalemli-Ozcan (VoxEU) Jan 7, 2014
Financial crises are generally preceded by credit booms and a build-up of external debts. Although it is unclear whether Turkey is experiencing a financial bubble, as of 2013, 58% of the corporate sector’s debt was denominated in foreign currencies. This column argues that this explains the Central Bank of Turkey’s interventions to prop up the value of the Turkish lira. Given the relatively low level of reserves and the unfolding corruption scandal, it is a critical question how long the Bank can continue to do so.

Why Quants Don’t Know Everything
Felix Salmon (Wired) Jan 7, 2014
By now, nearly everyone from the president of the United States on down has admit­ted that the National Security Agency went too far. Documents leaked by Edward Snowden, the rogue NSA contractor who has since gained asylum in Rus­sia, paint a picture of an organization with access to seemingly every word typed or spoken on any electronic device, anywhere in the world. And when news of the NSA’s reach became public—as it was surely bound to do at some point—the entire US intelli­gence apparatus was thrust into what The New York Times recently called a “crisis of purpose and legitimacy.”

Thailand: Collision course Financial Times Subscription Required
Michael Peel (FT) Jan 8, 2014
The country’s reputation for democratic and economic leadership in Asia is crumbling as the two sides in its political struggle head for a showdown

Asian democracy must serve the people Financial Times Subscription Required
David Pilling (FT) Jan 8, 2014
The emergence of new forces to challenge imperfect – and outright phoney – democracies is a good thing. But there are dangers, too.

Why Turkey is back on the watch list Financial Times Subscription Required
Ian Bremmer (FT) Jan 8, 2014
Recep Tayyip Erdogan’s domineering style and a willingness to compromise Turkey’s rule of law has created an increasingly volatile political scene.

How the Great Rare-Earth Metals Crisis Vanished Wall Street Journal Subscription Required
Joseph Sternberg (WSJ) Jan 8, 2014
China's attempt to control the market for materials essential to the tech industry is turning to dust.

When Exactly Will China Rule the Economic World?
Christopher Matthews (Time) Jan 8, 2014
It may already. Here's why you shouldn't care.

The IFIs in 2013: year in review
Bretton Woods Project Jan 8, 2014
The Bretton Woods Project review of the most important developments at the World Bank and IMF in 2013.

China’s Liquidity Paradox
Zhang Monan (Project Syndicate) Jan 8, 2014
Despite China's swelling foreign-exchange reserves – the result of persistent current-account surpluses – market and interbank short-term interest rates are soaring. How did this happen, and what should policymakers do about it?

The Global Impact of US Shale
Daniel Yergin (Project Syndicate) Jan 8, 2014
The biggest innovation in energy so far this century has been the development of shale gas and the closely associated resource known as “tight oil.” Indeed, the emergence of shale gas and tight oil in the US demonstrates, once again, how innovation can change the balance of global economic and political power.

Rehab World
Niall Ferguson (Project Syndicate) Jan 8, 2014
The late English chanteuse Amy Winehouse sang, “They tried to make me go to rehab, but I said ‘No, no, no.’” Perhaps 2013 should be known as the year of Winehouse economics, with the singers being the world’s most important central banks, led by the Federal Reserve.

The Inequality Nightmare
Donald Kaberuka (Project Syndicate) Jan 8, 2014
“The poor cannot sleep, because they are hungry,” the Nigerian economist Sam Aluko famously said in 1999, “and the rich cannot sleep, because the poor are awake and hungry.” Deep wealth disparities affect everyone, because the political and economic system on which our prosperity depends cannot continue enriching some and impoverishing others.

The Great War and Global Governance
Kemal Dervis (Project Syndicate) Jan 8, 2014
This year marks the centennial of the outbreak of WWI – a devastating war, rooted partly in inadequately robust global-governance systems. Today, efforts to quantify the tradeoff between efficiency and robustness should play a larger role in addressing key issues, including financial reform and climate-change policy.

Inequality by the Click
Adair Turner (Project Syndicate) Jan 8, 2014
Technological change is the essence of economic growth. But new technologies come in subtly different forms, with inherently different economic consequences, and today’s new technologies may have far more troubling distributional effects than those of the electromechanical age.

What’s That You’re Calling a Bubble?
Justin Fox (HBR) Jan 8, 2014
The bubble has become an inescapable element of modern economic discourse. Every day somebody is proclaiming a new one, arguing that there isn’t one, proposing ways to prevent one, or complaining about how hard they are to prevent.

A consistent trinity for the Eurozone
Marco Buti (VoxEU) Jan 8, 2014
Though in the past two years substantial progress has been made in completing the structure of Europe’s Economic and Monetary Union, not all economic inconsistencies have been solved. This column discusses three main challenges that still need to be addressed. First, sound fiscal policies need to be conducted while keeping sustainable welfare systems. Second is the conflict between policy objectives and economic realities – vulnerable economies cannot reduce their debts and simultaneously gain competitiveness. Third, financial stability and integrated financial markets cannot be established unless the relationship between banks and their sovereigns is reformed. Addressing each of these challenges is important, and it could benefit all Eurozone members.

Banking rivalries: Risk on, risk off Financial Times Subscription Required
Tom Braithwaite (FT) Jan 9, 2014
Challenged by regulations, Goldman Sachs is sticking to its guns as the supreme trader while Morgan Stanley bets on wealth management.

Tomorrow holds both risks and riches Financial Times Subscription Required
Philip Stephens (FT) Jan 9, 2014
Wars, political tensions, climate change and resource sources – the pressures for conflict in this more disordered world are there to see.

Investors hunt ‘polar vortex’ in markets Financial Times Subscription Required
Ralph Atkins (FT) Jan 9, 2014
Much of the information is private; its collection is slow, expensive, inevitably incomplete and subject to endless arguments among economists.

Ten Challenges Around the World in 2014
Globalist Jan 9, 2014
The biggest challenges facing some of the world’s leading countries in the coming year.

Will TTIP Harm the Global Trading System?
Katinka Barysch and Michael Heise (YaleGlobal) Jan 9, 2014
The European Union’s member states form the world’s largest economy followed by the United States. So, the rest of the world is wary about ongoing negotiations for a Transatlantic Trade and Investment Partnership, or TTIP. Other trading partners of the US and the EU may have to meet new regulations without having a voice in their making. Or in other areas, the partners may have to deal with two sets of regulations while the US and the EU agree to accept their own differences.

Migration and trade
Jonathan Portes (Pieria) Jan 9, 2014
Immigration & coal mining: an economic analogy.

Debt and Demand
Adair Turner (Project Syndicate) Jan 9, 2014
While growth in the advanced economies seems to have picked up, it remains weak. A more stable growth model will require less of the "wrong" debt – that is, debt that finances purchases of existing assets, supports consumption without addressing inequality, and arises from unsustainable global imbalances.

The Distributional Challenge
Michael Spence (Project Syndicate) Jan 9, 2014
Many advanced and developing countries’ growth patterns – both before and since the 2008 crisis – have underpinned a dramatic shift in income and wealth toward the upper quartile of the distribution. This is producing high and rising levels of income inequality, and may also be contributing to reduced economic and social mobility.

Re-Empowering the Global Economy
Christine Lagarde (Project Syndicate) Jan 9, 2014
The global economy in 2013 remained suspended between the poles of hope and uncertainty. While recovery gained momentum, particularly in some advanced economies, the world economy is not yet flying on all engines – and is likely to remain underpowered next year as well.

The Perilous Retreat from Global Trade Rules
Pascal Lamy (Project Syndicate) Jan 9, 2014
With global trade talks deadlocked, mega-regional agreements seem poised to re-shape the world economy. But such agreements could lead to economic fragmentation, unless there is some consistency among them, they are backed by coherent national policies, and they exist within a functioning multilateral trade system.

Economic Shadows and Light
Mehmet Simsek (Project Syndicate) Jan 9, 2014
If it is true that we live in a “global village,” bound to one another through commercial, financial, and social ties, then it is also true that informal economic activity in one part of the world has a negative impact elsewhere. And that means that formalizing every economy should be viewed as a global public good.

Volatility insurance and exchange rate predictability
Pasquale Della Corte, Tarun Ramadorai & Lucio Sarno (VoxEU) Jan 9, 2014
Economists widely view exchange rate changes as unpredictable. This column explains a new currency trading strategy with economically valuable and statistically significant currency excess returns. The returns are generated primarily by spot exchange rate returns, rather than interest differentials. The strategy’s performance can be explained by speculator-hedger interactions in the currency market in the presence of time-varying capital constraints on speculators.

National growth rates: Converging to diverging paths
Michele Battisti, Gianfranco di Vaio & Joseph Zeira (VoxEU) Jan 9, 2014
A key question in economics is whether poor countries will automatically close the income gap with rich countries. However, different empirical methods yield different answers – growth regressions suggest convergence, whereas tests of distribution dynamics suggest divergence. This column discusses recent research that reconciles these two strands of the literature. It extends the benchmark growth regression model to include a parameter that determines the share of new technologies a country can adopt each year. The result is that, although each country converges to a growth path, the growth paths themselves may diverge.

Hazards of Revolution
Patrick Cockburn (LRB) Jan 9, 2014
The extent of the failure of the uprisings of 2011 to establish better forms of governance has surprised opposition movements, their Western backers and what was once a highly sympathetic foreign media. The surprise is due, in part, to a misunderstanding of what the uprisings were about.

Bravo for Bernanke and the QE Era Wall Street Journal Subscription Required
Austan Goolsbee (WSJ) Jan 10, 2014
Admit it: The Fed's loose money policy worked. Now the challenge is how to manage the tapering.

An Indian Trade Paradox
Arvind Subramanian (Business Standard/PIIE) Jan 10, 2014
When India's trading partners complain about the restrictiveness of the country's trade regime, they are both right and wrong. It is closed in trade policy terms but open in terms of trade outcomes.

Out of the Abyss: Looking for Lessons in Iceland's Recovery Recommended!
Guido Mingels (Spiegel) Jan 10, 2014
In 2008, Iceland experienced one of the most dramatic crashes any country had ever seen. Since then, its recovery has been just as impressive. Are there lessons to be learned? SPIEGEL went to the island nation to find out.

The long term economic impacts of reducing migration
Katerina Lisenkova (VoxEU) Jan 10, 2014
Efforts to limit immigration are being implemented in many rich nations. Restricting immigration to these advanced ageing economies could be an economic boon or bane. This column presents recent work examining the labour market and fiscal impacts of restricting immigration, taking the UK government’s stated goal as an example. The results suggest that a significant reduction in net migration would have strong negative effects on the UK economy.

Why fiscal sustainability matters
Willem Buiter (VoxEU) Jan 10, 2014
Fiscal sustainability has become a hot topic as a result of the European sovereign debt crisis, but it matters in normal times, too. This column argues that financial sector reforms are essential to ensure fiscal sustainability in the future. Although emerging market reforms undertaken in the aftermath of the financial crises of the 1990s were beneficial, complacency is not warranted. In the US, political gridlock must be overcome to reform entitlements and the tax system. In the Eurozone, creating a sovereign debt restructuring mechanism should be a priority.

Securitisation: It’s back Economist Subscription Required
Economist Jan 11, 2014
Once a cause of the financial world’s problems, securitisation is now part of the solution.

Investment: Dollar disruptions Financial Times Subscription Required
Robin Wigglesworth (FT) Jan 12, 2014
There are growing fears among economists that a strengthening US currency will spell calamity once again for emerging markets.

Raise rates to cure China’s credit habit Financial Times Subscription Required
Joe Zhang (FT) Jan 12, 2014
I found myself advocating on behalf of a regional lender. Sitting opposite me were my former central bank colleagues. I felt very uncomfortable.

Abuses of power threaten Asian democracies Financial Times Subscription Required
Victor Mallet (FT) Jan 12, 2014
From Sri Lanka to Cambodia, parliamentary democracies have fallen prey to the diseases of authoritarianism, violence and strident populism.

Is debt dangerous?
John Aziz (Pieria) Jan 12, 2014
Economic disagreement between stimulationists and austerians is clustered around the notion of whether more government debt is harmful or beneficial, or some varying mixture of the two.

The overstated pessimism over Latin America
Augusto de la Torre, Eduardo Levy Yeyati & Samuel Pienknagura (VoxEU) Jan 12, 2014
There is a wave of fashionable pessimism over the future growth of Latin America. This column distinguishes between two main types of concerns – related to the trend of the long-term growth, and to the cyclical vulnerabilities of the region. While the first type is partially justified, the second type is not because such concerns overlook two fundamental changes in Latin American economies. First, the de-dollarisation of financial contracts reduces the adverse effects of currency depreciations. Second, a more credible monetary policy was implemented with a substantial decline in the exchange rate pass-through to inflation.

A costly way to speak truth to markets Financial Times Subscription Required
Avinash Persaud (FT) Jan 13, 2014
Investors will quickly detect a change of direction no matter how gradually the central banks pull out of their bond-buying spree.

Non-bank financing must go mainstream Financial Times Subscription Required
Patrick Jenkins (FT) Jan 13, 2014
In the balance between bank lending and bond finance the traditional view ignores a growing trend: loans are increasingly granted by alternative providers.

Markets run into fog of forward guidance Financial Times Subscription Required
Satyajit Das (FT) Jan 13, 2014
Increasing reliance on forward guidance is drawing unwanted attention to the limitation of central banking instruments and policy.

Turkey: Clash of values Financial Times Subscription Required
Daniel Dombey (FT) Jan 13, 2014
Political and cultural conflicts have raised concerns that the governance that brought prosperity has decayed into a less rule-bound system.

Basel Makes Its Simple Leverage Rules ... Simpler?
Matt Levine (Bloomberg) Jan 13, 2014
If you want to read the new Basel III leverage ratio rules, you have a stronger stomach than I do.

India: Combating Poverty With Technology?
Lydia Powell (Globalist) Jan 13, 2014
Can tech-based solutions, like a new national identity card system, really fix India’s poverty challenges?

India's National ID: Trailing Pakistan
Lydia Powell (Globalist) Jan 13, 2014
Will a much-hyped new national ID actually fix any of India’s problems?

A Requiem for Global Imbalances
Barry Eichengreen (Project Syndicate) Jan 13, 2014
The start of 2014 marks ten years since we began fretting about global imbalances, and specifically about the chronic trade and current-account imbalances of the US and China. A decade later, we can happily declare that the era of global imbalances is over.

Empowering Financial Bankruptcy
Mark Roe (Project Syndicate) Jan 13, 2014
Four of the world’s most important financial regulators – the Bank of England, Germany’s BaFin, America's FDIC, and the Swiss Financial Market Supervisory Authority – recently asked the world’s derivatives industry to change the way it does business. The question now is how to ensure that the industry complies.

Gold mining: Squandered opportunity Financial Times Subscription Required
James Wilson (FT) Jan 14, 2014
Falling gold prices, squeezed reserves and disappointing returns are fuelling investor demands for restructuring and an end to the old “big gold” approach of sprawling expansion.

Distress appears in Asian funding markets Financial Times Subscription Required
Henny Sender (FT) Jan 14, 2014
Emerging market companies will find funding becomes increasingly costly as central bank liquidity dries up and banks decline to take on risk.

Urban Villagers Are Asia’s New Force
Pankaj Mishra (Bloomberg) Jan 14, 2014
Last week in an upmarket part of Delhi, where apartments sell for millions of dollars, I came across a household where both the poorly paid staff and the owner had voted for Arvind Kejriwal, the former engineer-turned- politician, who is now the new chief minister of the Delhi capital region -- India’s most urbanized state.

What Five Days of Trading Tell Us About 2014
Jim O’Neill (Bloomberg) Jan 14, 2014
Over the course of more than three decades in finance, I got into the habit each January of developing investment themes for the coming year. Some habits are hard to break, and even though investment strategy is no longer my day job, my mind has turned to the same task. Usually I come to a pretty strong view, one way or the other, about the year ahead. This year, things don’t look so clear.

The Wrong Way on Bank Risk
Bloomberg Jan 14, 2014
Regulators have been working hard to make new global capital rules more palatable for banks. They should now raise the minimum requirements high enough to make the risk of financial disaster more bearable for everyone else.

A Free Market Approach to Insider Trading
Fernando Herrera-Gonzalez (Mises Daily) Jan 14, 2014
So-called insider trading may take place in publicly traded firms. It occurs when an individual privy to private information (the insider) attempts to profit on the buying and selling of stocks using non-public information to anticipate the stock’s future price.

The Financial Fire Next Time
Robert J. Shiller (Project Syndicate) Jan 14, 2014
Just as most people are more interested in stories about fires than they are in the chemistry of fire retardants, they are more interested in stories about financial crashes than they are in the measures needed to prevent them. That is not exactly a recipe for a happy ending.

Partnership or Putsch?
Gordon Lafer (Project Syndicate) Jan 14, 2014
When democracies enact laws that run counter to the interest of the vast majority of voters, they do so, in part, by shunning democracy itself. There is no clearer example of this than the Trans-Pacific Partnership, which represents the single biggest threat to the preservation – or creation – of any signatory country’s middle class.

Ben Bernanke’s Global Legacy
Arvind Subramanian (Project Syndicate) Jan 14, 2014
It is too soon to assess whether outgoing Fed Chairman Ben Bernanke is headed for history’s chopping block or its pedestal. But the crucial international role that he and the Fed played during his tenure – a time when US economic weakness translated into relatively ineffective American global leadership – should not be overlooked.

Compete in the World? Yes, Indians Can
Kishore Mahbubani (YaleGlobal) Jan 14, 2014
Indian workers perform well and earn top incomes in most places except India.

First steps for banking union implementation
Silvia Merler & Guntram Wolff (VoxEU) Jan 14, 2014
The European Banking Union matures in 2014, with the ECB assuming its role as single supervisor. This column outlines the transition to the new steady state. This will involve a comprehensive balance sheet assessment, new rules regarding recapitalisation, restructuring, and resolution, and the determination of how recapitalisation costs are distributed across taxpayers in different European nations.

The win-win from eliminating corporate income taxes
Laurence J. Kotlikoff (VoxEU) Jan 14, 2014
Though taxing corporations may be a political no-brainer, it may be a big economic mistake. This column discusses recent research showing that the tax is not paid primarily by rich corporate shareholders. They can, and do, move their capital away from countries that have high corporate rates. Eliminating the US corporate tax by, for example, taxing accrued global corporate profits as personal income can produce dramatic increases in US investment, output, real wages, and saving. Modest gains accrue to early generations with very sizable gains going to young and future generations, both skilled and unskilled.

A crunch year for the Japanese economy Financial Times Subscription Required
David Pilling (FT) Jan 15, 2014
The outcome of a bold and radical experiment in monetary policy will have profound consequences for the rest of Asia.

The only way is up for commodities Financial Times Subscription Required
James Paulsen (FT) Jan 15, 2014
A confluence of factors could make commodities one of the best performing asset classes this year after trending down for three years.

Sudan: Rage against the regime Financial Times Subscription Required
Katrina Manson (FT) Jan 15, 2014
Economic problems and fears of disruption in its southern neighbour are destabilising Omar al-Bashir’s rule despite his clampdown on political dissent.

After Crisis, Iceland Holds a Tight Grip on Its Banks Financial Times Subscription Required
Nathaniel Popper (NYT) Jan 15, 2014
Iceland is a living experiment in what can happen when a country forces its financial firms to go under, rather than bailing them out.

Why the European Central Bank Will Likely Shrink from Quantitative Easing
Jacob Funk Kirkegaard (PIIE) Jan 15, 2014
Given the low inflation and ongoing financial fragmentation of the euro area and the increasingly suggestive comments from the European Central Bank (ECB), the bank appears more willing than ever to apply additional monetary stimulus to the economy—without actually acting to do so. The talk even goes so far as to suggest that the ECB will embark on its own program of bond purchases known as quantitative easing (QE). But talk is cheap in Frankfurt. Those advocating such bold action should not get their hopes up.

8 Questions: ‘The Dollar Trap’ Wall Street Journal Subscription Required
Eswar Prasad (WSJ) Jan 15, 2014
Last year, China’s yuan for the first time joined the ranks of the most-traded international currencies, highlighting the country’s ambitions to play a larger role in a market long dominated by the dollar. But the dollar has no rival as the world’s currency---and probably won’t for decades.

Africa: China and Japan's Next Battleground?
Shannon Tiezzi (Diplomat) Jan 15, 2014
While China and Japan may look like they’re competing in Africa, the two countries are actually playing different games.

Asia’s Newest Revolutions Are Just Beginning
Pankaj Mishra (Bloomberg) Jan 15, 2014
Asia’s urban migration is bringing about an “explosive transformation,” the Pakistani novelist Mohsin Hamid writes in “How to Get Filthy Rich in Rising Asia,” “the supportive, stifling, stabilizing bonds of extended relationships weakening and giving way, leaving in their wake insecurity, anxiety, productivity and potential.”

The Global Economy in 2014
Christine Lagarde (IMF) Jan 15, 2014
How the IMF sees the global economy as the wheels of time roll into yet another year.

Scaling Up Water Sustainability
Giulio Boccaletti (Project Syndicate) Jan 15, 2014
Since 2000, when the Millennium Development Goals were adopted, the global community has rightly focused on providing access to basic water and sanitation services. As the UN prepares to adopt the Sustainable Development Goals to succeed the MDGs, large-scale water infrastructure should be placed front and center.

Who Lost Thailand?
Yuriko Koike (Project Syndicate) Jan 15, 2014
Southeast Asia’s most developed and sophisticated economy is teetering on the edge of the political abyss, yet most of the rest of Asia appears to be averting its eyes from the country’s ongoing and increasingly anarchic unrest. That indifference is dangerously foolish.

Quality of goods and the pass-through puzzle
Natalie Chen & Luciana Juvenal (VoxEU) Jan 15, 2014
Empirical research finds that import prices do not fully adjust to exchange-rate changes. In other word, there is a limited response of trade to exchange-rate fluctuations. This column argues that part of this pass-through puzzle is explained by quality. Exchange-rate movements are more strongly absorbed into the export prices of higher quality goods. Therefore, the volume of their exports would be less responsive to exchange-rate shocks, leading to an incomplete exchange-rate pass-through.

Costing secrecy
Mark Harrison (VoxEU) Jan 15, 2014
Democracy often seems bureaucratic with high ‘transaction costs’, while autocracies seem to get things done at lower cost. This column discusses historical research that refutes this. It finds empirical support from Soviet archives for a political security/usability tradeoff. Regimes that are secure from public scrutiny tend to be more costly to operate.

Greece must resist return to markets Financial Times Subscription Required
Ralph Atkins (FT) Jan 16, 2014
Across eurozone periphery, yields have fallen back to pre-crisis levels. Some in Athens – and London bankers – see a chance for country to test mood.

Development of Asean Bond Market Picks Up
Nitin Jaiswal (Asia Sentinel) Jan 16, 2014
Pace accelerates as needs grow and market develops.

US Congress Gears Up for "Fast Track" Trade Fight
Bridges Weekly Trade News Digest, Volume 18, Number 1 Jan 16, 2014
Trade policy is set to headline the Washington congressional agenda in the coming months, after senior US lawmakers submitted last week a long-awaited bill that, if passed, would help in ratifying trade deals with 11 Pacific nations and the 28-member EU.

EU Member States Sign Off on Short-Term Carbon Market Fix
Bridges Weekly Trade News Digest, Volume 18, Number 1 Jan 16, 2014
EU member states signed off last week on a plan to withhold as many as 400 million carbon allowances from its Emissions Trading System (ETS) this year, in a move geared at propping up the bloc’s struggling carbon market until a long-term solution can be found.

Indonesia Enacts Mineral Export Ban
Bridges Weekly Trade News Digest, Volume 18, Number 1 Jan 16, 2014
Indonesia on Sunday implemented a controversial ban on exports of raw minerals in an effort to help stimulate domestic processing. Cited as one of the most significant economic policy decisions of President Susilo Bambang Yudhoyono’s tenure, critics warn that the move could seriously threaten the country’s nickel and bauxite US$2 billion annual export revenue.

Russia Launches WTO Dispute Against EU Import Duties
Bridges Weekly Trade News Digest, Volume 18, Number 1 Jan 16, 2014
Russia filed its first-ever WTO complaint last month (DS474), targeting EU duties on imports of ammonium nitrate and certain steel products. The move is expected to strain the already tense relationship between the two trading partners, which has worsened noticeably in the past year.

US Challenges China Compliance with WTO Steel Ruling
Bridges Weekly Trade News Digest, Volume 18, Number 1 Jan 16, 2014
In a landmark move, the US issued a formal challenge on Monday against China’s compliance with an adverse WTO ruling, marking the first time that the Asian economic powerhouse has faced such a claim.

EU Takes Aim at Brazilian "Tax Advantages" in WTO Dispute
Bridges Weekly Trade News Digest, Volume 18, Number 1 Jan 16, 2014
The EU filed a formal WTO complaint against Brazil in late December, targeting a series of tax measures that it claims provide unfair advantages to the South American country’s manufacturing sector.

Is North Korea Opening for Business?
Lee Jong-Wha (Project Syndicate) Jan 16, 2014
North Korea’s system is failing, owing to serious energy constraints, a severe food shortage, a high infant-mortality rate, and a long-stagnant economy. In order to survive, the world’s most centralized and closed economy will have to open up – and that means implementing wide-ranging economic reforms.

A Dark Day for International Cooperation
Edwin M. Truman (PIIE) Jan 16, 2014
The impending congressional adoption this week of a $1.1 trillion appropriations bill has been hailed far and wide as a victory for sorely needed bipartisanship cooperation in Washington. Left out of the legislation, however, was an important but little understood and underappreciated proposal to implement reform at the International Monetary Fund (IMF). The proposal would fulfill an agreement pressed energetically by President Barack Obama at the G-20 leaders’ meeting in Seoul in November 2010. The omission, which has gotten too little attention, is a major blow to US credibility around the world, with ominous consequences for the future of international economic, financial, and political cooperation.

Ukraine is the Key to Restoring a Greater Russia
Andreas Umland (Globalist) Jan 16, 2014
Ukraine is caught between European integration and Russian re-unification aims.

Ukraine: Why Europe Has the Most Leverage
Andreas Umland (Globalist) Jan 16, 2014
As Brussels remains reticent, Russia continues bluffing that it can shape the post-Soviet space.

A Dutch Cure for the Dutch Disease
Michael J. Boskin (Project Syndicate) Jan 16, 2014
When a European country reverses course to reduce welfare dependency and restore work incentives, it is worth noting. That is especially true when the country is the Netherlands, which built one of the world’s most expansive welfare states in the 1960’s and 1970’s.

France’s economic sickness might defy a cure
Charles Wypolsz (Conversation) Jan 16, 2014
The news from France has not been good over the last few years. Poor economic growth, stubbornly high unemployment, plant closures on the rise, strikes (not new, really), voter disenfranchisement and the rise of populism all paint the picture of a country suffering economic decline and political turmoil.

The roots of shadow banking
Enrico Perotti (VoxEU) Jan 16, 2014
The ‘shadow banking’ sector is a loose title given to the financial sector that exists outside the regulatory perimeter but mimics some structures and functions of banks. This column introduces a new CEPR Policy Insight that looks into what we have learned about shadow banking since the Global Crisis.

How Japan stood up to old age Financial Times Subscription Required
David Pilling (FT) Jan 17, 2014
Twenty-five per cent of Japanese are over 65. But not only do they live longer, they work longer, stay healthier, care for their elderly better – and have found ways to pay for it.

Three Myths on the World's Poor Wall Street Journal Subscription Required
Bill and Melinda Gates (WSJ) Jan 17, 2014
Foreign aid is a phenomenal investment that's transforming the world.

A New Model for New Europe
Martin N. Baily and Pal Erik Sjatil (Projet Syndicate) Jan 17, 2014
Five years ago, Central and Eastern Europe was home to one of the world’s most impressive growth stories. But the region has struggled to regain momentum since the global financial crisis and subsequent recession, which suggests that a new growth model is needed.

What the Asset Quality Review is likely to find: Independent evidence
Viral Acharya & Sascha Steffen (VoxEU) Jan 17, 2014
The Single Supervisory Mechanism – a key pillar of the Eurozone banking union – will transfer supervision of Europe’s largest banks to the ECB. Before taking over this role, the ECB will conduct an Asset Quality Review to identify these banks’ capital shortfalls. This column discusses recent estimates of these shortfalls based on publicly available data. Estimates such as these can defend against political efforts to blunt the AQR’s effectiveness. The results suggest that many banks’ capital needs can be met with common equity issuance and bail-ins, but that public backstops might still be necessary in some cases.

Picking the world champion of trade: Trading up Economist Subscription Required
Economist Jan 18, 2014
Which country gets the most out of international commerce?

The onrushing wave Economist Subscription Required
Economist Jan 18, 2014
Previous technological innovation has always delivered more long-run employment, not less. But things can change.

The weather report Economist Subscription Required
Economist Jan 18, 2014
Economists are getting to grips with the impact of climate change.

Coming to an office near you Economist Subscription Required
Economist Jan 18, 2014
The effect of today’s technology on tomorrow’s jobs will be immense—and no country is ready for it

Grand convergence: a future sustainable development goal?
The Lancet Jan 18, 2014
On Jan 16, in the North Lawn Building of the United Nations in New York, Norway's Permanent Representative to the UN, Mr Geir Pedersen, is hosting an event that just might change the course of negotiations on the future of sustainable development.

Above it all: Welcome to Davos 1914 Financial Times Subscription Required
Margaret MacMillan (FT) Jan 19, 2014
Now, as then, the rich and powerful show up for the annual Alpine parade that lends itself to a big dose of confidence.

India: Taxation's Fatal Neglect?
Arvind Subramanian and Devesh Kapur (Business Standard/PIIE) Jan 19, 2014
India's obsession with spending and subsidies, to the neglect of taxation and the potential detrimental consequences for democracy and accountability.

Averting economic cold war/A>
Yiping Huang (EAF) Jan 19, 2014
China and the future of Asia Pacific trade.

The Global Crisis and East Asian currency misalignment
Eiji Ogawa & Zhiqian Wang (VoxEU) Jan 19, 2014
Since the East Asian financial crisis of 1997, the emphasis on regional monetary cooperation has grown. This column discusses recent research into intra-regional exchange rate misalignments. In the aftermath of the Global Financial Crisis, investors in the US and Europe withdrew from emerging markets, causing a depreciation of emerging-market currencies against the US dollar. At the same time, the appreciation of the Japanese yen – fuelled in part by intra-regional capital flows – has increased the misalignment of intra-regional exchange rates.

Finance: Bucking the trend Financial Times Subscription Required
Tracy Alloway and Nicole Bullock (FT) Jan 20, 2014
The opening of a small rural lender highlights the difficulties of launching community banks in the US, which is dominated by just five institutions.

Australia's Asian tilt a mere wish list Financial Times Subscription Required
Satyajit Das (FT) Jan 20, 2014
The strategy is undermined by a contradiction between the nation’s political and defence partnership with the US and its economic dependence on Asia.

Is a robot coming to take your job? Financial Times Subscription Required
Brian Groom (FT) Jan 20, 2014
Automatons and computers, which once did routine tasks, should soon be able to diagnose fraud or illness more accurately than accountants or doctors.

Peak demand oil theory fails scrutiny Financial Times Subscription Required
Mark Lewis (FT) Jan 20, 2014
Fall in US oil demand over 2008-12 was due mainly to the weakness of the US economy and the tightness of the local oil market until recently.

Kenya’s Banking Revolution Lights a Fire New York Times Subscription Required
Murithi Mutiga (NYT) Jan 20, 2014
The service has brought millions into the financial system and created tens of thousands of jobs.

Does Brazil Have the Answer? New York Times Subscription RequiredJoe Nocera (NYT) Jan 20, 2014
As income inequality gets worse in the United States, it is falling in Brazil.

China Growth Figures Show Rapidly Narrowing Gap With U.S. Economy New York Times Subscription Required
Keith Bradsher (NYT) Jan 20, 2014
Factors like rising prices that are fueling China’s growth have pushed the economy to expand at a rate almost four times that of the United States economy.

Oxfam: 85 richest people as wealthy as poorest half of the world
Graeme Wearden (Guardian) Jan 20, 2014
As World Economic Forum starts in Davos, development charity claims growing inequality has been driven by 'power grab'

Forecast 2014: Africa
Alessandro Bruno (Geopolitical Monitor) Jan 20, 2014
Africa is discovering a new spirit of optimism, reminiscent of the first decade of its post-colonial era.

Russia's Growing Regional Debts Threaten Stability
Stratfor Jan 20, 2014
Since the 2009 financial crisis, the Kremlin has allowed Russia's regions to take the brunt of the country's economic decline in order to keep the federal government seemingly healthy, with a nominally small budget deficit and large currency reserves. But now most of Russia's regional governments' debt is so high, it is becoming dangerous for the federal government and big banks and could soon become unmanageable.

Making Sense of China’s Growth Model
Zhang Jun (Project Syndicate) Jan 20, 2014
Over the last two decades, a consensus about China's growth model has emerged, with observers arguing that a shift to an intensive, efficiency-driven growth is essential. But empirical research reveals a critical flaw in this assessment – namely, that annual efficiency gains in China far exceed those of the US.

Free Trade and Costly Love
Robert Skidelsky (Project Syndicate) Jan 20, 2014
The argument for free trade is an argument for welfare, but welfare defined exclusively in terms of money. The trouble is that the more we start to think of our welfare in terms of money, the more likely we are to regard spending time with friends or making love as an “opportunity cost.”

Market mechanisms in retreat
Jeffrey Frankel (VoxEU) Jan 20, 2014
Market-based mechanisms such as cap-and-trade can tackle externality problems more efficiently than command-and-control regulations. However, politicians in the US and Europe have retreated from cap-and-trade in recent years. This column draws a parallel between Republicans’ abandonment of market-based environmental regulation and their recent disavowal of mandatory health insurance. The author argues that in practice, the alternative to market-based regulation is not an absence of regulation, but rather the return of inefficient mandates and subsidies.

Multilateralising 21st-century regionalism
Richard Baldwin (VoxEU) Jan 20, 2014
The global value chain revolution has changed trade and trade agreements. Trade now matters for making goods as well as selling them. Trade governance has shifted away from the WTO towards megaregional agreements. This column argues that 21st-century regionalism is not fundamentally about discrimination, and that its benefits and costs are best thought of as network externalities and harmonisation costs respectively. More research is needed to determine how the megaregional trade agreements across the Pacific and Atlantic will fit with the WTO.

Model of a modern central banker Financial Times Subscription Required
Martin Wolf (FT) Jan 21, 2014
The Fed managed to deal with the crisis and its aftermath in fraught circumstances. For this, Ben Bernanke deserves great credit.

Failed finance kings should forget Davos Financial Times Subscription Required
Patrick Jenkins (FT) Jan 21, 2014
It is not yet time for the world to forgive the men who led western banks when the financial crisis took hold and are now trying to reinvent themselves.

Too early to take plunge back into EMs Financial Times Subscription Required
John Plender (FT) Jan 21, 2014
This is not a rerun of the Asian crisis of 1997-98 and markets may be overreacting, but there is a formula for things to worsen before they get better.

Two-Track Future Imperils Global Growth Wall Street Journal Subscription Required
Stephen Fidler (WSJ) Jan 22, 2014
'Squeezed Middle' chafes as superrich, world's poorest reap globalization's benefits; capital becoming king again.

Global Growth on the Rise but Risks Remain, Predicts IMF WEO
IMF Survey Jan 21, 2014
Global growth is expected to increase in 2014 after having been stuck in low gear in 2013, says the IMF’s latest WEO Update. The IMF forecasts global growth to average 3.7 percent in 2014―up from 3 percent in 2013―and to rise to 3.9 percent in 2015.

The Circular Revolution
Frans van Houten (Project Syndicate) Jan 21, 2014
The Copernican Revolution beginning in the sixteenth century eventually paved the way toward a new, scientific worldview and enhanced human prosperity. Today, the global economy needs a similar paradigm shift.

Achieving Escape Velocity
Mohamed A. El-Erian (Project Syndicate) Jan 21, 2014
While the prospect of faster global GDP growth in 2014 is good news, it is too early to celebrate. Indeed, there is a risk that, by tempting policymakers into complacency, this year’s economic upturn could even end up being counterproductive.

Secular Stagnation Heads South
Andrés Velasco (Project Syndicate) Jan 21, 2014
An extraordinarily benevolent external environment sustained rapid GDP growth in Latin America in the years following the 2008-2009 global economic crisis. But now, as commodity prices fall and the Fed’s gradual exit from quantitative easing boosts US interest rates, the region’s economies could be facing a long-term slowdown.

Tapering and emerging-market capital flows
Andrew Burns, Mizuho Kida, Jamus Lim, Sanket Mohapatra & Marc Stocker (VoxEU) Jan 21, 2014
The Federal Reserve has begun to ‘taper’ its programme of quantitative easing. The ‘taper tantrum’ that followed the announcement of tapering in June 2013 suggests that the normalisation of rich countries’ unconventional monetary policies may lead to capital outflows and currency depreciations in emerging markets. This column presents the results of recent World Bank research into these effects. In the baseline scenario, the unwinding of QE is predicted to reduce capital inflows by about 10%, or 0.6% of developing-country GDP by 2016. However, if markets react abruptly, capital flows could decline by as much as 80% for several months.

Why Japan’s debt hasn’t wreaked havoc yet
Charles Yuji Horioka, Takaaki Nomoto & Akiko Terada-Hagiwara (VoxEU) Jan 21, 2014
Japan’s sovereign debt-to-GDP ratio is higher than any country in Europe and more than twice the OECD average. This column explains why Japan’s massive government debt did not wreak havoc in the past. Robust domestic saving and a temporary inflow of foreign capital caused by the Global Crisis have prevented a crisis thus far. As both of these factors become less applicable the government faces pressure to reduce debt-to-GDP ratio can be brought under control quickly.

China: Delta blues Financial Times Subscription Required
Demetri Sevastopulo (FT) Jan 22, 2014
Shoppers will have to pay more as the world’s factory comes under wage and labour strain, and pressure builds for a change in direction.

China weans itself off growth at all costs Financial Times Subscription Required
David Pilling (FT) Jan 22, 2014
Beijing knows that the economic and political stakes are too high to allow for anything other than a gradual change of dosage.

Fed history is key to Bernanke legacy Financial Times Subscription Required
Scott Minerd (FT) Jan 22, 2014
For the sake of preserving price stability, Bernanke added almost $4tn to reserves in the banking system in the aftermath of the 2008 financial crisis.

A Conversation With: Pankaj Ghemawat, IESE Business School Professor New York Times Subscription Required
Neha Thirani Bagri (NYT) Jan 22, 2014
India Ink spoke with Mr. Ghemawat, who co-authored a study that measured the globalization levels of 139 countries, about why India ranked near the bottom of his rankings.

Financial Sector Can Help Bolster Africa's Economy, Panelists Say New York Times Subscription Required
Michael J. de la Merced (NYT) Jan 22, 2014
At a panel looking at Africa in 2015, several speakers argued that opening and supporting more foreign investment would naturally trickle down to the populace.

An emerging problem
David Ignatius (WP) Jan 22, 2014
The decline of the United States might be greatly exaggerated.

Russia Is Losing Sources of Economic Growth
Anders Aslund (Moscow Times/PIIE) Jan 22, 2014
The annual Gaidar Forum, held last week in Moscow, is a good occasion to assess the country's economic state of affairs. As usual, economist Vladimir Mau mobilized hundreds of prominent speakers for the forum, who offered a clear message: Russia's economy and politics are marked by what optimists call stability and what pessimists call stagnation.

Poverty and Inequality
Angel Ubide (PIIE) Jan 22, 2014
In December, President Obama defined economic inequality and reduced social mobility as one of the most important challenges of our days. Increasing inequality has become one of the fundamental points of the American political debate and was one of the arguments that helped elect Bill de Blasio as mayor of New York City.

The Limits of China's Globalization Strategy
Kevin P. Gallagher (Globalist) Jan 22, 2014
Why factoring human rights and the environment into investment will help China in the long run.

India's Two Futures Foreign Affairs Subscription Required
Sumit Ganguly (FA) Jan 22, 2014
The upcoming election is more than an ideological showdown.

Europe’s Top-Down Myopia
Katinka Barysch (Project Syndicate) Jan 22, 2014
The French statesman Georges Clemenceau famously remarked that, “Generals always fight the last war.” Today, in the wake of the euro crisis, the same might be said of the European Union as it seeks to put itself on a more stable institutional footing.

China’s one-child policy and saving puzzle
Taha Choukhmane, Nicolas Coeurdacier & Keyu Jin (VoxEU) Jan 22, 2014
Since China is growing rapidly, one might expect Chinese households to borrow against their future income. In fact, Chinese households save 30.5% of their income – compared to about 5% in OECD countries. This column discusses recent research linking the Chinese saving puzzle to China’s one-child policy. The savings rate of households with twins is about 6–7 percentage points lower than that of households with an only child. Demographic factors can explain an estimated 35–45% of the 20 percentage-point rise in China’s household saving rate between 1983 and 2011.

Puerto Rico: Harbour of debt Financial Times Subscription Required
Vivianne Rodrigues and Nicole Bullock (FT) Jan 23, 2014
The territory is imposing tough austerity measures as it seeks to allay investor concerns but the long-term plan has yet to take shape fully.

Banish talk of inequality from economics Financial Times Subscription Required
Samuel Brittan (FT) Jan 23, 2014
Once we realise true equality may only be possible in the grave it is easy to divert attention from the real problems in income and wealth distribution.

Beijing rebalancing needs more investment Financial Times Subscription Required
Jamil Anderlini (FT) Jan 23, 2014
Economists are questioning what has become the virtual orthodoxy of more consumption and less investment when assessing Beijing’s economy.

Money markets sound alarm for ECB Financial Times Subscription Required
Ralph Atkins (FT) Jan 23, 2014
About €450bn borrowed under LTRO scheme has been repaid this month – a rapid withdrawal of liquidity that has pushed up Eonia.

Argentina’s Currency Falls Sharply Against the Dollar, Stirring Inflation Fears New York Times Subscription Required
Simon Romero (NYT) Jan 23, 2014
The peso lost 8 percent of its value relative to the American dollar in one day, the worst performance since Argentina’s 2002 financial crisis.

Post-Bali Trade Agenda in Focus as Davos Meetings Begin
Bridges Weekly Trade News Digest, Volume 18, Number 2 Jan 23, 2014
The annual World Economic Forum in the Swiss ski resort of Davos kicked off on Tuesday, bringing together over 2500 business leaders and policymakers amid reports of a tentative global economic recovery. Coming fast on the heels of last month's WTO ministerial conference in Bali, Indonesia, the meet is also expected to give early signs of what a "post-Bali" agenda might look like, and could include the announcement of a plurilateral initiative to lower barriers to trade in green goods.

EU Temporarily Suspends Investment Part of US Trade Talks
Bridges Weekly Trade News Digest, Volume 18, Number 2 Jan 23, 2014
In a surprise announcement on Tuesday, the European Commission confirmed that it has put the investment component of its trade negotiations with the US temporarily on hold. Brussels will use that time to allow the European people to provide their input on the subject, in light of the "unprecedented public interest" in the talks.

European Commission Announces 2030 Climate, Energy Goals
Bridges Weekly Trade News Digest, Volume 18, Number 2 Jan 23, 2014
The European Commission unveiled its 2030 climate and energy policy framework on Wednesday, calling for a 40 percent greenhouse gas (GHG) reduction target below 1990 levels and an EU-wide binding renewable energy target of at least 27 percent.

Cotton Trade: China Shift on Stockpiling Policy Sparks Questions
Bridges Weekly Trade News Digest, Volume 18, Number 2 Jan 23, 2014
China appears to be moving away from its practice of building cotton stocks, in a move that analysts say marks a dramatic shift in policy. Two other major players in the global cotton market – the US and Brazil – are also engaged in a separate tussle on the subject, as the process to pass a new Farm Bill continues to drag on in Washington.

China-Japan rivalry overstated in Africa
Seifudein Adem (AT) Jan 23, 2014
Simultaneous visits to Africa this month by Japanese Prime Minister Shinzo Abe and Chinese Foreign Minister Wang Yi descended into a fight over who has the continent's best interests at heart. That China is increasingly modeling its economic activities in Africa on what it has learned from Japan suggest their approaches to Africa are not radically different.

Cowbells, or how Davos saves the world
Pepe Escobar (AT) Jan 23, 2014
Masters of the Universe wanting to play saviors of the world are flocking to tell it on the mountain this week. Their interminable business meeting amid the Swiss cowbells at the World Economic Forum is producing nothing but jingle-jangle, Russia-bashing, and an opportunity for Japan to blow its own horn.

Don't cry just for Argentina Economist Subscription Required
Economist Jan 23, 2014
Today's plunge in the Argentine peso was the biggest since the devaluation of 2002 following Argentina's debt default.

Japan’s New Dawn
Shinzo Abe (Project Syndicate) Jan 23, 2014
Japan has pledged that it will never again wage war, and it has never stopped working for a world that is at peace. The country's economic revival, with its promise of increased global and regional prosperity, can help to bring such a world closer.

Getting to Yes on Transatlantic Financial Regulation
Christopher Brummer (Project Syndicate) Jan 23, 2014
As the transatlantic regulatory relationship deteriorates, the conclusion that most observers are reaching is that, even in financial rule-making, power politics trumps the common good. But regulatory divergences are not just a product of national interest; rule-making processes also have a major impact.

The Real Challenges to Growth
Michael Spence (Project Syndicate) Jan 23, 2014
Advanced economies’ experience since the 2008 financial crisis has spurred a rapidly evolving discussion of growth, employment, and income inequality. That should come as no surprise: For those who expected a relatively rapid post-crisis recovery, the more things stay the same, the more they change.

IMF conditionality and its discontents
Bretton Woods Observer Jan 23, 2014
A new study shows a significant worldwide pattern of protests targeting the IMF, reflecting the increase in IMF influence through loan programmes with austerity conditions attached and indirect pressure on governments.

World Bank strategy: untested innovation or more of the same?
Bretton Woods Observer Jan 23, 2014
The new World Bank Group strategy moves into the implementation stage with changes to country planning and internal structure, but critics say that little will change.

Our Man in Africa Foreign Policy Subscription Required Recommended!
Michael Bronner (FP) Jan 23, 2014
America championed a bloodthirsty torturer to fight the original war on terror. Now, he is finally being brought to justice.

Unequal societies in a more equal world Financial Times Subscription Required
Tim Harford Jan 24, 2014
It is misleading to suggest that a sharp rise in the income share of the rich in anglophone countries shows the plight of the world’s poorest is getting worse.

Erik Prince: Out of Blackwater and Into China Wall Street Journal Subscription Required
David Feith (WSJ) Jan 24, 2014
The former CIA asset on his latest venture: After being 'blowtorched' by U.S. politics, he says, this time he's working for Beijing.

What’s Behind the Emerging-Market Meltdown
Bloomberg View Jan 24, 2014
Emerging-market economies had a brutal week. For years, during the crash and its aftermath, they did well as the advanced economies slumped. Recently, not so much. Many developing countries are seeing their currencies drop and their bonds and equities hammered. Just as the global recovery appeared to be strengthening, a fresh source of instability has presented itself.

China-Dumps-Dollars Hoax Not So Funny
William Pesek (Bloomberg) Jan 24, 2014
If we could reverse engineer the mechanics of the global financial system, no sane person would recommend that relatively poor China prop up Americans living beyond their means.

The perils of denial Economist Subscription Required
Economist Jan 24, 2014
The big sell-off in emerging market currencies yesterday is an odd example of "remembrance of things past"; one's mind is drawn back to 1998, or even 1982 and the crises of old.

The Decline of Upward Mobility
Richard N. Haass (Project Syndicate) Jan 24, 2014
Concern about economic inequality is in the air almost everywhere. What should matter is not inequality per se, but rather whether citizens have a genuine opportunity to become rich, or at least become substantially better off.

Absent America
Jeffrey Frankel (Project Syndicate) Jan 24, 2014
The US Congress has now carelessly blocked a long-awaited reform of the IMF, which would be bad enough if it were an isolated episode. But this was just the latest in a series of self-inflicted blows since the turn of the century that have needlessly undermined America's claim to global leadership.

Marx Is Back Foreign Policy Subscription Required
Charles Kenny (FP) Jan 24, 2014
The global working class is starting to unite -- and that's a good thing.

China’s New Obsession: French Wine New York Times Subscription Required
Wilson T. Vorndick (NYT) Jan 25, 2014
Globalization stirs the fears and hopes of oenophiles.

Efficient retail payments and growth in Europe
Iftekhar Hasan & Tuomas Takalo (VoxEU) Jan 24, 2014
Efficient retail payments are associated not only with lower direct costs but also with indirect benefits, and ultimately – with enhanced economic growth. This column presents research on different retail payment habits in the Eurozone. A correlation exists between the forms of payment in a country and its recent economic fortune. There are a number of methods to promote more efficient payments. The biggest challenge to increase the efficiency of retail payments in Europe is the heavy regulation and barriers to entry of new payment methods.

A tippler’s guide Economist Subscription Required
Economist Jan 25, 2014
What SABMiller’s lager sales say about the state of African economies.

Will robots steal our jobs? The humble loom suggests not
James Bessen (WP) Jan 25, 2014
Two hundred years ago the Industrial Revolution came to America on the banks of the Charles River in Waltham, Mass., where in 1814, the Boston Manufacturing Company built the first integrated textile mill.

Russia against EU’s Eastern Partnership
Thorvaldur Gylfason & Per Magnus Wijkman (VoxEU) Jan 25, 2014
The EU’s Eastern Partnership is currently in turmoil. Armenia and Ukraine – two of the four partner countries (which also include Moldova and Georgia) did not initiate association agreements. This column discusses the role of Russia in discouraging such negotiations. The soft power of the EU was apparently no match for the hard power of Russia in the cases of Armenia and Ukraine. A successful partnership would require peaceful international relations between the four partners, and solving their conflicts with Russia.

Why Asian firms hold cash
Charles Yuji Horioka & Akiko Terada-Hagiwara (VoxEU) Jan 25, 2014
Corporate saving has sharply increased over the last two decades, but there has been relatively little research on its determinants. This column presents recent work that estimates Asian firms’ cash flow sensitivity of cash. The impact of cash flow on the increase in firms’ cash holdings is positive and statistically significant, and larger and more highly significant for smaller firms. Since smaller firms are more likely to be financially constrained, these results suggest that Asian firms – especially smaller ones – save more when their cash flow increases in order to finance future investments

Finance: In search of a better bailout Financial Times Subscription Required
Robin Wigglesworth (FT) Jan 26, 2014
The IMF wants to overhaul sovereign debt restructuring but critics warn the proposals will increase the severity and frequency of crises.

Buenos Aires is Argentina’s weakness Financial Times Subscription Required
Walter Molano (FT) Jan 26, 2014
Centralisation has become the animating force of the country’s politics, regardless of the consequences, and genuine devolution is urgently required.

America’s ‘exorbitant privilege’ is ebbing Financial Times Subscription Required
Delphine Strauss (FT) Jan 26, 2014
The dollar’s role in US global power – and China’s bid to supplant it – are tackled in this new collection of essays.

Asia's Scramble for Africa: Who Woos Best?
Shihoko Goto (Globalist) Jan 26, 2014
China and Japan wage a charm offensive to win access to Africa’s resources.

The Bernanke Tide Wall Street Journal Subscription Required
WSJ Jan 26, 2014
What the Fed gives to emerging markets it also takes away.

Lagarde Cautions Davos on Global Deflation Risk
Ian Katz (Bloomberg Businessweek) Jan 26, 2014
When Christine Lagarde arrived in Davos in 2008 as French finance minister, the battle was just beginning against a financial crisis that would bring the world economy to its knees. Six years later, as head of the International Monetary Fund, she warned the World Economic Forum at the Swiss mountain resort that the fight isn’t over, just before a currency crisis 7,000 miles away in Argentina reinforced her view.

Globalisation and growth are no cure-all Financial Times Subscription Required
Gideon Rachman (FT) Jan 27, 2014
World leaders are beginning to witness the emergence of new forms of political conflict that are resistant to their traditional prescriptions.

China’s boom risks turning into bust Financial Times Subscription Required
Ruchir Sharma (FT) Jan 27, 2014
History shows that the longer a credit hot streak lasts, the more likely it is to end abruptly. The risks grow every day that the binge continues.

Obama in tight spot over IMF impasse Financial Times Subscription Required
Richard McGregor (FT) Jan 27, 2014
To the annoyance of even fellows Democrats, Barack Obama seems to have all but given up on using the weight of office to bend Republicans to his will.

Love affair with pound to be tested Financial Times Subscription Required
Jamie Chisholm and David Bloom (FT) Jan 27, 2014
When the market shifts from interest rate fixation to a balance of payments model it will be ‘traumatic’ for sterling.

Two big questions about China Financial Times Subscription Required
Howard Davies (FT) Jan 27, 2014
One of the questions that keeps recurring: is the rapid growth of shadow banking in the country an accident waiting to happen?

Dinosaur tail risks
Martin Hutchinson (AT) Jan 27, 2014
The World Economic Forum's "Global Risks 2014" annual report supposedly outlines the hazards that could cause real trouble in the next decade. A lot of it was fashionable pap, but there do appear to be more "tail risks" than 50 years ago.

Argentina Learns Limits of Opportunism
Bloomberg View Jan 27, 2014
Argentina’s economic disarray has played a leading role in turning investors against emerging markets in recent days. Multiple policy errors and the prospect of tighter U.S. monetary policy fueled a surge of pessimism that drove down the peso and overwhelmed the government’s currency controls. The administration of President Cristina Fernandez de Kirchner announced a loosening of those restrictions Friday: She had no choice.

Squaring the Eurozone’s Vicious Circle
Lucrezia Reichlin and Luis Garicano (Project Syndicate) Jan 27, 2014
Over the last two years, European policymakers have been working to weaken banks’ grip on their sovereigns, introducing a Europe-wide supervisor and working toward a European resolution mechanism. But stabilizing eurozone financial markets also requires efforts in the other direction: mitigating sovereigns’ power over domestic banks.

Deep Decarbonization
Jeffrey D. Sachs (Project Syndicate) Jan 27, 2014
Wherever the oil, coal, or gas industry is a large economic player, politicians typically are afraid to tell the truth about the need for low-carbon energy. “Brave” politicians who tell the truth about climate change are found mainly in countries that do not have a fossil-fuel industry.

The Energy Internet
Kandeh K. Yumkella (Project Syndicate) Jan 27, 2014
In the next 20 years, almost three billion people will join the middle class, propelling global demand for more and better housing, televisions, cars, food, water, energy, and myriad other goods and services. How, then, can the world sustain economic development and reduce poverty, without fueling an environmental catastrophe?

America’s False Dawn
Stephen S. Roach (Project Syndicate) Jan 27, 2014
Financial markets and the so-called Davos consensus are in broad agreement that something close to a classic cyclical revival in the US economy may finally be at hand. But, while the celebration may seem warranted at first glance, the champagne should be kept on ice.

Climate of Corruption Foreign Policy Subscription Required
Ty McCormick (FP) Jan 27, 2014
How a $50 million graft scandal is pushing Malawi even closer to environmental catastrophe.

The global economic outlook
Olivier Blanchard (VoxEU) Jan 27, 2014
The global economy seems to be on the mend. In this column, IMF Chief Economist Olivier Blanchard provides a quick overview of the likely developments. The key points are that the recovery is happening as expected, but it remains fragile and uneven across major economies. Normalising monetary policy poses risks for vulnerable emerging markets and deflation is a real concern for the Eurozone.

Sandwich generation: From the cradle to the grave Financial Times Subscription Required
Emma Jacobs (FT) Jan 28, 2014
As more employees become responsible for ageing parents, companies are finding that providing care for the elderly makes sound financial sense.

The challenges of a post-crisis world Financial Times Subscription Required
Martin Wolf (FT) Jan 28, 2014
What is to be done? Nations must nurture recovery and promote reform. Co-operation and communication should be the order of the day.

The rich stay rich while the poor struggle Financial Times Subscription Required
John Kay (FT) Jan 28, 2014
Thanks to globalisation the centres of major cities now appear similar. But strange and exotic sights still exist in Nairobi and Shanghai.

China is biggest risk to emerging markets Financial Times Subscription Required
Henny Sender (FT) Jan 28, 2014
Beijing’s efforts to tighten credit combined with a slowing of growth in China are having a ripple effect across emerging markets and beyond.

Argentina on the Brink New York Times Subscription Required
NYT Jan 28, 2014
Misguided government policies have stoked inflation and raised fears of another financial crisis.

‘Fragile Five’ Is the Latest Club of Emerging Nations in Turmoil New York Times Subscription Required
Landon Thomas Jr (NYT) Jan 28, 2014
The name identifies Turkey, Brazil, India, South Africa and Indonesia as economies too dependent on skittish foreign investment to finance their growth ambitions.

Capitalism vs. Democracy New York Times Subscription Required
Thomas B. Edsall (NYT) Jan 28, 2014
Is deepening inequality inevitable? The case for a global wealth tax.

2014 Oil Outlook: How Slick Is the Oil Slope
Greg E. Sharenow (PIMCO) Jan 28, 2014
While the supply outlook tilts the balances toward bearish in 2014, an improving global economy is a positive for oil demand and a support for prices. With roll yields positively contributing to returns, investors ultimately could be paid to hold a security that hedges both global event risk and any resulting shock to inflation. Growth in shale oil has been a powerful moderating force for prices by both filling an important gap in global supply and demand and by anchoring the back end of the futures curve.

Demystifying Gold Prices
Nicholas J. Johnson (PIMCO) Jan 28, 2014
What is it about gold prices? Many people seem to believe they are impossible to predict, or even understand.

The IMF is Courting New Risks with a Change in Policy on Debt Restructuring
Douglas A. Rediker and Angel Ubide (PIIE) Jan 28, 2014
With surprisingly little public debate, the International Monetary Fund (IMF) is on the verge of confronting one of the most sensitive issues in international finance: how to balance political and economic considerations when a country loses market access and needs to restructure its debt or its economy, or both. In the next several weeks, the Fund is expected to release a follow up to last year's controversial staff paper on sovereign debt restructuring, which could dramatically alter how countries borrow and the risks for investors who lend to them.

Will China Stop Taper?
David Llewellyn-Smith (EconoMonitor) Jan 28, 2014
That is the question today. Let’s first ask markets.

Why Economic Mobility Is Stuck in Neutral
Cass R. Sunstein (Bloomberg) Jan 28, 2014
We are seeing an outpouring of new empirical work on inequality, led by the economists Raj Chetty of Harvard University and Emmanuel Saez of the University of California at Berkeley. The findings in their two latest papers, written with several co-authors, are casting a fresh light on contemporary political debates.

When Easy Money Ends
Richard Cooper and Richard Dobbs (Project Syndicate) Jan 28, 2014
Observers seize upon every new piece of economic data to forecast the continuation of quantitative easing or an acceleration of its decline. But more attention needs to be paid to the impact of either outcome on different economic players.

The PADRE plan: Politically Acceptable Debt Restructuring in the Eurozone
Pierre Pâris & Charles Wyplosz (VoxEU) Jan 28, 2014
The Eurozone will either struggle for decades with very high public debts, or it will restructure. This column introduces a new Geneva Special Report on the World Economy arguing that the restructuring option is workable and preferable. The plan – dubbed PADRE – would substantially lower EZ nations’ debts without cross-nation transfers and with limited moral hazard. The financing is simple. Each EZ member’s debt is reduced by the securitisation of its own share of ECB seignorage.

Elite migrant workers must be welcomed Financial Times Subscription Required
John Gapper (FT) Jan 29, 2014
Skilled migrants boost their host cities by inspiring economic activity. They also attract new employers and are a wellspring of new companies.

Investors put too much faith in Modi Financial Times Subscription Required
David Pilling (FT) Jan 29, 2014
Assuming that he is elected, it is not clear that India’s most talked-about politician could do for the national economy what he did for Gujarat.

Markets beyond Turkey face stormy skies Financial Times Subscription Required
George Magnus (FT) Jan 29, 2014
It is true that many emerging markets look stronger today than in the 1990s. At the same time they are also more vulnerable to shocks.

China sensitive assets in thrall to PMI Financial Times Subscription Required
Jamie Chisholm (FT) Jan 29, 2014
The final reading of China’s HSBC/Markit manufacturing purchasing manager’s index will be closely watched head of lunar new year.

Eurozone must maintain reform momentum Financial Times Subscription Required
Andreas Utermann (FT) Jan 29, 2014
Momentum for change already appears to be receding while important risk factors serve as a reminder the eurozone is not yet out of the woods.

Investors Still Wary of Efforts to Shore Up Currencies New York Times Subscription Required
Jack Ewing and Sebnem Arsu (NYT) Jan 29, 2014
Turkish and South African currencies plummeted on Wednesday, despite emergency measures by their central banks.

Reforms in China: The impact on growth
Michael Pettis (AT/CFM) Jan 29, 2014
Economic reforms recently proposed by China's leaders aim to unlock greater productivity potential in the economy and return the country to a sustainable growth path. But, even assuming they are forcefully implemented, the higher productivity resulting from the reforms will not lead to higher reported GDP growth.

The deflation 'ogre'
Noureddine Krichene (AT) Jan 29, 2014
Central bank inflationists are still not satisfied with stocks rising at 30% a year, defying the reality faced by ordinary workers who have to contend with rising prices of everyday essentials. Such officials are scared by the deflation "ogre", and their miserable track record since 2002 cannot dissuade them from their destructive policies.

Pacific nations need help away from aid
Catherine Wilson (AT/IPS) Jan 29, 2014
Long-term dependence on aid in Pacific Island nations, some of whom rely on foreign funding for more than half their government development budgets, continues to cause concern. Pacific experts are calling for greater political will for locally driven self-sustaining economic growth.

Could Britain's Past Be America’s Future?
Charles Kenny (Globalist) Jan 29, 2014
Is the end of empire such a bad thing? Perhaps for the elites, but not for the population at large.

A Brain’s View of Economics
Ricardo Hausmann (Project Syndicate) Jan 29, 2014
The human brain makes predictions by finding similarities between the patterns in recent sensory inputs and previous experiences stored in its vast memory. The same process is now perfectly feasible for those engaged in promoting economic development.

New Paths for Development Finance
Mahmoud Mohieldin (Project Syndicate) Jan 29, 2014
The post-2015 development agenda promises to take on the unfinished business of the Millennium Development Goals, while adding objectives related to sustainability, growth, and inclusion. Financing such an agenda will require the more efficient use of existing resources, as well as the mobilization of new funding sources.

The World Economy’s Impossible Demand
Marek Dabrowski (Project Syndicate) Jan 29, 2014
Policymakers worldwide continue to focus on short-term demand management in the hope of resurrecting pre-2008 growth rates. But supply-side factors indicate that demand stimulus cannot be sustained over the longer term – or even serve as an effective short-term policy.

The Great War’s Long Shadow
Joschka Fischer (Project Syndicate) Jan 29, 2014
This year marks the centennial of the outbreak of World War I, which is reason enough to reflect on what this seminal European catastrophe teaches us today. Indeed, the Great War’s consequences for international relations and the global system of states continue to be felt.

Assured Mutual Dependence
Alejandro Litovsky and Michael Schaefer (Project Syndicate) Jan 29, 2014
During the Cold War, the certainty of “mutually assured destruction” steered the nuclear arms race away from catastrophe: a would-be attacker would face immediate retaliation, inevitably ending in both sides’ annihilation. Today, a very different race – a resource race – is undermining stability in key regions of the world.

Inequality and household debt: New evidence
Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak & John Mondragon (VoxEU) Jan 29, 2014
One popular explanation for the increase in US household debt in the years before the subprime mortgage crisis is that households with stagnating incomes borrowed more to ‘keep up with the Joneses’. This column presents recent research that questions this explanation. Low-income households in high-inequality regions in fact borrowed relatively little compared to similar households in low-inequality regions. A theoretical model in which greater local income inequality facilitates the screening of loan applicants makes predictions that are consistent with the data.

Emerging markets: Fear of contagion Financial Times Subscription Required
James Kynge (FT) Jan 30, 2014
Policy makers from Argentina to Turkey are scrambling to defend their currencies, raising concerns that further turmoil lies ahead.

India is still in the great Asian race Financial Times Subscription Required
Philip Stephens (FT) Jan 30, 2014
The chaos of democracy blunts the communal rivalries and separatist impulses that once held the threat of break-up.

England must reject Scottish currency union Financial Times Subscription Required
Martin Wolf (FT) Jan 30, 2014
It would be folly for the rest of the UK to enter such an arrangement voluntarily, given what has happened in the eurozone.

Poor credit stalling Europe’s recovery Financial Times Subscription Required
Sarah Gordon (FT) Jan 30, 2014
While region’s giants gorge on cheap credit, smaller companies deal with scarcity of funding and, in the region’s periphery, a veritable drought.

Obama fights own party over trade deals Financial Times Subscription Required
Shawn Donnan (FT) Jan 30, 2014
Trade remains a deeply divisive issue for Democrats but with midterm elections looming a senior party figure cautions against an internecine battle.

Dark Side of Capital in Emerging Markets New York Times Subscription Required
Floyd Norris (NYT) Jan 30, 2014
For countries like Turkey, the tide of investment from abroad has turned.

Emerging Markets Inflow Numbers Point to Exit by Bond Investors New York Times Subscription Required
Landon Thomas Jr (NYT) Jan 30, 2014
When bond investors pull out — as they have been doing in Turkey, Brazil, India and other such countries, according to data from a financial trade group — the broader economic effect could be pronounced, a new paper argues.

Talking Troubled Turkey New York Times Subscription Required
Paul Krugman (NYT) Jan 30, 2014
The last thing we needed right now was a new economic crisis in a country overwhelmed with political turmoil. Haven’t we heard this one before?

Obama Presses for "Fast Track" Trade Powers, Climate Action
Bridges Weekly Trade News Digest, Volume 18, Number 3 Jan 30, 2014
US President Barack Obama made a public call on Tuesday for Congress to pass "fast track" trade powers, as part of a larger effort to advance ongoing negotiations with the EU and with 11 Asia-Pacific countries. Climate action was another key component of his State of the Union address, which comes after what analysts generally say was the toughest year of Obama's presidency.

"Green Goods" Trade Initiative Kicks Off in Davos
Bridges Weekly Trade News Digest, Volume 18, Number 3 Jan 30, 2014
A group of 14 WTO members – including the US, EU, and China – has agreed to pursue "global free trade" in environmental goods, announcing last week their plan to negotiate a plurilateral deal that would eliminate tariffs on such products.

Australian PM: For Upcoming G-20 Summit, "Trade Comes First"
Bridges Weekly Trade News Digest, Volume 18, Number 3 Jan 30, 2014
Australian Prime Minister Tony Abbott made a strong public call at last week's World Economic Forum in Davos, Switzerland, for G-20 members to put free trade "first" as they work to sustain the momentum of the global economic recovery. Australia is the holder of this year's G-20 presidency, taking the helm from Russia, with the annual leaders' summit scheduled for November in the city of Brisbane.

China's Rise Leads India and Japan to Wary Embrace
Harsh V. Pant (YaleGlobal) Jan 30, 2014
Japan and India are forging closer ties, in part because of shared interests as Asian democracies but also to counter China’s assertive rise and prepare for a decline in US security spending. Harsh V. Pant of King’s College points out that “changing geopolitical realities are now forcing Delhi to acknowledge significant convergence between its own regional interests and that of longstanding US allies such as Japan and South Korea.”

High Yield in 2014: Where Can You Look for Upside in a 'Medium Yield' Market?
Andrew R. Jessop & Hozef Arif (PIMCO) Jan 30, 2014
Default rates and credit losses in high yield markets remain below their long-term averages, and we believe default rates will remain low in 2014 and 2015 as well. Investors should consider positioning for better convexity via exposure to sectors with favorable industry dynamics and positive event risk from M&A or equity offerings, potential upside from price recovery in high quality bonds trading below par and exposure to select new supply from former investment grade companies.

The Temptation of the Central Bankers
Simon Johnson (Project Syndicate) Jan 30, 2014
Keeping global megabanks in business and highly profitable has become a key objective for policymakers in the US, Europe, and many other countries. All too often, however, this means that central bankers defer to these firms’ executives.

Is America Turning Japanese?
J. Bradford DeLong (Project Syndicate) Jan 30, 2014
Japan’s economy today is some 40% smaller than observers back in the late 1980’s confidently predicted. According to all evidence, the US economy’s fall from its long-run growth path has left America 7% poorer today (and into the indefinite future) than expected just seven years ago.

Cut the Spending, Spare the Poor
Jean Pisani-Ferry (Project Syndicate) Jan 30, 2014
Some European governments have no choice but to cut inequality-reducing programs, and others may find it more politically expedient to change the distribution of income than to enforce efficiency. But others can still do much to trim public spending without undermining the European social model.

January 2014 Capital Flows to Emerging Market Economies Recommended!
Various (IIF) Jan 30, 2014
Emerging market conditions have continued to be quite choppy, including a significant market correction in early 2014. We do not anticipate a sustained pull-back from emerging markets, but investors have become increasingly sensitive to country risks, which will test countries that experience heightened political uncertainties or do not take timely and decisive measures to address weaknesses in policy frameworks. As our baseline scenario, we continue to expect a gradual rebound in capital flows in 2014 and 2015, in line with a projected sustained pick-up in world growth and a gradual Fed exit. However, flows will remain at a much lower level relative to GDP than over 2010-2012 and uncertainty around our baseline projection remains high.

Emerging Markets’ Victimhood Narrative
Dani Rodrik and Arvind Subramanian (Bloomberg) Jan 31, 2014
From Istanbul to Brasilia to Mumbai comes a crescendo of complaints about dollar imperialism. Heads of state and central bank governors allege that the policies of central banks in industrial countries, especially the U.S. Federal Reserve, pursued in self-interest, are wreaking havoc in emerging-market economies. This allegation is mostly unfair. Emerging markets aren’t hapless and undeserved victims; for the most part they are simply reaping what they sowed.

All Praise Ben Bernanke
Clive Crook (Bloomberg) Jan 31, 2014
Economists are mostly impressed with Bernanke's record, but conservative politicians and pundits certainly aren't. That's a problem, because to remain an effective central bank the Fed needs to guard its operational independence.

Has Monetary Cooperation Broken Down?
Edwin M. Truman (PIIE) Jan 31, 2014
When Governor Raghuram Rajan of the Reserve Bank of India, an acknowledged international monetary heavyweight, speaks he makes news. Often he delivers a well-deserved wake-up call. Unfortunately, on January 31, speaking to Bloomberg and as reported in the Financial Times, he sounded the wrong alarm in declaring that international monetary cooperation has broken down and implicitly blaming the difficulties facing a number of emerging market countries on that breakdown. Governor Rajan did a disservice to international monetary cooperation in three respects.

The Trouble with Emerging Markets
Nouriel Roubini (Project Syndicate) Jan 31, 2014
The financial turmoil that hit emerging-market economies in the spring of last year, following the Federal Reserve’s “taper tantrum” over its quantitative-easing policy, has returned with a vengeance. But the immediate trigger for these pressures should not be confused with deeper causes: Many emerging markets are in real trouble.

China’s Risky Credit Boom
Andrew Sheng and Xiao Geng (Project Syndicate) Jan 31, 2014
Credit in China is growing at a breakneck pace, raising serious concerns about the level of risk in the financial system. The government now must determine how to balance the economy’s liquidity needs with protecting the system's solvency.

The Future of American Growth
Martin Feldstein (Project Syndicate) Jan 31, 2014
The Congressional Budget Office projects that real per capita GDP growth in the US will slow from an annual rate of 2.1% in the 40 years before the recent recession to just 1.6% over the next 40 years. Even so, the average 30-year-old in 2044 will be far better off than the average 30-year-old today.

Privatisation and debt: Lessons from Greece’s fiasco
Paolo Manasse (VoxEU) Jan 31, 2014
Sales of state-owned assets have been proposed as a way for highly-indebted countries to ease the pain of fiscal consolidation. This column argues that, despite the potential merits of privatisation in terms of long-run efficiency, in practice it is unlikely to improve short-run fiscal solvency. Since governments rarely alienate control rights, the efficiency gains from privatisations are often small. Moreover, financial markets may not fully reflect these gains – particularly during a financial crisis. The implication is that the Troika policy of linking financial assistance to privatisations is inappropriate and self-defeating.

What’s behind recent trends in Asian corporate bond markets? Adobe Acrobat Required
Hannah Levinger and Chen Li (DB Research) Jan 31, 2014
Corporate bond markets in Asia have expanded rapidly. Since the global financial crisis, Asian corporates have made increasing use of bond issuance for their funding needs, complementing traditional channels such as bank lending. While the bond markets of Hong Kong, Singapore and Korea are comparatively advanced and liquid, markets in China, India, Indonesia and Thailand are still at an early stage of development. Considerable variation exists in terms of bond issuances' structural characteristics by sector, currency, issuing volume and the use of funds. Fast growth in bond markets has provided an effective source of financing for the corporate sector, but its development is far from complete.

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