The Coming Wave
G. Andrew Karolyi, David T. Ng, and Eswar S. Prasad (F&D) Jun 1, 2013
Private investors from emerging market economies increasingly put their funds in overseas assets.
The End of Cheap Labor
Mitali Das and Papa N'Diaye (F&D) Jun 1, 2013
China's working-age population is poised to decline, with big implications for China and the rest of the world.
Prudent or Profligate?
Paolo Mauro, Rafael Romeu, Ariel Binder, and Asad Zaman (F&D) Jun 1, 2013
A new database permits a two-century look at countries' success in managing their debt.
Amadou N.R. Sy (F&D) Jun 1, 2013
A growing number of countries in sub-Saharan Africa are tapping international capital markets.
A new era for manufacturing in China
Karel Eloot, Alan Huang, and Martin Lehnich (McKinsey Quarterly) Jun 1, 2013
Companies that continue to base their manufacturing strategies on the country's low wages and high domestic growth rates are in for a shock.
Winners and losers in China’s next decade
Michael Pettis (McKinsey Quarterly) Jun 1, 2013
The move from investment to consumption will drive some industries forward, while hampering others.
Mapping China’s middle class
Dominic Barton, Yougang Chen, and Amy Jin (McKinsey Quarterly) Jun 1, 2013
Generational change and the rising prosperity of inland cities will power the country's consumption for years to come.
After the Gold Rush
Nouriel Roubini (Project Syndicate) Jun 1, 2013
The run-up in gold prices in recent years – from $800 per ounce in early 2009 to above $1,900 in the fall of 2011 – had all the features of a bubble. And now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.
The Balkans: Europe's Soft Underbelly
Branko Milanovic (Globalist) Jun 1, 2013
Can Europe prosper while ignoring the Balkans? Anyone remember what triggered a world war a century ago?
Why austerity is like a B-movie monster
Wolfgang Münchau (FT) Jun 2, 2013
The eurozone behaves like a regular large, closed economy. The trouble is that it is run, and often analysed, as no more than the sum of its parts.
Ireland’s woes are more than a bank crisis
Jamie Smyth (FT) Jun 2, 2013
An excellent guide to the demise of the Celtic Tiger – but the definitive work on the Irish financial crisis is yet to be written.
China Is Reaping Biggest Benefits of Iraq Oil Boom
Tim Arango & Clifford Krauss (NYT) Jun 2, 2013
Since the toppling of Saddam Hussein, Chinese state-owned companies have poured workers and billions of dollars into Iraq to secure a steady supply of energy for China
The hazy Chinese dream
Fred Hiatt (WP) Jun 2, 2013
Does Xi Jinping’s vision include the rule of law?
ASEAN: Does convergence mean polarisation?
Jayant Menon (VoxEU) Jun 2, 2013
How will the new members of ASEAN catch up? This column argues that the gap in income is closing between the two groups within ASEAN: the newly industrialising economies and the older members. However, a marked cost of this convergence has been increasing income inequality within individual countries. To remedy this, and to increase overall convergence, a number of conditions must be simultaneously met: investment in social infrastructure, especially education and health; improving the investment climate; and land reform that directly redresses asset inequality.
Who profits from trade-facilitation initiatives?
Bernard Hoekman & Ben Shepherd (VoxEU) Jun 3, 2013
Making international trade easier and less bureaucratic – trade facilitation in WTO jargon – is one of the few areas where WTO talks are still making progress. This column discusses recent research that looks at the distribution of gains from trade facilitation among exporters of different sizes. Firm-level data from many developing countries show that firms of all sizes export more in response to improved trade facilitation.
Japan's Easy Money Tsunami
David Howden (Mises Daily) Jun 3, 2013
The Bank of Japan has just embarked on one of the most inflationary policies ever undertaken. Pledging to inject $1.4 trillion dollars into the economy over the next two years, the policy is aimed at generating price inflation of 2% and further depreciating the Yen. The idea is to fight “deflation” and increase exports.
Lower yen could pop China’s asset bubbles
Charles Dumas (FT) Jun 3, 2013
China’s real exchange rate has become overvalued, and it is heavily exposed to developed world countries ratcheting down their real exchange rates Read more >>
Bond haircuts in fashion for banks
Patrick Jenkins (FT) Jun 3, 2013
There is a growing belief that even banks that are rich in deposits should be forced to hold large quantities of bonds that could be ‘bailed in’
China's Development a 'Threat' to Democracies, Authors Say
Didi Kirsten Tatlow (NYT/IHT) Jun 3, 2013
As China buys strategic assets around the world and flexes its commercial muscle, will Western countries increasingly have to play by Beijing’s statist rules? Do these threaten democracies?
A Better Way to End 'Too Big To Fail'
David Skeel (WSJ) Jun 3, 2013
Let the giant banks themselves choose how to downsize their institutions.
The economics of the 'Turkish Spring'
Spengler (AT) Jun 3, 2013
The credit bubble that cosseted Erdogan's incipient Islamist dictatorship has now burst while politically directed generosity has come back to bite Turkish consumers. For a growing proportion of Turkish voters who mistrusted his agenda but liked his economics while the going was good, the devil they thought they knew hasn't kept his side of the bargain.
East Asia’s Lessons for Africa
Joseph E. Stiglitz (Project Syndicate) Jun 3, 2013
On June 1-3, Japan is hosting the fifth meeting of TICAD, the Tokyo International Cooperation on African Development. Japan’s engagement is particularly important not only in terms of money and moral support, but also because Africa may learn something from East Asia’s development experience.
Anchoring the Arab Awakening
Erik Berglof (Project Syndicate) Jun 3, 2013
The economic situation in the so-called Arab Awakening countries is deteriorating quickly, and the imperative for large-scale coordinated action is overwhelming. But the post-1945 Marshall Plan in Europe, which targeted countries with well-developed economic institutions, is the wrong model.
The Misrule of Law
Ana Palacio (Project Syndicate) Jun 3, 2013
Legality has emerged as the basis of authority in the modern world, replacing tradition and charismatic leadership. The problem is that those who are more interested in authority than legality are using the language of the rule of law to legitimize their dictatorial behavior, weakening the rule of law in the process.
China Crisis Is Good for the Global Economy
William Pesek (Bloomberg) Jun 3, 2013
The world should stop panicking over China’s economic slowdown. It’s actually a good thing.
An Austerity Success Story in Slovenia
Megan Greene (Bloomberg) Jun 3, 2013
Germany’s approach to repairing the euro area’s finances, by holding the feet of feckless governments to the fire and forcing them to make difficult adjustments, has lately fallen out of favor. The case of Slovenia, though, suggests the tough-love strategy might yet have some merit.
America owes a lot to Bernanke
Martin Wolf (FT) Jun 4, 2013
Those who criticise the Fed’s policies either lack imagination or are indifferent to what would have happened if the central bank had sat on its hands.
Poor nations offer healthcare advances
Muhammad Yunus (FT) Jun 4, 2013
A system utilising mobile phones and other services but tailored to the needs and resources of low-income patients is testing its upmarket counterpart.
The new leaders of global growth
Chris Giles and Kate Allen (FT) Jun 4, 2013
Advanced economies are now less important than poor and middle-income countries, with China and India making up almost half of world economic expansion.
Don’t ‘fast track’ free trade
Harold Meyerson (WP) Jun 4, 2013
Protecting the American people from bad deals.
How big are productivity gains from FDI?
Christian Fons-Rosen, Sebnem Kalemli-Ozcan, Bent E. Sørensen, Carolina Villegas-Sanchez & Vadym Volosovych (VoxEU) Jun 4, 2013
During the decades of globalisation, flows of foreign direct investment have surged in parallel with extensive policy momentum. This column examines whether the net aggregate gain from FDI is positive using a large panel of firms from 30 European countries. It turns out that even very large increases in FDI are not important for country-level productivity growth.
The origins of entrepreneurship and innovation clusters
Aaron Chatterji, Edward Glaeser & William Kerr (VoxEU) Jun 4, 2013
Contrary to received wisdom, entrepreneurial clusters in the US – like Silicon Valley – are seen as success stories. But what is the rationale behind these clusters? Do they actually work? This column reviews the evidence and discusses localised policies currently being pursued in the US. In general, our understanding of what works remains limited and economists should more thoroughly pursue researching the effects of entrepreneurial clusters.
The Threat to the Central-Bank Brand
Mohamed A. El-Erian (Project Syndicate) Jun 4, 2013
For the last 30 years, Western central banks have used their "brand" to help maintain low and stable inflation: by signaling their intention to contain price pressures, they would alter expectations and behavior. But, as corporate executives know, brand management is a tricky affair, particularly when popular sentiment overshoots.
The Latin Difference
Harold James (Project Syndicate) Jun 4, 2013
French President François Hollande is constantly flirting with the idea of building a new Latin bloc in Europe, in which Spain and Italy would join France in the struggle against fiscal austerity. In fact, the view of debt that Hollande's vision assumes harks back to the French Revolution of 1789.
Relax! China Isn't Taking over The World (Yet)
Jonathan Anderson (Globalist) Jun 4, 2013
Will Chinese products soon put everyone in the rest of the world out of a job?
Fix Money-Market Funds Before the Next Crisis
Bloomberg View Jun 4, 2013
The U.S. Securities and Exchange Commission blew a chance last year to reduce the odds that money-market mutual funds will play a starring role in another financial crisis, as they did in 2008.
Record equities highs are far from crazy
Peter Oppenheimer (FT) Jun 5, 2013
The gradual rise in risky assets likely to continue as risk premia moderate further, and profits and dividends grow on the back of an improving global economic cycle.
A cap on Gazprom’s ambitions
Guy Chazan and Neil Buckley (FT) Jun 5, 2013
Gazprom once symbolised Russia’s claim to be an energy superpower but is now losing its hold on European markets after misreading the US shale boom.
China isn’t a superpower
Fareed Zakaria (WP) Jun 5, 2013
And the U.S. shouldn’t treat it like one.
Is the euro a foreign currency to member states?
Giancarlo Corsetti & Luca Dedola (VoxEU) Jun 5, 2013
Spain and Britain have similar debt problems. So why does Spain face far higher sovereign-interest rates? Is this because Eurozone membership makes national economies vulnerable to self-fulfilling debt crises? This column argues that EZ membership does not fully explain this discrepancy. A central bank can provide an effective backstop to national debt both in monetary unions and in countries with their own currency. EZ members are more vulnerable to debt crises to the extent that the ECB cannot count on the joint support of national fiscal authorities.
The urgent need to recapitalise Europe’s banks
Harald Benink & Harry Huizinga (VoxEU) Jun 5, 2013
Europe has been postponing the recapitalisation of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalisation, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.
What to Do When the Invisible Hand Stops Working
Mark Buchanan (Bloomberg) Jun 5, 2013
Economists rave about the power of the market to deploy productive resources better than any central planner possibly could. A mysterious process, which Adam Smith called the “invisible hand,” guides countless individuals with conflicting aims to somehow coordinate into a remarkably effective economic organization. Usually.
Nations and the illusion of sovereignty
Philip Stephens (FT) Jun 6, 2013
The concept of freedom to act has been gaining wider appeal but it as compelling as it is unrealistic.
China and US should strike a bargain
Arvind Subramanian (FT) Jun 6, 2013
The world’s two leading powers need to make a deal that would preserve the very institutions through which the global economy functions.
‘Frankenstein’ CDOs twitch back to life
Gillian Tett (FT) Jun 6, 2013
It is not so much the CDO technology itself that is problematic, but how it is sometimes used – or abused – amid a desperate search for yield.
Finance: Forced into the shadows
Anne-Sylvaine Chassany and Henny Sender (FT) Jun 6, 2013
With Europe’s banks reluctant to lend to struggling companies, private equity groups are stepping in – but the emergence of US-style financing comes at a price.
That Third Bent Arrow
Michael Cucek (NYT) Jun 6, 2013
Abenomics is just old-school dirigisme applied to airy aspirations.
European Commission Imposes Duties on Chinese Solar Panels
Bridges Weekly Trade News Digest, Volume 17, Number 20 Jun 6, 2013
The European Commission confirmed on Tuesday that it would be imposing anti-dumping duties on imports of Chinese-made solar panels, as well as their component wafers and cells. The provisional duties, however, have been temporarily scaled-back in order to allow some time for the two sides to seek an amicable solution.
Lamy: July the "Last Petrol Stop" on the Road to Bali
Bridges Weekly Trade News Digest, Volume 17, Number 20 Jun 6, 2013
With just weeks before the WTO's annual summer break, "time is turning against us," Director-General Pascal Lamy warned members on Monday, referring to the pace of efforts to prepare a package of deliverables for the organisation's ministerial conference this December in Bali, Indonesia.
UN Panel Outlines Recommendations for Post-2015 Development Agenda
Bridges Weekly Trade News Digest, Volume 17, Number 20 Jun 6, 2013
The world should aim to end extreme poverty by 2030, according to a report released last week by a UN panel tasked with advising on a post-2015 development framework. The report aims to advise on the direction of a global development agenda when the Millennium Development Goals (MDGs) expire in two years' time.
China: The Dark Side of Growth
Yanzhong Huang (YaleGlobal) Jun 6, 2013
China’s intense focus on rapid growth carries health, environmental and social costs.
Regional transfers in Europe: Do we need fewer of them or different ones?
Sascha O Becker, Peter Egger & Maximilian von Ehrlich (VoxEU) Jun 6, 2013
The EU encourages regional cohesion through transfers for structural changes and development. This column presents new research suggesting that some poorer countries don't benefit as well as we might expect. This is likely to be because of worse technological and institutional absorptive capacity. Structural transfers need reform, and policymakers would do well to focus on recipients’ absorptive capacity.
Doing Business – less icing, more cake!
Thorsten Beck (VoxEU) Jun 6, 2013
The World Bank’s ‘Doing Business’ data collection project is under threat from large nations who score poorly, especially China. This column argues that although there are problems with country rankings, the underlying data is very valuable for empirical researchers. The Doing Business project should continue quantifying different dimensions of the business environment, but reduce its focus on country rankings.
Europe’s Youth Unemployment Non-Problem
Daniel Gros (Project Syndicate) Jun 6, 2013
European policymakers have decided that they must be seen to be “doing something” about youth unemployment. But there are several reasons to doubt that youth unemployment is a discrete problem meriting special treatment.
Inflation Is Still the Lesser Evil
Kenneth Rogoff (Project Syndicate) Jun 6, 2013
The world’s major central banks continue to express concern about inflationary spillover from their recession-fighting efforts. That is a mistake: given the political, social, and economic risks of continued slow growth, policymakers should encourage a sustained burst of moderate inflation.
Allan H. Meltzer (Project Syndicate) Jun 6, 2013
The US Federal Reserve's expansionary monetary policy has failed to bolster demand and employment growth, while embedding inflation in America's future. Moreover, it has distracted attention from the real problems facing the US economy, which monetary policy is powerless to solve.
Global factors in capital flows and credit growth
Valentina Bruno & Hyun Song Shin (VoxEU) Jun 7, 2013
‘Global liquidity’ focuses on the role of cross-border banking in the international transmission of financial conditions. This column argues that when global banks apply more lenient conditions on national banks by supplying wholesale funding, national banks transmit the more lenient conditions to their borrowers through greater availability of local credit. Researchers and policymakers would do well to recognise the role of global liquidity as a key concept in international finance.
Complex bilateral trade agreements
Peter Egger & Georg Wamser (VoxEU) Jun 7, 2013
Free trade agreements are often signed in conjunction with other bilateral economic agreements such as investment agreements, double taxation treaties, or even currency agreements. This column argues that this trend reflects the greater complexity of 21st century economic integration – especially the intertwining of FDI and trade in goods and services. Economists should analyse the effects of all such agreement conjointly. Failing to do so may result in attributing trade booms to the wrong policies.
Central Banking’s New Face
Paola Subacchi (Project Syndicate) Jun 7, 2013
Recently, the Bank of Japan announced plans to unleash the world's most aggressive quantitative easing program, as part of a comprehensive economic strategy. This coordination of monetary and fiscal policy has spurred a rethinking of central banks' role – and could portend a new era of active and varied monetary policy.
Exit strategies: Time to think ahead
Charles Wyplosz (VoxEU) Jun 8, 2013
Central banks on both sides of the Atlantic are pondering ways of unwinding their bloated balance sheets and easing out of extraordinary post-crisis monetary policy interventions. This column discusses the recent Geneva Conference on the World Economy that focused on ‘exit strategies’. Where exactly do central banks exit? And how? This column also introduces a new Vox feature, ‘Vox Views’, which are short video interviews with world-renown economists. The first two of these feature Alan Blinder and Don Kohn.
Commodities: Shocks and ores
Economist Jun 8, 2013
Short-term gyrations in commodity prices may do more damage than long-run trends.
The Danger of Politicized Foreign Investment Reviews
Daniel Rosen and Thilo Hanemann (The Hill/PIIE) Jun 8, 2013
At their Sunnylands summit this week, President Obama and China's President Xi Jinping are sure to discuss American attitudes toward Chinese investment in the United States. The announced takeover of US pork producer Smithfield by China's Shuanghui has stirred a public debate about foreign takeovers in the United States. Not surprisingly, many Americans have squealed at the idea of a Chinese firm with its hands on their morning bacon. And some experts are calling for an expansion of foreign investment reviews beyond just national security to include a wide range of public policy goals including food safety or labor rights. However, such an expansion of US investment screening would do little to address existing concerns while opening the door to protectionist abuse.
Economy: Out of proportion
Jamil Anderlini (FT) Jun 9, 2013
A visit to a model village that is proving to be a microcosm of the nation as it struggles to diversify out of manufacturing.
Hail the honesty about Greece’s bailout
Wolfgang Münchau (FT) Jun 9, 2013
The IMF’s recognition of excessive optimism about growth is to be welcomed, but the hard part will be acting on it.
A pessimist’s guide to the Great Recession
Ferdinando Giugliano (FT) Jun 9, 2013
A provocative critique of policy makers’ response to the economic crisis is lively but offers excessively conventional alternatives.
Japan Is a Model, Not a Cautionary Tale
Joseph E. Stiglitz (NYT) Jun 9, 2013
Along many dimensions — greater income equality, longer life expectancy, lower unemployment, and greater investments in children’s education and health — Japan has done better than the United States.
The Ghosts of Europe Past
Brendan Simms (NYT) Jun 9, 2013
The European Union closely resembles a formation that many citizens thought they had left to the dustbin of history: the Holy Roman Empire.
Why U.S. Wood Can—and Should—Power Europe
Chuck Leavell (WSJ) Jun 9, 2013
A forest owner (and Rolling Stones keyboardist) on the benefits of 'biomass' sales.
Joe Biden's Free-Trade Epiphany
Mary O'Grady (WSJ) Jun 9, 2013
He discovers Colombia's decades-old export of cut flowers—and credits the Obama administration.
Getting Germany Past Internal Devaluation
Adam S. Posen (Die Welt/PIIE) Jun 9, 2013
Cheap labor is no basis on which a rich country should compete. Yet, that has been the basis of the lion's share of Germany's export success in the last dozen years—and exports have been the sole consistent source of economic growth for Germany over the same period. For too long, the idea that trade surpluses somehow prove a nation's economic worth has persisted in Germany. The resulting false sense of security has combined with the problems of Germany's southern neighbors in the euro area to make it seem that everything in the current coalition's economic policies, and with the German economy, is as good as it needs to be. But it is not.
Everything the IMF wanted to know about financial regulation and wasn’t afraid to ask
Sheila Bair (VoxEU) Jun 9, 2013
Does anybody have a clear vision of the desirable financial system of the future? This column has one. It gives simple answers to 12 simple questions panellists at a recent IMF conference failed to answer.
The ECB must open itself up
Marcel Fratzscher (FT) Jun 10, 2013
The debate about policy should take place within the ECB – not in public and not via the media. Providing minutes would achieve this.
The Fed has turned markets upside down
David Rosenberg (FT) Jun 10, 2013
Equities are being sought for a source of income, and bonds for capital gains: a fascinating reversal.
Financing the Next Development Agenda
Mahmoud Mohieldin (Project Syndicate) Jun 10, 2013
As the 2015 target date for the Millennium Development Goals approaches, the challenge lies in identifying and financing creative solutions to support further gains. In order to meet future financing needs, governments, civil society, and the private sector must cooperate in order to meet the challenge.
Which of the emerging economies is afraid of higher interest rates?
Markus Jaeger (DB Research) Jun 10, 2013
The emerging markets weathered the 2008-09 global financial crisis without sustaining structural damage. True, a small number of EMs received liquidity support from the IMF. But thanks to by and large sound fundamentals, the EMs adjusted to the capital (and current) account shock through a combination of FX depreciation, central bank liquidity support and domestic economic contraction. In the past few years, global financial conditions have been very supportive, as reflected in ultra-loose monetary policies in the major advanced economies and strong capital flows to the (higher-yielding) EMs. So it may be time to ask which EMs are most exposed to a sharp slowdown in capital flows.
China’s Cold Eye on Hot Money
Zhang Monan (Project Syndicate) Jun 10, 2013
With China feeling the impact of large-scale inflows of short-term capital, the authorities have announced new rules aimed at controlling hot money and reducing external risks. But, while the regulations are essential to managing the renminbi’s rapid appreciation and ensuring the accuracy of trade data, will they be enough?
The overstated inflation danger
Martin Wolf (FT) Jun 11, 2013
As Japan shows, even ultra-low interest rates do not protect an economy against the adverse impact of prolonged fiscal deficits and deflation.
Investors should buy on market setbacks
Robert Parker (FT) Jun 11, 2013
The US and Japan have largely delevered, the eurozone shows some progress, and central banks will unwind QE slowly.
Separating the Biotech Wheat from the Chaff
Terry Wanzek (WSJ) Jun 11, 2013
Recent hysteria aside, genetically modified wheat is a safe product.
'Financialization' as a Cause of Economic Malaise
Bruce Bartlett (NYT) Jun 11, 2013
Washington seems not to have awakened to the problems caused by the growing share of the United States economy captured by the financial services sector, an economist writes.
Is “Austerity” Responsible for the Crisis in Europe?
Martin Masse (Mises Daily) Jun 11, 2013
Most European economies have been in recession, or close to it, since the beginning of 2012. Unemployment rates are reaching record highs. Meanwhile, a debate has been raging about the deleterious effects of “austerity” measures. Various heads of government, finance ministers, and European Union officials have declared that austerity has gone too far and is preventing a recovery.
Challenging greed in Africa's capital centre
Hakima Abbas (Aljazeera) Jun 11, 2013
Deep inequality and poverty in Kenya will not be solved by neoliberal economic policies.
The Power of the Prize
Kandeh K. Yumkella (Project Syndicate) Jun 11, 2013
For centuries, governments have used prizes to spur innovative research that yields creative solutions to global challenges. Now the world needs the same kind of inspired leadership to address the twenty-first century’s most pressing challenge: ensuring access to sustainable energy for all.
All Quiet on the Currency Front
Jeffrey Frankel (Project Syndicate) Jun 11, 2013
The term “currency wars” is a catchy way of saying “competitive devaluation,” and, in the wake of the sharp fall in the value of the yen, the issue is certain to top the agenda at the G-8’s upcoming summit in Northern Ireland. But should it?
Climate, ecosystem resilience, and the slave trade
James Fenske & Namrata Kala (VoxEU) Jun 11, 2013
The slave trade continues to shape modern Africa. This column analyzes environmental shocks to the supply side of the trans-Atlantic slave trade and their long-term effects. During warm periods, African ports exported fewer slaves because lower agricultural productivity raised slavers' costs. These temperature fluctuations had long-run impacts, and ports that experienced a warmer period during the decades when the slave trade was most active appear more developed today.
Abe should take aim at Japan’s farmers
Takatoshi Ito (FT) Jun 12, 2013
Cutting agricultural protection would have great symbolic importance and demonstrate to investors that the prime minister is serious about reform.
The day the central banks lost control
Ralph Atkins (FT) Jun 12, 2013
Fears of stimulus withdrawal trigger rising bond yields in emerging markets, but central banks could change tactics in a bid to calm markets.
WSJ Jun 12, 2013
The Nobel-winning economist was a contrarian with a purpose.
Is Japan Heading for Another Lost Decade?
Frank Shostak (Mises Daily) Jun 12, 2013
Recently various commentators have been warning Euro-zone policymakers that they needed to boost stimulus policies in order to avoid a Japanese-style lost decade. To support their case, they point to the years 1991 to 2000. The average growth of real GDP in Japan during that period stood at 1.2 percent versus the average growth of 4.7 percent during 1980 to 1990. In terms of industrial production, the average growth stood at 0.1 percent versus 4.1 percent.
The Ultra-Easy Money Experiment
William White (Project Syndicate) Jun 12, 2013
The world’s central banks are engaged in one of the great policy experiments in modern history: ultra-easy money. And, as the experiment has continued, the risk of failure – and thus of the wrenching corrections and deep economic dislocations that would follow – has grown.
Europe’s Way Out
Dani Rodrik (Project Syndicate) Jun 12, 2013
Ultimately, European economic union requires a reduction in structural and institutional heterogeneity (especially in labor markets) among its members. But the eurozone faces a short-term problem that is more Keynesian in nature, and for which longer-term structural remedies are ineffective at best and harmful at worst.
Africa’s Transparency Agenda
Alpha Condé (Project Syndicate) Jun 12, 2013
Like many African countries, Guinea has vast mineral wealth, including the world’s largest bauxite reserves and its richest undeveloped iron-ore deposits. Making these assets work for everyone requires uprooting deeply ingrained corruption – and confronting corruption's enablers in the world's financial centers.
Future of the world trading system: Asian perspectives
Richard Baldwin, Masahiro Kawai & Ganeshan Wignaraja (VoxEU) Jun 12, 2013
The WTO risks losing its centricity in the world trading system due to its focus on 20th century trade issues and lack of progress in the Doha Round. This column introduces a new eBook that looks at how Asia meanwhile built a deep network of supply chains and is experimenting with new forms of regional trade governance. Asia’s experience of open trade-led development offers lessons for other regions. Better coherence is also vital between Asia’s regional trade rules and global trade governance.
The wisdom of Karlsruhe: The OMT court case should be dismissed
Francesco Giavazzi, Richard Portes, Beatrice Weder di Mauro & Charles Wyplosz (VoxEU) Jun 12, 2013
An ongoing German Constitutional Court case threatens to make the Eurozone Crisis much worse. This column argues that a Eurozone breakup could well be self-fulfilling given the absence of large-scale fiscal backstopping. The ECB’s Outright Monetary Transactions (OMT) programme has so far blocked speculation that could lead to such a breakup. A German court ruling against the OMT would destroy the programme’s credibility. The court would be wise to dismiss the case, if it does not want to risk becoming a threat to Eurozone stability and to taxpayers in Germany and beyond.
Politics 2.0: Short-run and long-run effects of broadband internet on political participation
Filipe R Campante, Ruben Durante & Francesco Sobbrio (VoxEU) Jun 12, 2013
What has been the impact of high-speed internet on political participation? This column reports new evidence from Italy and the formation of Beppe Grillo’s Five Star Movement. Largely through social media, broadband internet has enabled a fledgling political movement to reach a large number of people, overcoming the costly barriers to entry usually associated with new political parties. And it is this reach that has encouraged some disillusioned voters back to the ballot box.
Asian society: Changes from within
David Pilling (FT) Jun 13, 2013
Technology has helped the continent’s civil activists organise themselves more effectively but some fear they are short of achieving big reforms.
China is giving Europe a harsh lesson
Philip Stephens (FT) Jun 13, 2013
A proposed trade and investment pact with the US offers the EU a chance to avoid irrelevance but a pall has fallen over prospects for a deal.
Cease this talk of competitiveness
Samuel Brittan (FT) Jun 13, 2013
The word makes much of trade, economic and even foreign policy sound like a zero-sum game in which one country’s gain is another’s loss.
Religion and Inequality
David Brooks (NYT) Jun 13, 2013
The naked dominance of today’s success ethic has contributed to a loss of cultural dynamism, maybe even social stagnancy.
Poorest WTO Countries Granted New TRIPS Extension
Bridges Weekly Trade News Digest, Volume 17, Number 21 Jun 13, 2013
WTO members have agreed to extend the transition period for least developed countries (LDCs) to implement the organisation's rules on intellectual property rights until July 2021. The news, announced on Tuesday, follows intensive discussions that kicked off earlier this year.
US Senate Clears Farm Bill
Bridges Weekly Trade News Digest, Volume 17, Number 21 Jun 13, 2013
The US Senate passed its version of a five-year Farm Bill on Monday, less than a month after that chamber's agriculture committee cleared the legislation. Many observers warn, however, that the real fight will be when the House of Representatives attempts to pass its own version of the agricultural spending legislation.
OECD, FAO: Agricultural Production Growth to Slow in Coming Decade
Bridges Weekly Trade News Digest, Volume 17, Number 21 Jun 13, 2013
Agricultural production is expected to grow more slowly over the coming decade, according to the Organisation for Economic Co-operation and Development (OECD) and the UN Food and Agriculture Organization (FAO). In another report, the FAO noted that government interventions, such as taxes or subsidies, may be useful in addressing nutritional needs
Turkey’s Economic Miracle Under Fire
Dilip Hiro (YaleGlobal) Jun 13, 2013
Turkey’s prime minister supports right to dissent in other countries, but not at home
Alexander Friedman (Project Syndicate) Jun 13, 2013
Given the West’s anemic growth performance in recent years, it is hardly surprising that envy of China’s economic dynamism has manifested itself in official policy. But Western countries are shifting to statism at the very moment that China is heading in the opposite direction.
Lessons of a Greek Tragedy
Barry Eichengreen (Project Syndicate) Jun 13, 2013
It was already clear in the first half of 2010, when Greece lost access to financial markets, that the country's public debt was unsustainable. If other countries draw the right lessons, Greece’s brave, beleaguered citizens can at least take comfort in knowing that many people elsewhere will be spared the same unnecessary sacrifices.
Protectionism’s quiet return: The GTA’s pre-G8 summit report
Simon J Evenett (VoxEU) Jun 13, 2013
Commentators increasingly talk about the steady rise of protectionism. This column presents evidence from the newest Global Trade Alert report to suggest that they’re right: the past twelve months have seen a quiet, artful, wide-ranging assault on free trade. Little of this has showed up in traditional monitoring. Protectionism in Q4 2012 and Q1 2013 far exceeds anything seen since the onset of the global financial crisis.
The Austerity Pandemic
Isabel Ortiz & Matthew Cummins (Project Syndicate)( Jun 14, 2013
While some northern countries are beginning to question the austerity prescription, their southern counterparts are increasingly adopting cost-cutting measures. But the dangers posed by austerity are even more pronounced in developing countries, where citizens are especially vulnerable to its economic and social consequences.
EZ banking union with a sovereign virus
Daniel Gros (VoxEU) Jun 14, 2013
The doom-loop between banks and the national governments played a dominant role in the Eurozone crisis for Ireland and Cyprus. A Eurozone banking union is usually viewed as the solution. This column argues that the doom-loop cannot be undone as long as banks hold oversized amounts of their government’s debt. A simple solution would be to apply the general rule that banks are prohibited from holding more than a quarter of their capital in government bonds of any single sovereign.
Taking credit for nothing
Economist Jun 15, 2013
China’s credit boom has got people worried. Should they be?
Chinese industry: Ambitions in excess
Jamil Anderlini (FT) Jun 16, 2013
Foreign companies tremble at the flow of cheap goods from China but overcapacity poses a significant risk to the world’s second-biggest economy
Simplify the corporate tax system
Eric Schmidt (FT) Jun 16, 2013
The G8 and other international forums are precisely the places to decide on the highly complex, interconnected issue of company fiscal reform.
Justice is new front in war on poverty
George Soros and Gunilla Carlsson (FT) Jun 16, 2013
Leaving the rule of law out of the UN millennium development goals was a mistake and the new development agenda must include measurable targets for it.
Forget the G-8. It's Time for the D-10
David Gordon and Ash Jain (WSJ) Jun 16, 2013
Together, the U.S. and its democratic allies can advance common values and strategic interests.
Higher government wages may reduce corruption
Jakob de Haan, Erik Dietzenbacher & Van Hà Le (VoxEU) Jun 16, 2013
Do higher government wages reduce corruption? This column argues that they do, but only in relatively poor countries. When a country’s poor, higher government wages reduce bureaucrats’ incentive to extract illegal incomes. However, as income per capita rises, higher government wages gradually lose their effectiveness in combating corruption.
Poland: Time to go high-tech
Jan Cienski (FT) Jun 17, 2013
The country has transformed its once decrepit economy but must now undertake profound reforms to foster an ecosystem of more innovative businesses.
QE addiction may be hard to kick
Satyajit Das (FT) Jun 17, 2013
Difficulty of exit is complicated by the size of the intervention as well as the reliance of financial markets on support measures.
How the Revival of Postwar Germany Began
Bruce Bartlett (NYT) Jun 17, 2013
Germany’s economic recovery began 65 years ago this week when a strong-willed economist laid out the path forward and the United States, Britain and France followed it, an economist writes.
Europe’s Economic Groupthink
Hans-Helmut Kotz (Project Syndicate) Jun 17, 2013
During a hearing on the constitutionality of the ECB’s measures to prevent the eurozone from falling apart, Andreas Vosskuhle, President of Germany’s Constitutional Court, raised an important question: Do non-German economists condemn the ECB’s measures as unequivocally as most German experts do?
Are Free-Trade Agreements Actually Protectionist?
Evan Soltas (Bloomberg) Jun 17, 2013
Are free-trade agreements protectionist? It sounds like a silly question, but it's always worth asking of regional (as opposed to global) trade pacts -- like the ones the U.S. is seriously considering with the European Union and the Pacific Rim.
Russian Cyprus round-tripping: Corruption-linked money laundering
Päivi Karhunen, Svetlana Ledyaeva & John Whalley (VoxEU) Jun 17, 2013
Russian involvement in Cyprus was widely recognised during the acute phase of the most recent EZ crisis. This column argues that some of this is driven by corruption-linked money laundering. Using official Russian statistics, the authors estimate a standard model of FDI location to identify usual patterns related to nations with lax anti-money laundering measures such as Cyprus and the British Virgin Islands. Funds from such nations were biased towards locating investments in the most corrupt Russian regions compared to a group of genuine foreign investors.
India: A bumpy road for carmakers
James Crabtree and Henry Foy (FT) Jun 18, 2013
The country has lured global companies looking to cash in on a boom, but they face a dilemma about how much more to invest as sales slide.
It’s hard to write a happy ending to ‘QE’
John Plender (FT) Jun 18, 2013
In such uncertain monetary territory anything could yet happen. What is clear is the global market game rules have changed in a remarkably short time.
HK fears cooling of hot money flows
Paul J Davies (FT) Jun 18, 2013
For much of Asia, particularly Hong Kong, the real pain from a reversal in global money flows is possibly not in stock or bond markets, but among the banks.
The Fed Takes Aim at Foreign Banks
Sally Miller (WSJ) Jun 18, 2013
Bernanke's proposed rules run counter to Dodd-Frank's intent.
Trade Deal Could Stick U.S. With EU’s Bank Bomb
Simon Johnson (Bloomberg) Jun 18, 2013
With grand rhetoric, Group of Eight leaders this week seized upon the prospect of a deal between the U.S. and Europe that would reduce or eliminate tariffs and other trade barriers. David Cameron, the U.K. prime minister, called it “the biggest bilateral trade deal in history” and “a once-in- a-generation prize” that “we are determined to seize.”
Brazil’s Middle-Class Anxiety
Bloomberg View Jun 18, 2013
It is tempting to liken this week’s surprising protests in Brazil, which have attracted huge crowds in the country’s biggest cities, to another movement a couple of years ago in the Northern Hemisphere. But there are important differences between Brazil’s unrest and the Occupy Wall Street movement.
Anu Bradford (Project Syndicate) Jun 18, 2013
Although open labor migration would bring massive economic benefits, it inspires fear among source and destination countries alike. A "reversible-bond" system would insure both sides against the risks and allow labor markets’ actual needs to dictate migration flows – thus unlocking the global economy's true potential.
Corrupted credit ratings: Standard & Poor’s lawsuit and the evidence
Matthias Efing & Harald Hau (VoxEU) Jun 18, 2013
In response to the civil lawsuit filed by the US Department of Justice in February 2013, Standard & Poor's affirms that its ratings were "objective, independent and uninfluenced by conflicts of interest". This column presents empirical evidence opposing this claim. The data suggests a systematic rating bias in favour of the agencies' largest issuer clients.
Water: Battle of the Nile
Katrina Manson and Borzou Daragahi (FT) Jun 19, 2013
Ethiopia’s $4.8bn plan to dam Africa’s longest river has infuriated states downstream, with Egypt vowing it will not give up a drop of water.
Matthieu Aikins (NYT) Jun 19, 2013
Pakistani manufacturers with cutting-edge operations struggle to make headway because of government failures.
Why India Trails China
Amartya Sen (NYT) Jun 19, 2013
A great gap between India and China is in the provision of essential public services — a failing that depresses living standards and is a persistent drag on growth.
Rethinking That Chinese Pork Takeover
Joseph Sternberg (WSJ) Jun 19, 2013
A Smithfield Foods investor says the offer 'significantly' undervalues the company.
The Logic of the Informal Economy
Ricardo Hausmann (Project Syndicate) Jun 19, 2013
In developing countries, an unusually large number of small, unproductive firms coexist with a small number of large, productive firms, which, according to economic theory, is inefficient. So, why do the inefficient firms survive, trapping resources in low-productivity activities?
Fixing the Innovation Supply Chain
David Berry (Project Syndicate) Jun 19, 2013
Just as individual innovators must challenge conventional wisdom, so companies must approach innovation in a new way – one that resembles the logic behind manufacturing supply chains. But innovation supply chains – where they exist – tend to be characterized by inefficiency, ambiguity, and self-defeating competition.
Is the high level of uncertainty in the euro area finally receding?
Stefan Vetter (DB Research) Jun 19, 2013
Even though there seem to be fewer acute risks for the euro area, with risk premiums for the crisis countries having fallen, the currency union remains mired in recession. This is probably also due to the very high level of political and economic uncertainty. At least in that respect, things seem to be looking up.
Financial globalisation: Retreat or reset?
Richard Dobbs & Susan Lund (VoxEU) Jun 19, 2013
Is financial globalisation in retreat? This column suggests it might be. There’s been a recent and significant retreat in European financial integration and a retrenchment of global banking (although capital inflows into emerging markets and FDI are only just below their recent peaks). What are we to make of this shift? A more compartmentalised global financial system could certainly reduce the likelihood of a financial crisis spreading from one country to the next. But there is now a danger that the pendulum could swing too far, Policymakers should therefore do more to remove limitations on FDI and investor purchases of foreign equities and bonds, balancing the trade-off between the need for stability and the need to provide financing for economic growth.
It’s the ECB that should worry investors
Martin Sandbu (FT) Jun 20, 2013
Most central bankers and their political masters have a clear idea of what normality they wish to return to after the crisis era – but not in Europe.
Russia is not a place to do business
Sergei Guriev (FT) Jun 20, 2013
The country could grow at 5% to 6% a year but in all rankings of business regulation, investment risk and corruption, it trails.
Fasten seat belts for turbulent QE exit
Gillian Tett (FT) Jun 20, 2013
The market whiplash we have seen in the last 24 hours is actually a thoroughly good thing, since it will force investors to shift their mindsets and portfolios.
Central Banks and the Borrowing Addiction
Romain Hatchuel (WSJ) Jun 20, 2013
From 1980 to 2010, overall U.S. debt grew as fast as GDP. From 1950 to 1980, it was a small fraction of growth.
EU, US Formally Launch Trade Talks at G-8 Summit
Bridges Weekly Trade News Digest, Volume 17, Number 22 Jun 20, 2013
Washington and Brussels have officially kicked off negotiations for a bilateral trade and investment deal, announcing the news on Monday during the annual Group of 8 summit in Lough Erne, Northern Ireland. The decision comes just days after EU trade ministers signed off on a mandate for the bilateral talks, following prolonged internal arguing among the bloc's member states that had put the launch date in doubt.
Negotiators See Glimmer of Hope on WTO Food Stockholding Talks
Bridges Weekly Trade News Digest, Volume 17, Number 22 Jun 20, 2013
Trade negotiators may have identified key ingredients in a potential deal on food stockholding for the WTO's ninth ministerial conference in Bali, Indonesia this December, trade sources say.
Trade Restrictions on the Rise Among G-20 Members, WTO Warns
Bridges Weekly Trade News Digest, Volume 17, Number 22 Jun 20, 2013
Trade restrictive measures by the Group of 20 economies are once again on the rise, according to the latest monitoring report released by the WTO this week. The news comes just months after the organisation reined in its 2013 trade growth forecasts by more than one percentage point, in light of continued global economic uncertainty.
Investment Strategy amid a Global Currency War
Yifan Hu (PIIE) Jun 20, 2013
Prime Minister Shinzo Abe has pressed the Bank of Japan (BOJ) to be more aggressive in combating deflation, in a step seen by some as part of the global currency wars. Policies of the new Japanese government include organization of a new stimulus package and the implementation of a true monetary revolution. By injecting huge amounts of liquidity into the economy to boost exports and increase imported inflation, the BOJ targets a depreciation of the Japanese yen. This strategy has also been implicitly adopted by the Federal Reserve, the European Central Bank (ECB), and the People’s Bank of China (PBOC), which have kept a high level of liquidity in circulation in order to support their economies and avoid an overvaluation of their currencies. Emerging economies may also participate in the currency wars by accumulating foreign exchange reserves or establishing capital control measures in order to avoid an overly sharp appreciation of their currency.
How Germany Won the Euro Crisis
Alexander Reisenbichler and Kimberly J. Morgan (FA) Jun 20, 2013
Although the common wisdom is that Germany's success is the hard-won reward for strict economic management, the country owes much of its good fortune to the eurozone crisis. Immigrants and investors' cash are flowing into the country from the rest of Europe, in order to escape the dire conditions that Merkel and EU technocrats helped create through their hard-line focus on austerity, structural reforms, and price stability.
Germany versus the Euro
Marcel Fratzscher (Project Syndicate) Jun 20, 2013
The German Constitutional Court's recent hearing to consider the legality of the ECB's outright monetary transactions program was peculiar, for the scheme is the most successful monetary-policy measure of recent decades – not just in Europe, but anywhere. Why do so many Germans want to kill what has saved the common currency?
Putting the ‘system’ in the international monetary system
Michael Bordo & Angela Redish (VoxEU) Jun 20, 2013
The Eurozone has been going through an existential crisis since 2010. The column discusses research that draws an analogy between the careful planning in the 1980s leading to the creation of the euro and the planning that led to the Bretton Woods system. The outcome for the Eurozone, as in the earlier creation of a man-made international system, may be similar – collapse or at least major reworking.
Jonathan Portes (LRB) Jun 20, 2013
David Goodhart argues that low-skilled immigrants have taken jobs from unskilled natives, leaving them languishing on benefits, while high-skilled immigration reduces both the incentives and opportunities for ambitious natives to move up the ladder. Many find this thesis convincing, and it has been accepted as fact by much of the political elite. There is, however, almost no evidence to support it.
Euro crisis all in a name
Henry C K Liu (AT) Jun 23, 2013
A profound misunderstanding of the European sovereign debt crisis, infecting the thoughts of even respected analysts, arises from it being misnamed: eurozone government debts denominated in euros are not sovereign debts and that is the real reason behind the crisis and the main obstacle blocking recovery.
A 10-Step Program for India’s Economy
Jim O’Neill (Bloomberg) Jun 23, 2013
It’s fashionable to say the era of strong emerging-market growth is over. As the U.S. recovers, the global cost of capital will rise, holding back investment; against this background, avoiding the next crisis is the best that most emerging economies can do. If you take this view, India might seem a perfect example, with its widening current account deficit, heavy public borrowing, persistent inflation and weak currency.
Migrating out of poverty: The role of finance
Meghana Ayyagari, Thorsten Beck & Mohammad Hoseini (VoxEU)( Jun 23, 2013
Financial liberalisation has been controversial among academics and policymakers as it is not clear whom the benefits of expanded credit allocation accrue to. Using time and state-level variation across Indian states, this column finds strong evidence that financial deepening reduces rural poverty, especially among the self-employed. Financial deepening is also found to be associated with an inter-state migration trend from rural areas into the tertiary sector in urban areas.
Stopping Bank Crises Before They Start
John Cochrane (WSJ) Jun 23, 2013
Regulating the riskiness of bank assets is a dead end. Instead, fix the run-prone nature of bank liabilities.
Quantitative easing: End of the line
Robin Wigglesworth and Stefan Wagstyl (FT) Jun 23, 2013
Emerging markets have been big beneficiaries of US loose monetary policy. But with the Fed eyeing the exits, they are coming under pressure.
China’s Ponzi credit boom faces crunch
George Magnus (FT) Jun 23, 2013
The PBoC, together with other agencies, is trying to get to grips with weakly implemented regulation and unstable funding risks.
China: City limits
Simon Rabinovitch (FT) Jun 24, 2013
In the final part of a series on the challenges facing its economy, the FT explains why urbanisation has returned to the top of the policy agenda.
Rising wealth no guarantee of liberalisation
Stefan Wagstyl (FT) Jun 24, 2013
The demands of demonstrators in Brazil, Turkey and other emerging markets are a normal corollary of development, but some administrations may succeed in resisting reform.
Labor's Declining Share Is an International Problem
Bruce Bartlett (NYT) Jun 24, 2013
As economists get a clearer picture of the causes of labor’s decreasing share of income, it is clear that higher interest rates would help workers, an economist writes.
China's Credit Crunch
WSJ Jun 24, 2013
A deliberate curb on lending suggests reform is coming.
A Clubhouse for Technocrats
WSJ Jun 24, 2013
More than a talking shop for central bankers, the Bank for International Settlements embodies a certain anti-democratic ethos.
China Loses Control of Its Frankenstein Economy
William Pesek (Bloomberg) Jun 24, 2013
The world has grown used to the idea that China’s leaders are masterful stewards of their gargantuan economy. They steered brilliantly around the iceberg of the 2008 financial crisis, maintaining growth of near-double-digit rates. So when People’s Bank of China chief Zhou Xiaochuan began clamping down on excessive liquidity last week, some observers viewed him as a Chinese Paul Volcker. Now that the worst was over, Zhou seemed to indicate, it was time for China to rein in lending and prevent a credit bubble from swelling.
Another View on the Currency Wars
C. Fred Bergsten (PIIE) Jun 24, 2013
The Center for American Progress (CAP), a think tank founded by former members of the Clinton administration, has released a wide-ranging report entitled 300 Million Engines of Growth: A Middle-Out Plan for Jobs, Business, and a Growing Economy. Its primary focus (and about half the report) is on education reform, but it includes a section entitled “Balance Trade.” Most of that section contains unobjectionable but modest proposals for stronger enforcement of current US trade agreements and litigating more trade cases, but it also proposes a series of “policies to introduce a currency misalignment trigger” that draw heavily on the work of the Peterson Institute, including policy papers that I coauthored with Joseph Gagnon on the problem of undervalued currencies. It makes several suggestions that are worthy of comment.
Getting Prices Right
Andrew Sheng and Xiao Geng (Project Syndicate) Jun 24, 2013
Maintaining the property-rights infrastructure essential to a well-functioning market is primarily the responsibility of national governments. But, as the world economy has become increasingly interconnected, that infrastructure has gone global, raising the stakes of setting accurate market-price levels at the national level.
The Transatlantic Free-Trade Imperative
Alfred Gusenbauer (Project Syndicate) Jun 24, 2013
The confirmation of Michael Froman as the US Trade Representative is a fitting moment to highlight the opportunities that an EU-US free-trade agreement would offer Europe, America, and the world. Historically, free trade and economic growth have gone together, and deeper trade integration would strengthen growth on both sides of the Atlantic.
Spillovers: Why macro-fiscal policy should be coordinated in economic unions
Gerald A. Carlino & Robert P Inman (VoxEU) Jun 24, 2013
How should macro-fiscal policy be coordinated in economic unions? This column argues that the received wisdom has it right, and presents new empirical evidence suggesting that there are important positive spillovers between an economic union’s lower-tier governments in the management of macro-stabilisation policies. We should pursue coordinated policies. Finding programmes and institutions that can best facilitate this coordination is the important next step, both for new and established economic unions.
Croatia: A cool reception on arrival
Neil Buckley (FT) Jun 25, 2013
The nation is about to become the 28th member of the EU but many European capitals retain doubts about its economy and history of tackling corruption.
The dangers of courting Asean consumers
Jeremy Grant (FT) Jun 25, 2013
Much of the growth in southeast Asia has been credit-fuelled and there are now worries about the levels of household debt in Malaysia and Thailand.
How Emerging Markets Lost Their Mojo
Ruchir Sharma (WSJ) Jun 25, 2013
Investors have once again come to see state companies as slow-witted giants, prone to overinvest and overbuild.
Thank you, Mr. Bernanke?
Arvind Subramanian (Business Standard/PIIE) Jun 25, 2013
The rupee rout was triggered when Helicopter-drop Ben (Bernanke) intimated that he might turn into Hoover Ben. The prospect that the chairman of the US Federal Reserve would suck back the liquidity he had been so generously providing to the United States and the rest of the world created uncertainty and panic. Indian economic policymakers have watched with frustration and helplessness. Two aspects of this crisis have received less attention: first, that one of the major costs of the rupee decline is entirely self-inflicted; and second, that there may well be a silver lining for India. Consider each in turn.
Is China to Blame for Rising U.S. Interest Rates?
Evan Soltas (Bloomberg) Jun 25, 2013
Could turmoil in Chinese financial markets be the cause of the rise in interest rates on U.S. Treasuries?
Sub-Saharan Africa’s Subprime Borrowers
Joseph E. Stiglitz and Hamid Rashid (Project Syndicate) Jun 25, 2013
In recent years, a growing number of African governments have issued sovereign bonds, diversifying away from concessional debt and foreign direct investment. As a result, shortsighted financial markets, working with shortsighted governments, may be laying the groundwork for the world’s next debt crisis.
Germany’s Case Against the ECB
Hans-Werner Sinn (Project Syndicate) Jun 25, 2013
The German Constitutional Court's decision last year to allow Germany's government to accede to the European Stability Mechanism should leave little doubt about how it will rule on the ECB's pledge to purchase distressed eurozone members' sovereign debt. But, in courts, as in the open sea, predictions often prove unreliable.
Financial imbalances and cycles: Do they matter for the general public?
Livio Stracca (VoxEU) Jun 25, 2013
Should the public care about financial imbalances? This column suggests that financial imbalances are, in fact, not a main and direct concern for citizens. Of course, this does not exonerate policymakers from trying to prevent booms and busts (because they have substantial costs in terms of macroeconomic stability). Policymakers should focus on preventing the fallout of booms and busts for macroeconomic stability rather than trying to stabilise the ‘financial cycle’ as an end in itself.
The Inside Story of Russia's Fight to Keep the U.N. Corrupt
Colum Lynch (FP) Jun 25, 2013
From bullying out reformers to blocking efforts to save millions.
The Middling Kingdom
WSJ June 26, 2013
By 2040, China will have more people over 65 than the U.S. has people. It stands to be the first global power to get old before getting rich.
China's Coming Cash Crash?
Gordon G. Chang (WA) Jun 26, 2013
Chinese banks have suspended lending as the banking system freezes up. A severe liquidity crisis looks like the prelude to a historic crash sometime this year.
Rethinking competitiveness: The global value chain revolution
Gaaitzen de Vries, Bart Los, Robert Stehrer and Marcel Timmer (VoxEU) Jun 26, 2013
The rise of global value chains (GVCs) is posing new challenges to analyses of countries’ competitiveness. Commonly used measures such as gross exports and revealed comparative advantage are becoming obsolete. This column presents a new measure called ‘global-value-chain income’ that is based on the value added by countries along the international production chain. It shows how this measure can be derived from existing industry-level data and how it changes our view on a country’s competitive strengths.
Prosperity fuels the new age of unrest
Philip Stephens (FT) Jun 27, 2013
The leaders most likely to survive are those who crack down on corruption, mitigate inequality, and heed demands for public services.
Rich played dirty but changed the world
James Breiding (FT) Jun 27, 2013
The commodity trader was one of the greatest ever creators and sharers of wealth – today’s oil markets are partly the product of his vision.
Central bank intervention has helped
David Miles (FT) Jun 27, 2013
Some people have been far too quick to portray asset prices as a bubble when the evidence for this barely convincing.
Asia faces test of faith as crisis deepens
Henny Sender (FT) Jun 27, 2013
The Federal Reserve’s tapering plans and China slowdown are already hurting the region’s financial markets.
EU Farm Subsidies: Deal Reached to "Green" Direct Payments, Retain Coupled Support
Bridges Weekly Trade News Digest, Volume 17, Number 23 Jun 27, 2013
EU officials have agreed to push ahead with reforms to "green" EU direct farm payments in the next seven years - although national governments will still be allowed to provide "coupled" support for particular products.
The U.S. as a Global Risk Generator
Kevin P. Gallagher (Globalist) Jun 27, 2013
Are US regulators making it easier for Wall Street to return to pre-crash behaviors and export them to the world?
Nouriel Roubini (Project Syndicate) Jun 27, 2013
The prices of a wide range of risky assets have been rising, despite sluggish GDP growth worldwide. This discrepancy portends a new period of asset-price volatility – one that could mark the beginning of a broader de-risking cycle for financial markets.
Breaking Bad Habits
Stephen S. Roach (Project Syndicate) Jun 27, 2013
At last, central banks in the US and China seem to be headed toward monetary-policy normalization. While the move will be painful for liquidity-addicted investors, nothing less can ensure that current excesses in asset and credit markets do not spawn new and dangerous distortions in the global economy.
Central Bankers on the Ground
Raghuram Rajan (Project Syndicate) Jun 27, 2013
Markets are in turmoil again, following the Federal Reserve’s indication of an exit from quantitative easing toward the end of the year. Regardless of how markets ultimately respond, recent developments have exploded the myth that central bankers are disinterested technocrats, loftily independent of the politics of their time.
Explaining the global Great Recession
Philippe Bacchetta & Eric van Wincoop (VoxEU) Jun 27, 2013
How can we explain the rapid spread of the Great Recession? This column focuses on international co-movements to explain its global nature, developing a model that shows the global panic to be a rational self-fulfilling mechanism and global co-movements to occur even in countries without much economic integration. Perhaps most importantly, the global economy was ripe for panic due to historically unprecedented economic integration, tight credit, limited scope for monetary policy and limited room for fiscal policy due to high debt levels.
Getting Japan to Spend
Hiroko Tabuchi (NYT) Jun 28, 2013
A government strategy to encourage consumption and end deflation has yet to take broad hold, but higher-end shoppers seem to be starting to spend.
Obama steps into China's African shadow
Narayani Basu (AT) Jun 28, 2013
United States President Barack Obama and his entourage of business leaders have trade and investment in their sights on their wide-ranging tour of Africa. Wherever they go, Chinese money has probably been there first, and the specter of Beijing's flourishing influence in the region is a vital subtext.
What China Central Bank Learned From Past Credit Crunches
Stephen Bell and Hui Feng (Bloomberg) Jun 28, 2013
In signaling this week that it was prepared to inject liquidity into the markets, the People’s Bank of China brought the country’s financial system much needed relief that a “Lehman moment” might be avoided.
The Old Economies Strike Back
Yuriko Koike (Project Syndicate) Jun 28, 2013
For most of the twenty-first century, emerging markets’ rising importance – and, with it, a reordering of the global economy and international relations – has been conventional wisdom. But, today, it is the two largest “old” economies – Japan and the US – that are showing signs of increasing vitality.
The Resource Hope
Raimund Bleischwitz (Project Syndicate) Jun 28, 2013
Resource-rich developing countries' tax revenues have boomed in recent years, largely as a result of international rules that have improved financial transparency in the oil, gas, and mining industries. It is important to appreciate these efforts – and to ask for more.
Starving the Squid
J. Bradford DeLong (Project Syndicate) Jun 28, 2013
Is America’s financial sector slowly draining the lifeblood from its real economy? The journalist Matt Taibbi’s memorable description in 2009 of Goldman Sachs – “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” – still resonates, and for good reason.
Redistribution policies at the root of the Eurozone Crisis
Giuseppe Bertola (VoxEU) Jun 28, 2013
How can we make the Eurozone work, and work for everyone? This column suggests that a lack of productivity convergence and the Eurozone’s inability to deal with asymmetric shocks are both rooted in the incompleteness and incoherence of the current Eurozone policy framework. A robust and coherent European market and policy-integration process would require implementation of the behavioural constraints and redistribution schemes that operate, not without difficulties, within established national socioeconomic systems.
China’s cash crunch: Bear in the China shop
Economist Jun 29, 2013
This is not the country’s Lehman moment, but it does herald a change of momentum.
China's Reform Moment
WSJ Jun 30, 2013
The Communist Party can't afford to cling to a broken status quo.
U.S. Aid and El Salvador's Corruption
Mary Anastasia O'Grady (WSJ) Jun 30, 2013
Private business and civil-society groups fear more money will finance a coup against democracy.
Eurobonds: A change of gear
Ralph Atkins and Michael Stothard (FT) Jun 30, 2013
With banks continuing to struggle and interest rates at low levels, capital markets are expecting a surge in demand for the funds needed to power growth.
Obama’s Africa trip is too little, too late
Edward Luce (FT) Jun 30, 2013
China-Africa trade has shot up more than tenfold since 2000 to just under $170bn in 2012 and now stands at twice the level of US-Africa trade.
EU will regret not having a banking union
Wolfgang Münchau (FT) Jun 30, 2013
The trouble is that banks have become more national since the crisis. They are the buyers of last resort of their home countries’ national debt.
Uruguay: South America's New Zealand
Tim Harcourt (Globalist) Jun 30, 2013
Will tiny Uruguay get squeezed between its two much larger neighbors, Brazil and Argentina, or prove itself resilient?
Will Europe End in Croatia?
John O'Brennan (Project Syndicate) Jun 30, 2013
Croatia’s accession to the EU on July 1 provides a welcome boost to a region that has been placed on the back burner as a result of “enlargement fatigue” and the EU’s crisis-induced introspection. But enlargement fatigue among the member states continues to muddy the outlook for EU accession in the rest of the western Balkans.
Economic Rebalancing Acts
Robert Skidelsky (Project Syndicate) Jun 30, 2013
A phrase often heard, especially in leftist circles, is that the 2008 crisis has given us an opportunity to “rebalance the economy,” with production for profit yielding to production for “well-being.” But the world is currently moving overwhelmingly in the opposite direction, toward austerity and shrinking the size of the state.
Luiz Felipe Lampreia (Project Syndicate) Jun 30, 2013
The demonstrations that are shaking Brazil’s normally laid-back society are channeling a widespread sentiment: enough is enough! But there is little hatred in the street protests, which reflect, instead, a kind of impatient fatigue.
Li Keqiang’s Bottom Line
Zhang Jun (Project Syndicate) Jun 30, 2013
Last year, Chinese GDP growth reached a two-decade low, and no upturn is in sight. But, as Premier Li Keqiang seems to recognize, this downward trend could actually be beneficial, spurring the structural reforms that China needs to achieve its longer-term goal of more balanced and stable GDP growth.
The Euro on the Mend
Jean Pisani-Ferry (Project Syndicate) Jun 30, 2013
In a few months, it will be four years since the eurozone crisis began – almost an eternity by historical standards. Much has been done to engineer a return to normalcy, but it is still too early to declare the job done and claim victory.
Home-field liquidity advantage?
Viral Acharya, Gara Afonso & Anna Kovner (VoxEU) Jun 30, 2013
Dollars are the lifeblood of global finance, so it matters that US and non-US banks have different access to dollar funding. This column shows that the 2007 funding shock disproportionately affected non-US banks, and that non-US banks transmitted this shock to US borrowers. The results suggest that access to deposits and advances from Federal Home Loan Banks can help stabilise the banking sector and the transmission channel in a crisis. The ex-post efficacy gain, however, must be weighed against any ex-ante moral hazard.
Who Will Save Egypt?
Marina Ottaway (FA) Jun 30, 2013
Underneath all the anger in Egypt lies a basic fact: The country's economy is in deep trouble. Normally a country in such a bad way would go to the IMF for support. Instead, it has tried to play the fund and Gulf donors off one another to stay afloat. Read