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Articles/Commentary

Nafta Negotiations: What's at Stake in the Second Round
Prashant S. Rao (NYT) Sep 1, 2017
Trade representatives from Canada, Mexico and the United States will resume discussions after a tense first round of talks.

Trade and Commitment to Development: Which is More Damaging to Development, Agricultural Subsidies or Trade Tariffs?
Ian Mitchell and Hauke Hillebrandt (CGD) Sep 1, 2017
Next week, we will launch the results of the 2017 Commitment to Development Index (CDI), which scores 27 countries on how development-friendly their policies are. This year, we will include two new indicators assessing how rich-country “tariffs” (taxes on imports) and “subsidies” (payments to domestic producers) inhibit development. But which is more damaging, and therefore deserves a greater weight in the Index? Using the approach embedded in previous CDI calculations, we calculate that tariffs may be over three times as damaging as agricultural subsidies in inhibiting developing country trade. Below, we look at how tariffs and subsidy inhibit development, and assess their respective impact.

Modi's Biggest Move Is a Total Bust
Mihir Sharma (Bloomberg View) Sep 1, 2017
Eliminating 86 percent of the country's currency has had zero benefits.

A New Way to Work Could Revitalize the French Economy
Pascal-Emmanuel Gobry (Bloomberg View) Sep 1, 2017
Workers are stuck in two tiers: permanent and transient. The president proposes something in between.

Canada's Growth Surge Isn't Just a Win for Canada
Daniel Moss (Bloomberg View) Sep 1, 2017
The strong quarter shows a global recovery (and vindicates the central bank's rate hike).

Saving the International Economic Order
Paola Subacchi (Paola Subacchi) Sep 1, 2017
This autumn, the IMF and the World Bank will once again hold their annual conference in Washington, DC. At a time when the liberal international economic order that these institutions underpin is under threat, they cannot afford to stick to business as usual.

How to Renew the European Project
Christoph M. Schmidt (Project Syndicate) Sep 1, 2017
The French presidential and legislative elections earlier this year have instilled new hope in the European integration project, by raising the prospect of deeper Franco-German cooperation. And yet some forms of cooperation, not least shared-liability schemes, could do more harm than good.

The Two Pillars of French Economic Reform
Philippe Aghion and Benedicte Berner (Project Syndicate) Sep 1, 2017
The French government has just announced the guidelines for a new labor code, its first major reform to boost France’s economy, by giving more flexibility to companies to adapt to the marketplace. The second major reform sought by President Emmanuel Macron’s cabinet – an overhaul of the French state – is set to follow.

Bottling Indonesia’s Gini
M Niaz Asadullah and Maliki (Project Syndicate) Sep 1, 2017
During much of Indonesia’s early history, its egalitarian distribution of wealth and assets set it apart from its neighbors. And if the country is to remain one of Asia’s most robust economies, the government, confronting rising income and wealth inequality, along with deep regional disparities, must recommit to egalitarian policies.

Schrodinger's Immigrant
Robert Rowthorn and David Ruzicka (Project Syndicate) Sep 1, 2017
When Central and Eastern European leaders try to explain why they do not want to accept refugees, they tend to contradict one another. Some insist that refugees take jobs from natives, which implies that refugees are hard workers; others complain that refugees rely on welfare benefits, which suggests that they work too little.

International spillovers and local credit cycles
Yusuf Soner Baskaya, Julian di Giovanni, Sebnem Kalemli-Ozcan and Mehmet Fatih Ulu (VoxEU) Sep 1, 2017
Most models assume capital flows are endogenous to the business cycle, and that inflows increase during an economy’s ‘boom’ periods. This column shows that the international no-arbitrage condition in fact does not hold, and that capital flows are pushed into an economy due to high global risk appetite. Controlling for domestic monetary policy responses to capital flows and changes in the exchange rate, exogenous capital inflows lower real borrowing costs and fuel credit expansion. Most models assume capital flows are endogenous to the business cycle, and that inflows increase during an economy’s ‘boom’ periods. This column shows that the international no-arbitrage condition in fact does not hold, and that capital flows are pushed into an economy due to high global risk appetite. Controlling for domestic monetary policy responses to capital flows and changes in the exchange rate, exogenous capital inflows lower real borrowing costs and fuel credit expansion.

What Kills Inequality
Timur Kuran (FA) Sep 1, 2017
Redistribution’s violent history.

Bretton Woods to Brexit
Harold James (F&D) Sep 1, 2017
The global economic cooperation that has held sway since the end of World War II is challenged by new political forces.

False Profits
Michael Keen (F&D) Sep 1, 2017
Avoidance by multinationals and competition between governments are forcing a rethink of the international tax system.

Safe and Sound
Tobias Adrian and Aditya Narain (F&D) Sep 1, 2017
International financial regulators help ensure the safety and soundness of diverse financial systems.

Banking on Change
Tommaso Mancini Griffoli (F&D) Sep 1, 2017
New technologies promise to reshape the financial services industry.

Health in a Time of Austerity
Ramanan Laxminarayan and Ian Parry (F&D) Sep 1, 2017
When public budgets cannot grow, targeted taxes and subsidies can help improve a population’s well-being.

Risk and Complexity
Ian Goldin and Chris Kutarna (F&D) Sep 1, 2017
Global integration and new technology mean rapid progress—but also higher risk.

A new database on actual and equilibrium exchange rates
Cécile Couharde, Anne-Laure Delatte, Carl Grekou, Valérie Mignon and Florian Morvillier (VoxEU) Sep 2, 2017
Academics have traditionally computed their own measure for assessing whether a currency is over- or undervalued, while policymakers rely on scarce public information with inconsistent data. This column introduces a new database, EQCHANGE, which includes nominal and real effective exchange rates, as well as equilibrium real effective exchange rates for more than 180 countries from 1973 onwards. It represents the longest and largest publicly available database on equilibrium exchange rates and corresponding misalignments. Academics have traditionally computed their own measure for assessing whether a currency is over- or undervalued, while policymakers rely on scarce public information with inconsistent data. This column introduces a new database, EQCHANGE, which includes nominal and real effective exchange rates, as well as equilibrium real effective exchange rates for more than 180 countries from 1973 onwards. It represents the longest and largest publicly available database on equilibrium exchange rates and corresponding misalignments.

A better US patent system will spur innovation
Rana Foroohar (FT) Sep 3, 2017
Many investors are considering moving money away from America, towards Europe and Asia.

The ethical investment boom
James Kynge (FT) Sep 3, 2017
Will investor moves into funds that uphold ‘environmental, social and governance’ standards really pay off?

The quiet comeback of the middle class
Robert J. Samuelson (WP) Sep 3, 2017
But the big question is whether the underreported optimism can last.

A welfarist role for non-welfarist rules
Matthew Weinzierl (VoxEU) Sep 3, 2017
Under a welfarist approach, tax policy is judged on its implications for the well-being of those in the society to which it applies. An implicit vulnerability of this approach is that judgements are based on necessarily incomplete cost and benefit calculations. This column investigates people’s preferences for welfarist and non-welfarist approaches by exploring responses to envy. A narrow majority of respondents reject a redistribution of resources that raises overall welfare by assuaging envy. These respondents seem to be using non-welfarist principles to encode concerns about indirect policy consequences. Under a welfarist approach, tax policy is judged on its implications for the well-being of those in the society to which it applies. An implicit vulnerability of this approach is that judgements are based on necessarily incomplete cost and benefit calculations. This column investigates people’s preferences for welfarist and non-welfarist approaches by exploring responses to envy. A narrow majority of respondents reject a redistribution of resources that raises overall welfare by assuaging envy. These respondents seem to be using non-welfarist principles to encode concerns about indirect policy consequences.

Britain’s divorce bill puts Brexit progress at risk
FT View Sep 4, 2017
The onus is on UK ministers to pave the way for financial compromise.

Brexit sets Britain on a stable path of relative decline
Janan Ganesh (FT) Sep 4, 2017
A proper crisis gives you a chance to notice the problem and attempt a fix.

Macron’s First Step Toward Transforming France
Bloomberg View Sep 4, 2017
The president's labor-market reforms should be a prelude to bigger changes.

Role Reversal: Now Europe Looks Stable and the U.S. Volatile
Ferdinando Giugliano (Bloomberg View) Sep 4, 2017
The continent is healing from a decade of crisis, but the Trump administration could upend that at any time.

How Japan Needs to Change to Welcome Immigrants
Noah Smith (Bloomberg View) Sep 4, 2017
The country has to do more to assimilate foreigners and offset population decline.

The Flaws in India's Growth Model
Mihir Sharma (Bloomberg View) Sep 4, 2017
It worked when oil prices were falling, but not anymore.

How May Can Put Brexit Back on Track
Clive Crook (Bloomberg View) Sep 4, 2017
Britain's prime minister needs to get a grip.

Russia Is an Emerging Superpower in Global Food Supply
Leonid Bershidsky (Bloomberg View) Sep 4, 2017
Climate change is working against other regions but in favor of the Eurasian Grain Belt.

The Normalization Delusion
Adair Turner (Project Syndicate) Sep 4, 2017
There is a psychological bias to believe that exceptional events eventually give way to a return to “normal times.” But the world economy is far from a return to pre-2008 normality, with most of the obstacles to more robust recovery to be found on the demand side.

Optimizing Decision-Making in a Dangerous World
Graham Allison and Arianna Huffington (Project Syndicate) Sep 4, 2017
Creating the time and the space needed to recharge, refuel, and reflect is essential for the human operating system to function optimally. That is not a systemic bug; it’s a powerful feature – one that leaders today should be using, lest they plunge the world into an even deeper crisis than it is already in.

Autonomy, incentives, and the effectiveness of bureaucrats
Imran Rasul, Daniel Rogger and Martin J. Williams (VoxDev) Sep 4, 2017
Bureaucratic output is negatively associated with monitoring and incentive schemes but positively associated with the autonomy of mid-level bureaucrats.

Secular stagnation versus technological shock scenarios
Antonin Bergeaud, Gilbert Cette and Rémy Lecat (VoxEU) Sep 4, 2017
Over the 20th century, GDP growth was mainly driven by total factor productivity growth. Since the mid-2000s, however, productivity growth has been in decline. This column explores the history and future of growth focusing on four developed economies: the US, the Eurozone, the UK, and Japan. Simulated scenarios for the 21st century show a wide range of potential growth outcomes, dependent on whether total factor productivity growth stays indefinitely low, and whether the digital economy delivers a new productivity growth wave. Over the 20th century, GDP growth was mainly driven by total factor productivity growth. Since the mid-2000s, however, productivity growth has been in decline. This column explores the history and future of growth focusing on four developed economies: the US, the Eurozone, the UK, and Japan. Simulated scenarios for the 21st century show a wide range of potential growth outcomes, dependent on whether total factor productivity growth stays indefinitely low, and whether the digital economy delivers a new productivity growth wave.

The Chinese consumer is being overlooked by investors
Henny Sender (FT) Sep 5, 2017
Rising incomes offer opportunities for money managers, but Beijing is a risk.

Merkel and Schulz deliver a masterclass in stability
Frederick Studemann (FT) Sep 5, 2017
Given the frenzied nature of global politics, around the world, a bit of plodding is welcome relief.

Trump’s Looming Trade Crack-Up
Robert B. Zoellick (WSJ) Sep 5, 2017
His fight with Seoul would leave the U.S. a loser. Congress needs to assert its authority to stop him.

"Buy American" Is Bad for Taxpayers and Worse for Exports
Gary Clyde Hufbauer and Euijin Jung (PIIE) Sep 5, 2017
“Buy American,” while not new, features prominently in President Donald Trump’s array of trade policies. The practice of shutting out supplies from abroad originated in the Great Depression, alongside the infamous Smoot-Hawley Tariff.

It’s the environment, stupid
Brian Caplen (Banker) Sep 5, 2017
Banks are on the front line in the war against climate change. Getting it wrong could destroy them.

Will climate change cause the next financial crisis?
Silvia Pavoni (Banker) Sep 5, 2017
As extreme climate events become more frequent and governments ramp up their commitment to transitioning to lower carbon economies, are financial institutions prepared, or will their unaccounted-for climate risk lead to the next financial crisis?

Europe's Migrant Crisis Isn't Over
Pankaj Mishra (Bloomberg View) Sep 5, 2017
The numbers may be down, but not enough to quiet xenophobes.

Yes, Nations Can Spend Their Way Out of Recessions. Sometimes.
Ferdinando Giugliano (Bloomberg View) Sep 5, 2017
Central banks make it possible, or impossible.

Stronger Economies Dealing a Blow to Populism
Gary Shilling (Bloomberg View) Sep 5, 2017
For the first time in a decade, all 45 of the world’s major economies tracked by the OECD are expanding.

Financial Globalization 2.0
Hans-Helmut Kotz and Susan Lund (Project Syndicate) Sep 5, 2017
Aftershocks from the global financial crisis have sharply reduced cross-border capital flows, as lenders, especially in Europe, have focused on domestic markets. But this retrenchment has, paradoxically, improved the overall health and stability of the global financial system.

China’s Shift to City-Led Growth
Zhang Jun (Project Syndicate) Sep 5, 2017
Though China has achieved some four decades of rapid economic development, one powerful source of growth has yet to be fully tapped: urbanization. Now, the potential of cities as an engine of dynamism and increased prosperity is finally getting the attention it deserves.

Spending cuts may be as recessionary as revenue increases
Roel Beetsma, Oana Furtuna and Massimo Giuliodori (VoxEU) Sep 5, 2017
Research has shown that planned fiscal consolidations have been less recessionary when carried out through public spending cuts rather than through increases in government revenues. This column argues that this may be at least partly due to differences in follow-up for the two consolidation strategies. Better follow-up of announced spending contractions may result in negative Keynesian responses similar to those that follow announced revenue increases, and so they may not necessarily provide a 'cheaper' route to budgetary consolidation than revenue increases. Research has shown that planned fiscal consolidations have been less recessionary when carried out through public spending cuts rather than through increases in government revenues. This column argues that this may be at least partly due to differences in follow-up for the two consolidation strategies. Better follow-up of announced spending contractions may result in negative Keynesian responses similar to those that follow announced revenue increases, and so they may not necessarily provide a 'cheaper' route to budgetary consolidation than revenue increases.

Trump’s trade follies give Brussels an open door
FT View Sep 6, 2017
The EU seeks to assume the leadership role in the global system.

Britain’s Brexit brand is weak and confused
John Gapper (FT) Sep 6, 2017
Hectoring doubters is like blaming customers for not buying your fancy product.

Riskier EM fund managers trounce closet trackers
Steve Johnson (FT) Sep 6, 2017
Overall industry performance dragged down by timid, risk-averse funds.

Central banks are waking up to the threat of cryptocurrencies
Huw van Steenis (FT) Sep 6, 2017
There is growing anxiety about disruption to the payments system.

Australia’s economy: Riding the wave
Economist Sep 6, 2017
The last time Australia suffered a recession, in 1991, Bryan Adams was still topping the charts. Since then its economy has racked up a record-breaking 104 quarters of growth. Having benefited from China’s booming demand for coal and iron ore, Australia sailed through the ensuing slump in commodity prices. The diverse economies of Victoria and New South Wales, not to mention agricultural exports and tourism, picked up the slack

How the Fed’s balance sheet could affect developing economies
Brahima Sangafowa Coulibaly (Brookings) Sep 6, 2017
How the United States Federal Reserve’s move to reduce its balance sheet could have significant, potentially adverse, spillover effects on emerging market and developing economies around the globe.

Australia Must Get Serious About Investing in Asia
Daniel Moss (Bloomberg View) Sep 6, 2017
It's no longer optional.

China Isn't Really Reducing Capacity
Christopher Balding (Bloomberg View) Sep 6, 2017
Supply-side reform hasn't lived up to the hype.

Presidential Powers Pose a Problem for Markets
Gary Shilling (Bloomberg View) Sep 6, 2017
Despite gridlock in Washington, Trump is moving ahead on his own on deregulation and foreign trade.

As Harvey's Waters Recede, Commodities Will Still Float High
Shelley Goldberg (Bloomberg View) Sep 6, 2017
The raw materials most needed for the rebuild are iron ore and steel, but there will be increased demand for zinc and copper, too.

Canada Is the Test Kitchen for a New Economic Recipe
Daniel Moss (Bloomberg View) Sep 6, 2017
The central bank is not counting on low unemployment to raise wages and inflation.

Central Bankers’ Shifting Goalposts
Daniel Gros (Project Syndicate) Sep 6, 2017
The themes of the world’s foremost gathering of central bankers in Jackson Hole, Wyoming, and of the ECB's annual meeting this year, had little to do with monetary policy. Instead, they focused on economic growth, an issue that they can do little to influence.

Supply-Side Amnesia
J. Bradford DeLong (Project Syndicate) Sep 6, 2017
Would the tax-reform package that the US Congress will debate this fall yield a net benefit for all or most Americans, or would it be a handout to the super-wealthy? The question itself is dismaying, because Americans learned the answer more than 30 years ago.

Resolving China’s Corporate Debt Problem
Wojciech S. Maliszewski, Serkan Arslanalp, John Caparusso, José Garrido, Si Guo, Joong Shik Kang, W. Raphael Lam, T. Daniel Law, Wei Liao, Nadia Rendak, Philippe Wingender, Jiangyan Yu & Longmei Zhang (VoxChina) Sep 6, 2017
Corporate credit growth in China has been excessive. The debt problem should be addressed urgently with a comprehensive strategy, trading short-term economic pain for larger longer-term gain.

US trade wars with emerging countries in the 21st century
Antoine Bouët and David Laborde (VoxEU) Sep 6, 2017
During his election campaign, Donald Trump repeatedly announced that he would impose tariffs on imports from China, Mexico, and Germany. This column evaluates the likely outcomes should the US instigate trade wars by imposing such tariffs. In all scenarios, the net effect on US welfare and GDP is either zero or negative. Such trade wars would also have wider negative effects for the trading partners, and potentially, the world economy. During his election campaign, Donald Trump repeatedly announced that he would impose tariffs on imports from China, Mexico, and Germany. This column evaluates the likely outcomes should the US instigate trade wars by imposing such tariffs. In all scenarios, the net effect on US welfare and GDP is either zero or negative. Such trade wars would also have wider negative effects for the trading partners, and potentially, the world economy.

Dullness is not enough for Angela Merkel’s Germany
Philip Stephens (FT) Sep 7, 2017
The country cannot avoid discussion of its international role much longer.

Europe’s Growth Rate in Offshore Wind Must Triple to Reach Paris Goals
Michiel Mueller (Globalist) Sep 7, 2017
To meet the goal agreed at the Paris climate change conference in December 2015, Europe will need a fully decarbonized electricity supply by 2045.

Free Trade With Korea Is Great for the U.S.
Noah Smith (Bloomberg View) Sep 7, 2017
If Trump likes good deals, he should stick with this one.

Emerging market inflation approaches turning point
Steve Johnson (FT) Sep 8, 2017
Two decade-long run of softer price rises may be about to reverse.

Financial abuse curbs weigh on emerging markets
Philippe Le Houérou (FT) Sep 8, 2017
Rules to curb money-laundering and terrorist-funding are hitting EM business.

Why Europe's Central Bank Shouldn't Worry About the Euro
Ferdinando Giugliano (Bloomberg View) Sep 8, 2017
Instead, it should focus on increasing flexibility in the conduct of monetary policy.

It's Too Soon for Brazil to Relent on Rate Cuts
Daniel Moss (Bloomberg View) Sep 8, 2017
Inflation isn't the biggest risk. Right now the priority is to keep consumers spending.

Surmounting the German Surplus
Fabrizio Coricelli (Project Syndicate) Sep 8, 2017
Germany’s substantial and persistent current-account surplus has divided European politicians and economic policymakers for years, because few can agree on its ultimate causes and proximate effects. But, for Europe’s sake – and Germany’s – these and other disputes will have to be resolved by the new German government that emerges from this month’s federal election.

Macron’s Labor Gambit
Dani Rodrik (Project Syndicate) Sep 8, 2017
French President Emmanuel Macron’s entourage has been wisely telling anyone who will listen not to expect too much from the proposed new labor code. Indeed, the economics of the reforms suggest that they are unlikely to make a big difference on their own.

Routinisation, globalisation, and the fall in labour’s share of income
Mai Dao, Mitali Das, Zsoka Koczan and Weicheng Lian (VoxEU) Sep 8, 2017
In both developing and advanced economies, labour’s share of income has been declining since the 1970s, presenting a puzzle for classical trade theory. This column proposes that the globalisation of trade and ‘routinisation’ of tasks can reconcile declining labour shares in both advanced and developing economies. Countries with higher initial exposure to routinisation and a greater increase in participation in global value chains are shown to have experienced stronger declines in the labour income share of medium-skilled workers. In both developing and advanced economies, labour’s share of income has been declining since the 1970s, presenting a puzzle for classical trade theory. This column proposes that the globalisation of trade and ‘routinisation’ of tasks can reconcile declining labour shares in both advanced and developing economies. Countries with higher initial exposure to routinisation and a greater increase in participation in global value chains are shown to have experienced stronger declines in the labour income share of medium-skilled workers.

How to Deal With Declining Majorities
Eric Kaufmann (FA) Sep 8, 2017
Immigration and white identity in the West.

Can a Giant Science Fair Transform Kazakhstan's Economy?
David Segal (NYT) Sep 9, 2017
With Expo 2017, the former Soviet Republic is trying to wean itself from oil and create a new global financial hub.

Making sense of China’s capacity cuts
Economist Sep 9, 2017
Investors have faith that China is dealing with its industrial overcapacity. They should look more closely

China's hidden shipbuilding subsidies
Myrto Kalouptsidi (VoxEU) Sep 9, 2017
China’s shipbuilders have doubled their market share in recent years. It is hard to determine the role of industrial policy, particularly subsidies, in this because we do not know what policies are in place. This column argues that subsidies decreased shipyard costs in China by between 13% and 20% between 2006 and 2012. These policy interventions have led to substantial misallocation of global production with no significant consumer surplus gains. Japan, in particular, has lost market share. China’s shipbuilders have doubled their market share in recent years. It is hard to determine the role of industrial policy, particularly subsidies, in this because we do not know what policies are in place. This column argues that subsidies decreased shipyard costs in China by between 13% and 20% between 2006 and 2012. These policy interventions have led to substantial misallocation of global production with no significant consumer surplus gains. Japan, in particular, has lost market share.

China is leaving Donald Trump’s America behind
Michael Moritz (FT) Sep 10, 2017
An army of Chinese entrepreneurs faces the future with a sense of adventure.

The benefits of conscription are economic as well as military
Michael Moritz (FT) Sep 10, 2017
Other countries should follow the example of Sweden, Finland and Israel.

Finding America’s Lost 3% Growth
Phil Gramm and Michael Solon (WSJ) Sep 10, 2017
If the country can’t grow like it once did, then the American Dream really is irretrievably lost.

Why Asia needs to show the way on trade strategy
Peter Drysdale (EAF) Sep 10, 2017
In guarding these strategic global interests ASEAN now has a critical role to play, through the ASEAN-led Regional Comprehensive Economic Partnership (RCEP).

Methods for pricing options in the 19th century
George Dotsis (VoxEU) Sep 10, 2017
Option trading has grown phenomenally in the last 40 years, but option markets have existed since the early 17th century. This column reviews an option trading manual written by a London trader in 1906. It shows that traders in the 19th century developed sophisticated techniques for determining the prices of short-term calls and puts. They also priced at-the-money-forward straddles the same way they are priced today. Option trading has grown phenomenally in the last 40 years, but option markets have existed since the early 17th century. This column reviews an option trading manual written by a London trader in 1906. It shows that traders in the 19th century developed sophisticated techniques for determining the prices of short-term calls and puts. They also priced at-the-money-forward straddles the same way they are priced today.

Renminbi’s rise and fall raises eyebrows
Jennifer Hughes (FT) Sep 11, 2017
Traders weigh whether central bank has will and ability to restrain China’s currency.

The Saudi Arabian reform slowdown and the oil price dilemma
Jason Bordoff (FT) Sep 11, 2017
Falling revenues are restricting the kingdom’s room for fiscal manoeuvre.

Action needed now on poverty in Africa
David McNair (FT) Sep 11, 2017
Failure to invest in youth today risks tomorrow’s prosperity and stability.

China's Currency Rebounds as Economic Optimism Returns
Keith Bradsher (NYT) Sep 11, 2017
Though the country faces long-term problems, like soaring debt, the government's recent moves have reassured investors that it can stave off crises.

What the World Can Learn From India's Cash Experiment
Bloomberg View Sep 11, 2017
Demonetization has been a failure -- but an instructive one.

How Investors Are Dealing With Today’s Uncertainties
Mohamed Aly El-Erian (Bloomberg View) Sep 11, 2017
A desire to return to a comfort zone can lead to overly optimistic assessments of risks.

How Much Have Banks Really Cut Their Risks?
Mark Whitehouse (Bloomberg View) Sep 11, 2017
Not as much as it might seem.

Four Ways to Rebuild Consensus on Agricultural Trade
Max Sieben Baucus and Richard G Lugar (Bloomberg View) Sep 11, 2017
The U.S. is losing ground fast to global rivals in Asia.

Anatomy of Illiberal Capitalism
Jacek Rostowski (Project Syndicate) Sep 11, 2017
What do Russian President Vladimir Putin, US President Donald Trump, Turkish President Recep Tayyip Erdogan, Hungarian Prime Minister Viktor Orban, and Polish Law and Justice Party Chairman Jaroslaw Kaczynski have in common? They all view the market economy as an instrument of state power.

Trump’s 3% Growth for the 1%
Kenneth Rogoff (Project Syndicate) Sep 11, 2017
Even if US President Donald Trump hits his growth targets in 2018 and 2019 – and he just might – only the stock market may be cheering. Policies that produced more broadly shared and environmentally sustainable growth would be far better than policies that perpetuate current distributional trends and exacerbate many Americans’ woes.

The Euro’s Narrow Path
Barry Eichengreen (Project Syndicate) Sep 11, 2017
With Emmanuel Macron’s victory in the French presidential election, and Angela Merkel’s Christian Democratic Union enjoying a comfortable lead in opinion polls ahead of Germany’s general election on September 24, a window has opened for eurozone reform. But can the two sides agree on how to fix their flawed creation?

Asian Cities’ Endless Summer
Hans Joachim Schellnhuber and Bambang Susantono (Project Syndicate) Sep 11, 2017
Asia’s urban areas already experience twice as many hot days as its rural areas do – and could experience ten times as many by 2100. And so far, governments have not done nearly enough to assess Asia’s exposure to climate impacts, much less to strengthen protections for vulnerable areas or reduce greenhouse-gas emissions.

The myth of surplus peasants and China’s growth
Peter Robertson and Longfeng Ye (VoxEU) Sep 11, 2017
The conventional wisdom is that labour reallocation has been a key driver of China’s growth miracle, and slowing migrant labour flows and rapid wage growth have raised concerns over whether this source of growth has run its course. This column argues that the literature on growth and labour reallocation in China has been dominated by a method that, relative to the now standard growth accounting model, substantially overstates the gains. Allowing for this and for human capital differences across sectors, sectoral labour reallocation has not been a key source of productivity growth in China. The conventional wisdom is that labour reallocation has been a key driver of China’s growth miracle, and slowing migrant labour flows and rapid wage growth have raised concerns over whether this source of growth has run its course. This column argues that the literature on growth and labour reallocation in China has been dominated by a method that, relative to the now standard growth accounting model, substantially overstates the gains. Allowing for this and for human capital differences across sectors, sectoral labour reallocation has not been a key source of productivity growth in China.

Why loan syndication is a risky business
Max Bruche, Frédéric Malherbe and Ralf R Meisenzahl (VoxEU) Sep 11, 2017
Syndicated loan issuance has grown dramatically over the last 25 years. Over the period, the syndicated loan business model has evolved, affecting the nature of the associated risks that arranging banks are exposed to. This column introduces the concept of ‘pipeline’ risk –the risk associated with marketing the loans during the syndication process. Pipeline risk forces arranging banks to hold much larger shares of very risky syndicated term loans, which results in reduced lending by the arran¬-ging bank not only in the syndicated term loan market, but in others as well. Syndicated loan issuance has grown dramatically over the last 25 years. Over the period, the syndicated loan business model has evolved, affecting the nature of the associated risks that arranging banks are exposed to. This column introduces the concept of ‘pipeline’ risk –the risk associated with marketing the loans during the syndication process. Pipeline risk forces arranging banks to hold much larger shares of very risky syndicated term loans, which results in reduced lending by the arran¬-ging bank not only in the syndicated term loan market, but in others as well.

Trump Doesn’t Understand the Economics of Immigration
Linda Chavez (FP) Sep 11, 2017
The United States is facing an aging population and a lack of skilled workers. The president's immigration policy is only going to make it worse.

The long journey from Black Wednesday to Brexit
Helmut Schlesinger (FT) Sep 12, 2017
The exchange rate mechanism failed as a result of its over-ambitious construction.

How to save Venezuelans from cost of sanctions
Francisco Rodríguez (FT) Sep 12, 2017
The Trump administration’s measures open door to humanitarian aid.

Why lower for longer will remain the anthem for markets
John Plender (FT) Sep 12, 2017
Writing the obituary for the bull market in bonds has proved every premature.

Cultish long-termism can hobble investors
Izabella Kaminska (FT) Sep 12, 2017
Cryptocurrency mania shows the dangers of followers falling for fanciful narratives.

Australia can profit from Brexit, provided Britain stays open
Alexander Downer (FT) Sep 12, 2017
Optimism is tempered by uncertainty about the direction of British economic policy.

The Bank of England’s next move on interest rates is hard to predict
Delphine Strauss (FT) Sep 12, 2017
Sluggish wage growth and Brexit uncertainty defy policymakers’ hawkish rhetoric.

President Moon’s tricky mission to tame Korea Inc
Bryan Harris (FT) Sep 12, 2017
Family-run conglomerates account for a large chunk of the national economy, but controversy has put pressure on the new leader to rein them in.

Is China Deleveraging? Too Early to Cheer
Alicia García-Herrero (Brink) Sep 12, 2017
"Deleveraging" is the new buzzword in China. The leadership clearly wants to scale back its epic borrowing, but it is not necessarily ready to pay the price for it, namely, the price of having less support for growth. The question is whether the recent efforts of China’s leadership to force the deleveraging of its economy are bearing fruit.

The World Today: A Net Assessment
Dirk Helbing (Globalist) Sep 12, 2017
Is the call for a global emergency mere alarmism? Or do we really have reason to be alarmed?

Stanley Fischer and the IMF Changed Asia for Good
Daniel Moss (Bloomberg View) Sep 12, 2017
As he leaves the Fed, remember his influence in a previous role, shaping aid during the 1990s economic crisis.

How Western Capital Colonized Eastern Europe
Leonid Bershidsky (Bloomberg View) Sep 12, 2017
Populist politicians are too late with their nationalist messages.

The Economic View from the Alps
Jim O'Neill (Project Syndicate) Sep 12, 2017
As a popular tourist destination, Switzerland offers a wealth of anecdotal data with which to assess the state of the global economy. The number of Japanese and Chinese tourists visiting places such as the Bernese Highlands attests to recent growth in those countries, regardless of what one thinks of their official data.

Deconstructing Deglobalization
Harold James (Project Syndicate) Sep 12, 2017
US President Donald Trump and his advisers’ fierce rhetoric on trade and immigration has led some to wonder if our current era of globalization is now at risk. If it is, an even more pertinent question is whether the end will be accompanied by violence.

Tackling Migration at the Source
Kemal Dervis (Project Syndicate) Sep 12, 2017
For advanced economies, immigration is a contentious topic, with countries struggling to settle on policies that will enable them to reap the benefits of immigration, without incurring excessive costs. But, rather than focusing on their own borders, they should be looking to mitigate migration pressures in source countries.

This Land Is Their Land
Suketu Mehta (FP) Sep 12, 2017
Immigration is inevitable. When will the West learn that it promises salvation — not destruction?

Why the euro appreciation is a headache for the ECB
Lorenzo Bini Smaghi (FT) Sep 13, 2017
The rise of the single currency against the dollar may have further to go.

China’s economy helps salve North Korea angst
Henny Sender (FT) Sep 13, 2017
Its economic strength has helped markets shrug off regional tensions.

To coin a craze: Silicon Valley’s cryptocurrency boom
Richard Waters (FT) Sep 13, 2017
The flood of initial coin offerings is aimed at funding new platforms that bypass the likes of Google and Amazon. But sceptics fear another bubble.

For Europe, There Are No Shortcuts to Fiscal Union
Ferdinando Giugliano (Bloomberg View) Sep 13, 2017
Transfers are hard to agree, but the alternative won't be easier.

China Isn’t the Only Reason to Question Free Trade
Noah Smith (Bloomberg View) Sep 13, 2017
Encouraging exports could help boost a country's productivity.

A Global Education Ecosystem
Wendy Kopp and Dzingai Mutumbuka (Project Syndicate) Sep 13, 2017
This month, leaders from all 193 UN member states are gathering in New York City to try to assess progress on addressing some of the world’s thorniest development challenges, including ensuring quality education for all. Success will require significant new investment in local leadership.

Transparency’s Diminishing Returns
Raphaël Hadas-Lebel (Project Syndicate) Sep 13, 2017
Accountability and transparency requirements have improved democratic practices in many Western countries in recent decades. But defending personal privacy is still a valid objective, and maintaining secrecy in some domains, such as national security, diplomacy, and human rights, is essential.

The Mystery of the Missing Inflation
Nouriel Roubini (Project Syndicate) Sep 13, 2017
Since the summer of 2016, the global economy has been in a period of moderate expansion, yet inflation has yet to pick up in the advanced economies. The question that inflation-targeting central banks must confront is straightforward: why?

The Chinese Saving Rate: Long-Term Care Risks, Family Insurance, and Demographics
Ayse Imrohoroglu and Kai Zhao (VoxChina) Sep 13, 2017
In this paper, we show that a general equilibrium model that properly captures the risks in old age, the role of family insurance, changes in demographics, and the productivity growth rate is capable of generating changes in the national saving rate in China that mimic the data well. Our findings suggest that the combination of the risks faced by the elderly and the deterioration of family insurance due to the one-child policy may account for approximately half of the increase in the saving rate between 1980 and 2010. We also show that changes in total factor productivity growth account for the fluctuations in the saving rate during this period.

Aid for Trade and trade in services
Bernard Hoekman and Anirudh Shingal (VoxEU) Sep 13, 2017
Research on the effects of Aid for Trade has focused mostly on merchandise trade and investment in developing countries. This column discusses the relationship between Aid for Trade and trade in services and finds that while most Aid for Trade is allocated to service sectors, this is not associated with greater trade in services, in contrast to what is observed for trade in goods. These findings suggest that Aid for Trade could do more to target capacity weaknesses that constrain growth in services trade. Research on the effects of Aid for Trade has focused mostly on merchandise trade and investment in developing countries. This column discusses the relationship between Aid for Trade and trade in services and finds that while most Aid for Trade is allocated to service sectors, this is not associated with greater trade in services, in contrast to what is observed for trade in goods. These findings suggest that Aid for Trade could do more to target capacity weaknesses that constrain growth in services trade.

Bannon Says the U.S. Is at ‘Economic War with China.’ Is He Right?
Paul Haenle, Jacqueline N. Deal, Pamela Kyle Crossley, Christopher Balding & Victor Shih (ChinaFile) Sep 13, 2017
Before Steve Bannon left his White House position as chief strategist, he said the U.S. is “at economic war with China.” He added, “One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path.” Are the United States and China in a state of economic war? If not, is that a likely outcome if tensions between the two nations continue to rise?

Merkel’s message to Theresa May: Brexit means Brexit
Philip Stephens (FT) Sep 14, 2017
Misreading Germany has been a reliable thread of more than 44 years of British EU membership.

Emerging market export volume growth hits six-year high
Steve Johnson (FT) Sep 14, 2017
Asia’s thirst for imports leads to sharp narrowing of trade surplus.

India looks to have a ticket to superior returns
Merryn Somerset Webb (FT) Sep 15, 2017
Modi’s policies are the icing on the cake of an almost perfect emerging markets story.

African nations turn to bond markets for finance needs
Kate Allen (FT) Sep 15, 2017
Strong investor appetite despite some countries carrying heavy debt loads.

What Trump Can Do to Prevent the Next Crash
Ruchir Sharma (NYT) Sep 14, 2017
The Federal Reserve doesn’t do enough to restrain out-of-control prices for stocks, houses and other assets. It should, and Donald Trump can help.

NAFTA Parties Pursue “Accelerated” Timeframe, Gear Up for Third Round of Talks
Bridges, Volume 21, Number 29 Sep 14, 2017
Officials are gearing up for another negotiating round in the efforts to modernise the North American Free Trade Agreement (NAFTA), with the next set of talks due for 23-27 September. The gathering will mark their third round in just over one month as part of an “accelerated” timeframe planned by ministers.

EU Commission President Outlines Vision for Bloc’s Integration Future, Trade Agenda
Bridges, Volume 21, Number 29 Sep 14, 2017
European Commission President Jean-Claude Juncker announced a series of proposed initiatives and priority areas for the EU’s executive arm to take on through the end of 2018, while making unity, efficiency, strength, and economic growth among the key themes of his annual “State of the European Union” speech on Wednesday 13 September.

BRICS Leaders Stress Economic, Development Cooperation at Xiamen Summit
Bridges, Volume 21, Number 29 Sep 14, 2017
Leaders from Brazil, Russia, India, China, and South Africa concluded their ninth “BRICS” Summit last week, signing off on a declaration which covered topics such as economic cooperation and development, trade and investment, and other international concerns.

A US Content Requirement in NAFTA Could Hurt Manufacturing
Caroline Freund (PIIE) Sep 14, 2017
The US administration is reportedly considering adding a US-specific content requirement for vehicles imported through the North American Free Trade Agreement (NAFTA). The proposal would require vehicles to have 35 to 50 percent US content to qualify for duty-free access under the agreement.

What's Driving India's Bulls
Mihir Sharma (Bloomberg View) Sep 14, 2017
Advisers have an incentive to construct wildly optimistic narratives.

Don't Sweat Yuan's Climb; Consumers Drive China Now
Daniel Moss (Bloomberg View) Sep 14, 2017
The significant number this month is consumer confidence.

Yuan Bears, Don't Get Too Excited Just Yet
David Millhouse (Bloomberg View) Sep 14, 2017
The People's Bank of China believes capital flight risks have diminished, and the policy of yuan liberalization can resume.

Counting What Counts in Development
Selim Jahan (Project Syndicate) Sep 14, 2017
When statisticians compare countries, they rely on commensurable data, like life expectancy and per capita income. But such metrics, while useful, do not tell the entire story of human development, which can be revealed only by understanding how quantitative progress affects the quality of people’s lives.

What the West Gets Wrong About China's Economy
Yukon Huang (FA) Sep 14, 2017
Debt, trade, and corruption.

How not to build a state: Evidence from Colombia
Daron Acemoglu, Leopoldo Fergusson, James Robinson, Dario Romero and Juan F. Vargas (VoxDev) Sep 14, 2017
Top-down strategies that prioritise military objectives may fail to develop, or even lead to the deterioration of, other crucial state capacities.

Market liquidity after the financial crisis
Tobias Adrian, Michael J. Fleming and Or Shachar (VoxEU) Sep 14, 2017
The potential adverse effects of regulation on market liquidity in the post-crisis period continue to receive significant attention. This column shows that dealer balance sheets have continued to stagnate and that various measures point to less abundant funding liquidity. Nonetheless, there is little evidence of a wide-spread deterioration in market liquidity. Liquidity remained resilient even during stress events like the 2013 ‘temper tantrum’. The potential adverse effects of regulation on market liquidity in the post-crisis period continue to receive significant attention. This column shows that dealer balance sheets have continued to stagnate and that various measures point to less abundant funding liquidity. Nonetheless, there is little evidence of a wide-spread deterioration in market liquidity. Liquidity remained resilient even during stress events like the 2013 ‘temper tantrum’.

Should We Worry About Chinese SOEs?
Jay H. Bryson (Wells Fargo) Sep 14, 2017
Leverage in the non-financial corporate sector in China has risen sharply over the past decade. Concerns about the country's state-owned enterprises (SOEs) wax and wane, but angst has dissipated over the past year or so due to the stabilization in China's rate of economic growth. However, we think it would be premature to state that Chinese SOEs are "out of the woods."

Why China Is Cracking Down on Cryptocurrencies and ICOs
Martin Chorzempa (PIIE) Sep 15, 2017
China initiated a harsh crackdown on cryptocurrencies in early September, part of a broader toughening against financial risk and increased regulatory vigilance on new financial products. Initial Coin Offerings (ICOs) are now banned, a necessary action at present to protect investors from fraud and maintain financial stability in the short term. The ban is likely to be temporary and should not become permanent.

Bank of England Can't Afford to Mix Messages Anymore
Daniel Moss (Bloomberg View) Sep 15, 2017
Sure, Brexit's been crazy. Central bankers can reduce the anxiety instead of adding to it.

Fed to Join Bank of England in Warning Against Complacency
Mohamed Aly El-Erian (Bloomberg View) Sep 15, 2017
Traders and investors have been underestimating the probability of a rate hike this year.

Digital Currencies Won't Kill the Dollar
Noah Smith (Bloomberg View) Sep 15, 2017
But they could still change the world.

U.S. Energy Boom Can Bring China Into the Global Order
Meghan L O'Sullivan (Bloomberg View) Sep 15, 2017
Beijing will continue to threaten the post-World War II system unless allowed to help reshape it.

Germany’s Anti-Populist Exceptionalism
Michael Bröning (Project Syndicate) Sep 15, 2017
As Germany prepares for this month’s federal election, the country seems remarkably resistant to the populist challenge that other Western societies have faced. But weak support for extremist parties doesn’t mean that Germans are satisfied.

Artificial intelligence in service business operations
Yoko Konishi (VoxEU) Sep 15, 2017
The latest AI boom that started in 2012 shows no signs of fading, thanks to the recent availability of big data and widespread adoption of deep learning technologies. This column argues that this new combination of data and technology offers an unprecedented opportunity for society. AI will develop sustainably only if systems are in place to collect relevant data, and AI is not adopted for its own sake. The latest AI boom that started in 2012 shows no signs of fading, thanks to the recent availability of big data and widespread adoption of deep learning technologies. This column argues that this new combination of data and technology offers an unprecedented opportunity for society. AI will develop sustainably only if systems are in place to collect relevant data, and AI is not adopted for its own sake.

Global poverty revisited
Martin Ravallion and Shaohua Chen (VoxEU) Sep 15, 2017
Past studies have measured poverty in either relative terms (mostly in the developed countries) or absolute terms (the developing world). This column presents a new unified approach to global poverty that assumes that people care about both their own income and their income relative to others in their country of residence. The study finds that global poverty has declined more in absolute terms than in relative terms. The vast bulk of the relatively poor now live in the developing world. The advanced countries have seen little progress against poverty, unlike the developing world. Past studies have measured poverty in either relative terms (mostly in the developed countries) or absolute terms (the developing world). This column presents a new unified approach to global poverty that assumes that people care about both their own income and their income relative to others in their country of residence. The study finds that global poverty has declined more in absolute terms than in relative terms. The vast bulk of the relatively poor now live in the developing world. The advanced countries have seen little progress against poverty, unlike the developing world.

The China Puzzle
NYT Sep 16, 2017
President Trump has reason to worry about China, but he should seek areas of agreement with Beijing and enlist it in addressing global problems.

A legal vulnerability at the heart of China’s big internet firms
Economist Sep 16, 2017
Variable interest entities are their weakest link.

In a Great Recession, the case for flexible exchange rates is alive and well
Giancarlo Corsetti, Gernot Müller and Keith Kuester (VoxEU) Sep 16, 2017
The classic rationale for flexible exchange rates was that policymakers would be unconstrained by currency targets. The Great Recession, however, saw numerous central banks constrained instead by the zero lower bound. This column considers which exchange rate regime is best for small open economies in a global recession. The model suggests that if the source of the shock is abroad and foreign interest rates become constrained at their zero lower bound, then flexible exchange rates do provide a great deal of insulation to the domestic economy. The classic rationale for flexible exchange rates was that policymakers would be unconstrained by currency targets. The Great Recession, however, saw numerous central banks constrained instead by the zero lower bound. This column considers which exchange rate regime is best for small open economies in a global recession. The model suggests that if the source of the shock is abroad and foreign interest rates become constrained at their zero lower bound, then flexible exchange rates do provide a great deal of insulation to the domestic economy.

The Real Economic Cost of Accepting Refugees
Michael Clemens (CGD) Sep 17, 2017
The arrival of more than a million refugees and migrants in Europe has brought widespread concern they will become an economic drain on the countries that welcome them. When economists have studied past influxes of refugees and migrants they have found the labor market effects, while varied, are very limited, and can in fact be positive.

The EU’s free marketeers struggle to hold the line
FT View Sep 18, 2017
Activist trade policy must not be allowed to become protectionism.

Now Apple needs to reinvent the digital economy
John Thornhill (FT) Sep 18, 2017
Apps, more than the iPhone, have been revolutionary — and now we need another shift.

Emerging market sovereign debt doubles in a decade
Steve Johnson (FT) Sep 18, 2017
Longer maturities and more local-currency paper may have reduced risk overall.

India’s faltering economy poses questions for Narendra Modi
Amy Kazmin (FT) Sep 18, 2017
Much-touted economic boom shows signs of wobbling.

Soros hatred is a global sickness
Gideon Rachman (FT) Sep 18, 2017
For a new generation of nationalists, the investor has become the perfect villain.

Emerging markets’ fortunes depend on manufacturers
Michael Hunter (FT) Sep 19, 2017
UBS sounds positive note on outlook for EM assets.

America’s inflation enigma continues to confound
Sam Fleming (FT) Sep 18, 2017
As the Federal Reserve meets this week, officials are flummoxed by restrained price rises.

Why China Is So Confident
Christopher Balding (Bloomberg View) Sep 18, 2017
Life is getting better. It's a good time for reform.

What Last Week Tells Us About Bitcoin
Mohamed Aly El-Erian (Bloomberg View) Sep 18, 2017
It will take time to understand the currency's full array of costs and benefits.

Harvey and Irma Have Global Market Implications
Komal S Sri-Kumar (Bloomberg View) Sep 18, 2017
The fallout for investors is likely to include a delay in the normalization of interest rate policies and a further weakening of the dollar.

The Next Crisis Will Start in Silicon Valley
William J Magnuson (Bloomberg View) Sep 18, 2017
Forget Wall Street. Worry about fintech.

Only the Ghost of Benjamin Disraeli Can Fix Theresa May’s Omnishambles Brexit
Robert Zaretsky (FP) Sep 18, 2017
The winner of the battle for Britain's future, and Tory leadership, is already in its history books.

Banking reform nine years on
John Vickers (VoxEU) Sep 18, 2017
The general opinion expressed by those in the financial sector and its regulators is that reform since 2008 has got us to about the right place in terms of limits on bank leverage. But the majority view of economists outside the financial sector is that Basel III goes nowhere near far enough. This column argues that while it represents a huge improvement on Basel II, Basel III should be seen as a staging post, not an end-point, and built upon in the years ahead. The general opinion expressed by those in the financial sector and its regulators is that reform since 2008 has got us to about the right place in terms of limits on bank leverage. But the majority view of economists outside the financial sector is that Basel III goes nowhere near far enough. This column argues that while it represents a huge improvement on Basel II, Basel III should be seen as a staging post, not an end-point, and built upon in the years ahead.

Firm efficiency, foreign ownership, and CEO gender in corrupt environments
Jan Hanousek, Anastasiya Shamshur and Jiri Tresl (VoxEU) Sep 18, 2017
Bribery and corruption still present a significant cost to many countries today. This column examines how the efficiency of Eastern European private firms is affected by the level of corruption in their operating environment. An environment of high corruption has an adverse effect on firm efficiency, with ‘honest’ firms – typically foreign-owned and/or with female CEOs – penalised even more. Bribery and corruption still present a significant cost to many countries today. This column examines how the efficiency of Eastern European private firms is affected by the level of corruption in their operating environment. An environment of high corruption has an adverse effect on firm efficiency, with ‘honest’ firms – typically foreign-owned and/or with female CEOs – penalised even more.

Insanely Concentrated Wealth Is Strangling Our Prosperity
Steve Roth (Evonomics) Sep 18, 2017
Today’s mountains of wealth throttle the very engine of wealth creation itself.

CFIUS, Chinese investment, and how to improve both
Derek Scissors (AEI) Sep 18, 2017
The People's Republic of China is making a concerted effort to acquire American technology through both formation of national funds and bids by individual companies. The Committee on Foreign Investment in the United States should remain exclusively focused on national security, but the US should extend its investigations beyond traditional mergers and acquisitions, providing the necessary resources to do so. The US should be concerned with the nature of the American asset involved, not the ownership status of the foreign investor. Excluding national security concerns, the US should welcome Chinese investors, especially greenfield investors, that obey intellectual property and other laws.

The eurozone recovery achieves critical mass
FT View Sep 19, 2017
The central bank’s loose policies are key to the bloc’s remarkable turnround.

Capitalism and democracy — the odd couple
Martin Wolf (FT) Sep 19, 2017
We are making a bad job of reconciling the tensions to hold this marriage together.

Robot shock threatens the most vulnerable communities
Sarah O’Connor (FT) Sep 19, 2017
Service sector jobs that replaced those in manufacturing are in turn at risk from AI.

China’s economy slows but credit steady ahead of congress
FTCR Sep 19, 2017
Official and FTCR data highlight government priorities ahead of key party meeting.

NAFTA Doesn’t Need a Senseless Sunset
Jeffrey J. Schott (PIIE) Sep 19, 2017
The Trump administration wants a revised North American Free Trade Agreement (NAFTA) to include a sunset provision terminating the pact after five years unless all three countries approve its renewal.

A Third Wave of Intellectual Leadership on Development at the UN?
Cindy Huang (CGD) Sep 19, 2017
In the lifetime of the United Nations, there have been two times when there have been intellectual centers addressing major global issues that led to a sea change in how the world works. One such time was in the late 1940s when a number of Nobel Prize thinkers created national accounting, like the gross national product, and established the post-World War II international trade regime. The second such time started in 1989. Can we imagine a third wave of intellectual leadership at the UN?

What U.S. Decline? The World Still Watches the Fed
Daniel Moss (Bloomberg View) Sep 19, 2017
The U.S. wields plenty of soft power. Just ask central bankers in Poland and South Africa.

The IMF Needs to Stop Torturing Greece
J Kyle Bass (Bloomberg View) Sep 19, 2017
The fund should write down the country's debt, not demand another bank recapitalization.

Making Fiscal Money Work
Biagio Bossone, Marco Cattaneo, Massimo Costa and Stefano Sylos Labini (Project Syndicate) Sep 19, 2017
Proposals for a new system of “fiscal money” have increasingly appeared in political debates in Italy, where budget constraints and a lack of monetary sovereignty have tied policymakers’ hands. If it is properly designed, such a system could substantially boost economic output and public revenues at little to no cost.

The Global Leadership Vacuum
Javier Solana (Project Syndicate) Sep 19, 2017
Will Angela Merkel’s Germany ensure that great-power cooperation does not deteriorate beyond the point of no return in the Trump era? The answer to that question will likely determine if the international order has any order to speak of in the years ahead.

Jean-Claude Juncker’s Roadmap for European Disaster
Hans-Werner Sinn (Project Syndicate) Sep 19, 2017
This month, the European Commission's president called for an acceleration of the eurozone's eastward expansion. But his plan for doing so could recreate the conditions that fueled the EU-wide crisis stemming from Southern Europe just a few years ago.

The Risk of a New Economic Non-Order
Mohamed A. El-Erian (Project Syndicate) Sep 19, 2017
The upcoming IMF and World Bank annual meetings offer a critical opportunity to start a serious discussion on how to arrest the lose-lose dynamics that have been gaining traction in the global economy. The longer it takes for the seeds of reform to be sown, the less likely they will be to take root.

Reviving India’s Economy
Kaushik Basu (Project Syndicate) Sep 19, 2017
Given the Indian economy’s massive size and extensive global linkages, its growth slowdown is a source of serious concern not just domestically, but around the world. The good news is that carefully crafted policies that address both short- and long -term impediments can reverse the downward trend.

The rise of robots in the German labour market
Wolfgang Dauth, Sebastian Findeisen, Jens Südekum and Nicole Woessner (VoxEU) Sep 19, 2017
Recent research has shown that industrial robots have caused severe job and earnings losses in the US. This column explores the impact of robots on the labour market in Germany, which has many more robots than the US and a much larger manufacturing employment share. Robots have had no aggregate effect on German employment, and robot exposure is found to actually increase the chances of workers staying with their original employer. This effect seems to be largely down to efforts of work councils and labour unions, but is also the result of fewer young workers entering manufacturing careers. Recent research has shown that industrial robots have caused severe job and earnings losses in the US. This column explores the impact of robots on the labour market in Germany, which has many more robots than the US and a much larger manufacturing employment share. Robots have had no aggregate effect on German employment, and robot exposure is found to actually increase the chances of workers staying with their original employer. This effect seems to be largely down to efforts of work councils and labour unions, but is also the result of fewer young workers entering manufacturing careers.

What’s the One U.N. Treaty Trump Should Love?
David Bosco (FP) Sep 19, 2017
Though Trump isn’t a fan of the U.N., there’s a reason he might like a multilateral treaty on sea law.

Turkey’s EU accession: the way forward
Timothy Ash (FT) Sep 20, 2017
For all the harsh words, Erdogan does not want to walk away.

McKinsey has closed its eyes in South Africa
John Gapper (FT) Sep 20, 2017
Along with Bell Pottinger and KPMG, the consulting firm failed to resist financial temptation.

Can Technology Solve the De-risking Problem?
Vijaya Ramachandran and Jim Woodsome (CGD) Sep 20, 2017
In recent years, regulators have raised their expectations for what counts as adequate AML/CFT compliance. At the same time, they have cracked down on institutions that have fallen short. While arguably necessary, this more stringent enforcement has produced some unintended side effects. In particular, it has put pressure on banks’ ability and willingness to deliver certain types of services, notably correspondent banking services.

The Fed Buys into Secular Stagnation
Joseph E. Gagnon (PIIE) Sep 20, 2017
As was widely expected, the Federal Open Market Committee (FOMC) held its short-term interest rate steady on September 20 and announced that starting next month the Fed will gradually shrink its $4.5 trillion balance sheet, which it built up in response to the Great Recession to support the economy.

Making Economic Sanctions on North Korea Work
Yasheng Huang (Project Syndicate) Sep 20, 2017
China is the only country with the power to compel North Korea to change its nuclear policy. Convincing Chinese leaders to wield that power, by fully isolating the regime economically, must be the international community's top priority.

China’s Monetary Policy and Its RMB Exchange Rate Regime
Guofeng Sun (VoxChina) Sep 20, 2017
With over twenty years of experience at the frontline of China’s monetary policy operations and with two decades of academic research experience, I provide a unique, first-hand perspective on a number of facets dealing with China’s monetary policy and theory. The book opens with an introduction of monetary theories, including my credit monetary theory, followed by a review of some focal issues regarding China’s monetary policy and a discussion of the RMB exchange rate regime and international balance. The book presents China as a country at a crossroads, forced to choose between the free flow of capital and monetary policy independence.

Economists respond to Juncker’s State of the Union speech
Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon and Ricardo Reis (VoxEU) Sep 20, 2017
The European Commission president’s suggestion that joining the euro should be compulsory for all EU members is not well received by over three quarters of leading economists responding to the latest Centre for Macroeconomics and CEPR survey. This column also reveals how, when asked a broader question about the success of the common currency, half the experts think it has had more benefits than costs, while only a quarter think the opposite. The majority view is that there have been significant benefits, but the way the Eurozone has been operated has also imposed significant costs. The European Commission president’s suggestion that joining the euro should be compulsory for all EU members is not well received by over three quarters of leading economists responding to the latest Centre for Macroeconomics and CEPR survey. This column also reveals how, when asked a broader question about the success of the common currency, half the experts think it has had more benefits than costs, while only a quarter think the opposite. The majority view is that there have been significant benefits, but the way the Eurozone has been operated has also imposed significant costs.

Ideas aren’t running out, but they are getting more expensive to find
Nicholas Bloom, Chad Jones, John Van Reenen and Michael Webb (VoxEU) Sep 20, 2017
The rate of productivity growth in advanced economies has been falling. Optimists hope for a fourth industrial revolution, while pessimists lament that most potential productivity growth has already occurred. This column argues that data on the research effort across all industries shows the costs of extracting ideas have increased sharply over time. This suggests that unless research inputs are continuously raised, economic growth will continue to slow in advanced nations. The rate of productivity growth in advanced economies has been falling. Optimists hope for a fourth industrial revolution, while pessimists lament that most potential productivity growth has already occurred. This column argues that data on the research effort across all industries shows the costs of extracting ideas have increased sharply over time. This suggests that unless research inputs are continuously raised, economic growth will continue to slow in advanced nations.

US Trade Rep Outlines Expectations for NAFTA, WTO, EU Ties
Bridges, Volume 21, Number 30 Sep 21, 2017
US Trade Representative Robert Lighthizer told a Washington audience this week that trade watchers should “expect change, expect new approaches, and expect action” in the current Trump Administration’s policy plans going forward.

The Coming Bear Market?
Robert J. Shiller (Project Syndicate) Sep 21, 2017
The US stock market today looks a lot like it did at the peak before all 13 previous price collapses. That doesn't mean that a bear market is imminent, but it does amount to a stark warning against complacency.

The forward guidance paradox
Alex Haberis, Richard Harrison and Matt Waldron (VoxEU) Sep 21, 2017
In New Keynesian models, a promise to hold interest rates lower in the future has powerful effects on economic activity and inflation today. This result relies on a strong link between expected future policy rates and current activity, and also a belief that the policymaker will make good on the promise. This column argues that a tension between both of these creates a paradox – the stronger the expectations channel, the less likely it is that people will believe the promise in the first place. As a result, forward guidance promises are much less powerful than standard analysis suggests. In New Keynesian models, a promise to hold interest rates lower in the future has powerful effects on economic activity and inflation today. This result relies on a strong link between expected future policy rates and current activity, and also a belief that the policymaker will make good on the promise. This column argues that a tension between both of these creates a paradox – the stronger the expectations channel, the less likely it is that people will believe the promise in the first place. As a result, forward guidance promises are much less powerful than standard analysis suggests.

How Not to Do Trade Deals
Swati Dhingra and Nikhil Datta (LRB) Sep 21, 2017
Given that the EU is within swimming distance from the UK, has a population of more than 500 million and a GDP of almost $20 trillion (double that of China), an equivalent replacement is effectively impossible.

Angela Merkel’s Great Escape
James Traub (FP) Sep 21, 2017
The chancellor's response to the refugee crisis was going to be her downfall. Then Germany's welfare state kicked in.

Germany’s Crisis of Complacency
Helmut K. Anheier (Project Syndicate) Sep 22, 2017
Over the past decade, Germany has gone from being the “sick man of Europe” to a bastion of stability. But with German Chancellor Angela Merkel poised to gain a fourth term, it is worth asking if too much stability can be a bad thing.

The New Monopolists
Mordecai Kurz (Project Syndicate) Sep 22, 2017
While innovations in information technology have transformed how people live, work, and connect, the IT industry's growth pattern has contributed to a widening gap between rich and poor. Addressing it will require new taxation schemes and modernization of antitrust legislation.

Quality and quality variation beget export success
Kalina Manova and Zhihong Yu (VoxEU) Sep 22, 2017
Pinpointing how multi-product firms organise their operations is key for understanding the drivers of global competitiveness. This column presents a theory on the behaviour of multi-product firms when cost and quality competitiveness jointly determine export performance. Using Chinese data, it finds that firms’ production and sales activity across products and markets is governed by a product hierarchy based on quality. This phenomenon also determines how firms respond to economic shocks. Pinpointing how multi-product firms organise their operations is key for understanding the drivers of global competitiveness. This column presents a theory on the behaviour of multi-product firms when cost and quality competitiveness jointly determine export performance. Using Chinese data, it finds that firms’ production and sales activity across products and markets is governed by a product hierarchy based on quality. This phenomenon also determines how firms respond to economic shocks.

Unfinished Business: The North Atlantic crisis and its aftermath
Tamim Bayoumi (VoxEU) Sep 22, 2017
Nine years ago, Lehman Brothers collapsed and the economic world changed. This column introduces a new book that asks how the North Atlantic economy became so unstable that the failure of a medium-sized US investment bank could topple the entire North Atlantic region into deep recession, and the Eurozone into a depression. The answer lies in serial but different regulatory mistakes in Europe and the US starting in the 1980s. Nine years ago, Lehman Brothers collapsed and the economic world changed. This column introduces a new book that asks how the North Atlantic economy became so unstable that the failure of a medium-sized US investment bank could topple the entire North Atlantic region into deep recession, and the Eurozone into a depression. The answer lies in serial but different regulatory mistakes in Europe and the US starting in the 1980s.

Income mobility and welfare: A new approach
Tom Krebs, Pravin Krishna and William Maloney (VoxEU) Sep 22, 2017
Research on economic mobility has failed to disentangle the underlying economic drivers. In particular, opportunities for upward movement represent welfare-enhancing mobility, while risky income shocks represent welfare-reducing mobility. This column presents a framework for differentiating between these factors, and applies the model to Mexican data. Results show that opportunity and risk are equally important drivers of income mobility, with large but opposing welfare effects. This challenges the idea that societies with higher measured income mobility are better. Research on economic mobility has failed to disentangle the underlying economic drivers. In particular, opportunities for upward movement represent welfare-enhancing mobility, while risky income shocks represent welfare-reducing mobility. This column presents a framework for differentiating between these factors, and applies the model to Mexican data. Results show that opportunity and risk are equally important drivers of income mobility, with large but opposing welfare effects. This challenges the idea that societies with higher measured income mobility are better.

How high intra-national trade costs limit the gains of globalisation
Dave Donaldson and David Atkin (VoxDev) Sep 22, 2017
High trade costs and mark-ups on transportation within African countries reduce the surplus and market access of remote consumers.

How China is battling ever more intensely in world markets
Economist Sep 23, 2017
But does it play fair?

The benefits of central bank digital currency
Michael Bordo and Andrew Levin (VoxEU) Sep 23, 2017
Central banks across the world are considering sovereign digital currencies. This column argues that these currencies could transform all aspects of the monetary system and facilitate the systematic and transparent conduct of monetary policy. In particular, a central bank digital currency can serve as a practically costless medium of exchange, a secure store of value, and a stable unit of account. To achieve this, the currency would be account based and interest bearing, and the monetary policy framework would target true price stability. Central banks across the world are considering sovereign digital currencies. This column argues that these currencies could transform all aspects of the monetary system and facilitate the systematic and transparent conduct of monetary policy. In particular, a central bank digital currency can serve as a practically costless medium of exchange, a secure store of value, and a stable unit of account. To achieve this, the currency would be account based and interest bearing, and the monetary policy framework would target true price stability.

Hungary’s assault on Soros and EU values
FT View Sep 24, 2017
Cohesion fund payments should be linked to observing the rule of law.

Botched reforms put the brakes on India’s growth
FT View Sep 24, 2017
Modi needs to change his style if he is to deliver economic renewal.

Why America’s tax and trade debate is wrong
Rana Foroohar (FT) Sep 24, 2017
Policy should concentrate on creating local supply chains that enrich the economy.

Beijing effort and inflation push China debt load down
Gabriel Wildau (FT) Sep 24, 2017
First fall in debt-to-GDP ratio since 2011 as corporate liabilities decline.

A Nafta Exit Would Be a Rotten Deal
Thomas J. Donohue (WSJ) Sep 24, 2017
Hundreds of thousands of U.S. jobs would be lost, especially in heartland states that backed Trump.

Why Asia is the Champion of Globalization
Ronald Meinardus (Globalist) Sep 24, 2017
Can the EU replace the United States, as China starts dominating the globe?

Modi’s first three years: some wins but breakthroughs yet to come
Amitendu Palit (EAF) Sep 24, 2017
There are major economic policy fronts on which Modi has yet to break through.

Riding the energy transition: Oil beyond 2040
Reda Cherif, Fuad Hasanov and Aditya Pande (VoxEU) Sep 24, 2017
The motor vehicle was very quick to replace horses in the early 20th century, and the advent of the electric car suggests that another profound shift in transportation and energy could be around the corner. This column projects how different rates of electric car adoption will effect oil demand and consumption over the next three decades. In a fast-adoption scenario, oil prices could converge to the level of current coal prices by the early 2040s. Even under a slow adoption scenario, oil could become obsolete before it is depleted. The motor vehicle was very quick to replace horses in the early 20th century, and the advent of the electric car suggests that another profound shift in transportation and energy could be around the corner. This column projects how different rates of electric car adoption will effect oil demand and consumption over the next three decades. In a fast-adoption scenario, oil prices could converge to the level of current coal prices by the early 2040s. Even under a slow adoption scenario, oil could become obsolete before it is depleted.

Winners and losers from China’s ‘commodities-for-manufactures’ trade boom
Francisco Costa, Jason Garred and João Pessoa (VoxEU) Sep 24, 2017
In addition to being a competitor for other countries’ industries, China has also become an increasingly important consumer of goods produced elsewhere. This column looks at how the steep rise in ‘commodities-for-manufactures’ trade with China has affected workers in Brazil. While the analysis confirms a negative effect of Chinese import competition on employees of manufacturing firms, it also suggests that growth in trade with China has created some winners in Brazil, with wages rising more quickly in parts of the country benefiting more from increasing Chinese demand. In addition to being a competitor for other countries’ industries, China has also become an increasingly important consumer of goods produced elsewhere. This column looks at how the steep rise in ‘commodities-for-manufactures’ trade with China has affected workers in Brazil. While the analysis confirms a negative effect of Chinese import competition on employees of manufacturing firms, it also suggests that growth in trade with China has created some winners in Brazil, with wages rising more quickly in parts of the country benefiting more from increasing Chinese demand.

Foreign investors shift focus to western Ukraine
Yuri Bender (FT) Sep 25, 2017
Lviv region attracts international money despite ongoing conflict further east.

Why oil markets are taking Kurdish referendum in their stride
Alan Mohtadi (FT) Sep 25, 2017
Traders reckon impact on overall Iraq crude production will be minimal.

Where EM investors can avoid the crowds
Michael Hunter (FT) Sep 25, 2017
UBS analysis emphasises recent fund flow data to offer insight into emerging markets.

Global Economic Challenges and Opportunities
Tao Zhang (IMF) Sep 25, 2017
Nearly a decade after the global financial crisis, the global economy is getting better. The most recent IMF forecast, issued in July, projected global growth at 3.5 percent this year and 3.6 percent in 2018, up from 3.2 percent in 2016. The Fund will issue its next World Economic Outlook in a week, and there is every reason to see these trends continuing.

The Law Strangling Puerto Rico
Nelson A. Dents (NYT) Sep 25, 2017
The Jones Act has outlived its original World War I intent and is devastating the island’s economy.

As China Piles on Debt, Consumers Seek a Piece of the Action
Keith Bradsher and Ailin Tang (NYT) Sep 25, 2017
Mortgage and credit card balances are surging, helping Chinese households reach the middle class but adding to the country’s borrowing binge.

German election kills eurozone reform
Brian Caplen (Banker) Sep 25, 2017
The big loser in Germany’s surprise election result is much-needed eurozone reform. Investors must accept that the eurozone and some banks remain prone to crises.

The Fear Factor in Today’s Interest Rates
Carmen Reinhart (Project Syndicate) Sep 25, 2017
Atlantic-hugging policymakers and pundits, buffered by a continent and a large ocean, may not fully appreciate the significant effect on global financial markets that the threat posed by North Korea has had in recent months. But competition for safe assets has clearly heated up.

The Rentiers Are Here
Stephanie Blankenburg and Richard Kozul-Wright (Project Syndicate) Sep 25, 2017
In the past few decades, the world's largest corporations have increasingly been extracting profits from the economy instead of generating them through innovation. Reversing this trend is essential for future growth and social cohesion; but it won't be easy.

Why Financial Markets Underestimate Risk
Jeffrey Frankel (Project Syndicate) Sep 25, 2017
Today's economy is in a “risk-on” period, when investors exchange safe-haven assets like US Treasury Bills for riskier ones, from real estate to carry-trade currencies. But when such behavior assumes that economic conditions are more stable than they are, as seems to be the case today, trouble inevitably follows.

Germany’s Economic Road Ahead
Clemens Fuest (Project Syndicate) Sep 25, 2017
The next German government will have a chance to lay the groundwork for the country's future prosperity. But if policymakers are to make the most of the opportunity, they will have to act neither rashly nor reticently.

Nobody Is Buying What Theresa May Is Selling
Philippe Legrain (FP) Sep 25, 2017
The British prime minister’s big Brexit speech was a big flop.

India’s Post-Demonetization Policy Agenda
V. Anantha Nageswaran and Gulzar Natarajan (CEIP) Sep 25, 2017
How the Indian government can reap a range of economic benefits from its extraordinary move in November 2016 to remove large bills from circulation in the country’s highly cash-based economy.

‘Chicken Little’ investors in China given debt boost
James Kynge (FT) Sep 26, 2017
Search for opportunities gets under way during grand economic transition.

German Elections: What Merkel’s "Jamaica Coalition" Might Mean for Global Development
Hauke Hillebrandt and Ian Mitchell (CGD) Sep 26, 2017
Germans have given Chancellor Angela Merkel a fourth term as chancellor, but once again without a parliamentary majority. It seems likely that Merkel will now try to negotiate a black-green-yellow “Jamaica coalition” (referring to the parties’ colors) with the Greens and the pro-business Liberals replacing the Social Democrats as coalition partners. Despite the gain in vote for nationalists, our analysis suggests the Jamaica coalition could actually strengthen Germany’s role in accelerating global development, as well as benefitting Germany.

The WDR 2018: Learning for All, All for Learning
Lant Pritchett and Maryam Akmal (CGD) Sep 26, 2017
The release of the World Bank’s World Development Report (WDR) is a milestone in the struggle to prepare the youth of today for the challenges of the world they will face. The report focuses on both the need to “get education right” and how to reform education systems to meet the challenge of preparing today’s youth to be tomorrow’s citizens, parents, community members, workers, and leaders. As we outline below, the WDR and our RISE programme share many core themes.

Shinzo Abe's Momentous Gamble
Bloomberg View Sep 26, 2017
Japan's economic future, and his own political legacy, may well depend on next month's elections.

India's Great Tax Tangle
Mihir Sharma (Bloomberg View) Sep 26, 2017
Complexity and poor planning are bogging down one of the most important reforms in years.

Banking Rules Have Improved. Just Not Enough.
Ferdinando Giugliano (Bloomberg View) Sep 26, 2017
Many economists fear the financial system remains exceedingly vulnerable to shocks.

The Fall, Rise and Fall of Creative Destruction
Justin Fox (Bloomberg View) Sep 26, 2017
What's the lifespan of a company in the age of startups and tech disruption? Longer than it used to be.

The Fed Is Holding Back the Dollar
Jason M Schenker (Bloomberg View) Sep 26, 2017
The central bank's decision to begin reducing its balance sheet is just one of many indicators that global monetary policy is changing.

How to Improve NAFTA
Jorge G. Castañeda (Project Syndicate) Sep 26, 2017
Trade pacts like NAFTA must no longer be regarded merely as charters of rights for large corporations. Instead, they must serve ordinary citizens and address their problems, such as low wages, endemic corruption, and human-rights violations.

A Test for Europe’s German Anchor
Daniela Schwarzer (Project Syndicate) Sep 26, 2017
While Germany’s center has held, its policy consensus is about to be tested. With the far-right AfD party in the Bundestag, the German public will be exposed to more radical positions on foreign affairs than have been heard in the country in over a generation.

Europe’s Battle on Four Fronts
Anatole Kaletsky (Project Syndicate) Sep 26, 2017
Last year’s "multi-crisis" in the EU – including Brexit, refugees, “illiberal democracy” in Hungary and Poland, and the still-unresolved euro crisis – has produced a convergence of opportunities. With Germany's election over, European leaders no longer have an excuse for inaction while they wait for voters’ next rebuff.

Tackling AMR With the IMF
Jim O'Neill (Project Syndicate) Sep 26, 2017
The world has made significant and relatively fast progress in the fight against antimicrobial resistance. But to ensure continued success, more effective mechanisms are needed to hold governments to their increasingly lofty promises.

Germany’s Grave New World
Joschka Fischer (Project Syndicate) Sep 26, 2017
The far-right Alternative for Germany is now the third-largest bloc in the Bundestag and the second-largest party in the states comprising the former East Germany. For the sake of German democracy itself, the parties that still stand for democratic values must take seriously their responsibility to form a new government.

Tackling Non-Inclusive Growth
Michael Spence (Project Syndicate) Sep 26, 2017
Rigorous research on the causes and consequences of unequally distributed growth is necessary to identify solutions. But the best analysis means little in the absence of hands-on consensus-building and political engagement.

The Courage to Normalize Monetary Policy
Stephen S. Roach (Project Syndicate) Sep 26, 2017
A decade after the onset of the global financial crisis, it seems more than appropriate for central bankers to move the levers of policy off their emergency settings. A world in recovery – no matter how anemic it may be – does not require a crisis-like approach to monetary policy.

Effects of the euro on the synchronisation of business cycles
Nauro Campos, Jarko Fidrmuc and Iikka Korhonen (VoxEU) Sep 26, 2017
The debate about the future of the Economic and Monetary Union entails a careful examination of the costs and benefits of the European single currency. This column takes stock of the empirical evidence on the euro’s effects on business cycle synchronisation. We find that synchronisation across European countries increased by 50% after 1999 (the year the euro was introduced) and that this increase was more pronounced in euro area countries. The debate about the future of the Economic and Monetary Union entails a careful examination of the costs and benefits of the European single currency. This column takes stock of the empirical evidence on the euro’s effects on business cycle synchronisation. We find that synchronisation across European countries increased by 50% after 1999 (the year the euro was introduced) and that this increase was more pronounced in euro area countries.

How firm productivity impacts the optimal inflation rate
Klaus Adam and Henning Weber (VoxEU) Sep 26, 2017
The productivity of many firms evolves over time, which impacts the optimal inflation rate, that is, the rate of price increase with the least distortionary effect on relative goods prices. This column presents estimates for the US that suggest that, due to firm-level productivity changes, the optimal inflation rate has dropped from somewhat over 2% in the mid-1980s to a current level of roughly 1%. The productivity of many firms evolves over time, which impacts the optimal inflation rate, that is, the rate of price increase with the least distortionary effect on relative goods prices. This column presents estimates for the US that suggest that, due to firm-level productivity changes, the optimal inflation rate has dropped from somewhat over 2% in the mid-1980s to a current level of roughly 1%.

The impact of isolationist policies: Insights from regional capital and labour flows in Thailand
Robert Townsend (VoxDev) Sep 26, 2017
Big data with big theory reveal how restrictive regional economic policies can lead to lower national productivity and higher inequality.

A Fiscal Union for the Eurozone
Pierpaolo Barbieri and Shahin Vallée (FA) Sep 26, 2017
The only way to save the EU.

World Bank warns of ‘global learning crisis’
Shawn Donnan (FT) Sep 27, 2017
Education for children in poor countries still lags far behind that in the rich world.

Macron’s European Dream
WSJ Sep 27, 2017
He wants more EU integration. Voters want reform closer to home.

How Big Banks Became Our Masters
Rana Roroohar (NYT) Sep 27, 2017
Lending to consumers or small companies is no longer a core business for large banks. Mainly they are trading assets that enrich the rich.

Yes, the German election has created a problem for euro area reform.
Jeromin Zettelmeyer (PIIE) Sep 27, 2017
Angela Merkel will carry on as German chancellor, but has emerged weakened from the September 24 German parliamentary election. Has this outcome undermined the prospect for deepening Europe's economic and monetary union (EMU)? Compromises on euro area reform have clearly become more difficult.

A resilient Euro needs Franco-German compromise
Agnès Bénassy-Quéré, Markus K. Brunnermeier, Lars Feld, Marcel Fratzscher, Philippe Martin, Hélène Rey, Isabel Schnabel, Nicolas Véron, Beatrice Weder di Mauro, Jeromin Zettelmeyer, Henrik Enderlein, Emmanuel Farhi, Clemens Fuest, Pierre-Olivier Gourinchas and Jean Pisani-Ferry (Bruegel) Sep 27, 2017
A path to a more sustainable Euro. Germany will need to accept some form of risk sharing. France will need to allow more market discipline. But the two countries can find a common vision for reforms.

Are the Sustainable Development Goals Achievable?
Andrew Sheng and Xiao Geng (Project Syndicate) Sep 27, 2017
The SDGs were always bound to meet strong headwinds, owing to technological disruption, geopolitical rivalry, and widening social inequality. But populist calls for nationalist policies, including trade protectionism, have intensified those headwinds considerably.

The International Consequences of US Tax Reform
Martin Feldstein (Project Syndicate) Sep 27, 2017
The proposed shift to a territorial tax system is likely to have far-reaching effects on US corporations’ behavior. But that change, together with a reduction in the 35% corporate-tax rate, could trigger another round of tax reform among developed countries seeking to improve their attractiveness to internationally mobile capital.

Book Synopsis The Making of an Economic Superpower: Unlocking China’s Secret of Rapid Industrialization
Yi Wen (VoxChina) Sep 27, 2017
This book argues that China’s rapid industrialization since 1978 can be attributed to its rediscovery of the secret recipe of the original Industrial Revolution. The secret recipe is not based on institutional changes per se but rather the sequential creation of mass markets to support mass production. Market creation requires a strong state and appropriate industrial policies because mass markets are a public good that is extremely costly to create and can only be created through stages and under enormous political stability and social trust.

Eclipsing LIBOR
Stephen Cecchetti and Kim Schoenholtz (VoxEU) Sep 27, 2017
Financial firms have paid fines totalling more than $9 billion for manipulating LIBOR, yet this flawed benchmark has not been replaced. This column argues that there are reduced incentives for banks to participate in setting the LIBOR rate, and so the potential of, and incentives for, manipulation remain. Although LIBOR is unsustainable, international regulators are working to produce more robust alternatives and to smooth the transition. Financial firms have paid fines totalling more than $9 billion for manipulating LIBOR, yet this flawed benchmark has not been replaced. This column argues that there are reduced incentives for banks to participate in setting the LIBOR rate, and so the potential of, and incentives for, manipulation remain. Although LIBOR is unsustainable, international regulators are working to produce more robust alternatives and to smooth the transition.

Emerging market equities tear up the history book
Steve Johnson (FT) Sep 28, 2017
Sector and style performance the mirror image of previous dollar sell-offs.

Officials Highlight Inclusive Trade, Growth as WTO Public Forum Gears Up
Bridges, Volume 21, Number 31 Sep 28, 2017
International agency chiefs, trade experts, and industry officials alike called for improving education, tackling inequality, and advancing policies to share the benefits of trade more widely within and among countries as the WTO Public Forum began this week in Geneva, Switzerland.

As Brexit Talks Continue, Debate on European Integration Future Heats Up
Bridges, Volume 21, Number 31 Sep 28, 2017
UK Prime Minister Theresa May gave her highly-anticipated speech on her government’s vision for post-Brexit relations with the European Union on Friday, suggesting that the two sides determine a new type of economic partnership once the UK leaves the bloc and requesting a “transition period” for the first couple of years.

TPP-11 Negotiators Consider Potential Options, Schedule October Session
Bridges, Volume 21, Number 31 Sep 28, 2017
Negotiations on the Trans-Pacific Partnership, or TPP-11, resumed late last week in Tokyo, Japan, as officials debated proposed options for advancing the accord before key meetings in October and November.

The Euro Zone: What’s Next
Poul Thomsen (IMF) Sep 28, 2017
I will primarily take the opportunity to share with you our view on some of the key issues facing the Euro Zone at this time.

The Economic Cost of Weakening Capital Requirements for Large Banks
William R. Cline (PIIE) Sep 28, 2017
The policy response to the financial crisis of 2007–09 brought new regulations on bank capital and stress tests that have strengthened the ability of the major US financial institutions to withstand future shocks. However, recent proposals by the US Treasury Department could weaken capital requirements, undermining the improvement in financial stability that has been achieved.

Russia: Growth Up, Inflation Down
Yacov Arnopolin (PIMCO) Sep 28, 2017
Sanctions and volatile oil prices haven’t stopped Russia’s emergence from stagflation.

The Real Reason Why Eastern Europe Wants No Refugees
Barry Wood (Globalist) Sep 28, 2017
Despite shrinking populations, Eastern European countries are worried that taking in refugees is socially disruptive while providing no benefit in closing the income gap with Western Europe.

Why Germany's Shakeup Won't Help Greece
Leonid Bershidsky (Bloomberg View) Sep 28, 2017
Finance Minister Wolfgang Schaeuble is on the way out. His replacement could prove even tougher.

Trump's Trade-Bashing Hurts the U.S.
Bloomberg View Sep 28, 2017
Slapping a giant tariff on a Canadian plane would leave American travelers -- and workers -- poorer.

Inflation Is No Mystery to the Bond Market
Ben Emons (Bloomberg View) Sep 28, 2017
Periods of slow inflation often lead to bouts of faster inflation, just like when energy prices bottomed in early 2016.

Low-Balling Inflation Puts the Fed at Risk
Samuel E Rines (Bloomberg View) Sep 28, 2017
Beware of any metric that doesn't fully reflect housing prices.

Brazil’s Economic Deliverance
Otaviano Canuto (Project Syndicate) Sep 28, 2017
Brazil's proliferating corruption scandals have imposed substantial costs on some of the country's largest companies. But, in the long term, today's efforts to strengthen the rule of law and ensure fair market competition will prove to have been well worth it.

Macron’s Challenge for Europe
Philippe Legrain (Project Syndicate) Sep 28, 2017
French President Emmanuel Macron’s plan for reforming the European Union and the eurozone is highly ambitious, but credible – if Germany plays ball. But while Germany would be committing a monumental strategic blunder if it did not engage seriously with Macron’s proposals, its newly complicated domestic politics could get in the way.

Global value chains and the missing US exports
Yuqing Xing (VoxEU) Sep 28, 2017
The last few decades have seen the US running its largest ever trade deficit. This column uses the case of Apple to demonstrate that the failure of trade statistics to capture flows of intellectual property embedded in exports explains a significant share of this deficit. Reforming trade statistics by including the value added of intellectual property embedded in products manufactured abroad is an essential step towards a better understanding of how trade benefits all countries involved, in particular countries specialising in exporting intangible intellectual property.

Will Euro Appreciation Derail the Eurozone Economy?
Jay H. Bryson and Abigail Kinnaman (WF) Sep 28, 2017
The broad-based appreciation of the euro this year raises some interesting macroeconomic questions. In our view, we are still a long way away from worrying about the growth-restraining and CPI-depressing effects of euro appreciation, because the effects that the exchange rate has on export growth and CPI inflation tend to be rather modest.

Brazil's Narrative of Equality Is Oversold
Mac Margolis (Bloomberg View) Sep 29, 2017
Despite progress fighting poverty, South America's largest economy is still marked by vast disparities.

Fed Knows It's Too Risky to Curb Market Bubbles by Hiking Rates
Timothy A Duy (Bloomberg View) Sep 29, 2017
The risk of financial instability associated with high asset prices alone currently does not affect monetary policy much, if at all.

A Graying Germany Complicates Merkel's Task
Pascal-Emmanuel Gobry (Bloomberg View) Sep 29, 2017
Older voters have supported the establishment, which rewards them generously. But that is creating a dangerous rift.

Soaring Bond Yields May Be Short-Lived
Komal S Sri-Kumar (Bloomberg View) Sep 29, 2017
The Fed's rate hikes and the proposed tax cuts won't spur inflation or faster growth.

Short-Termism Poses Long-Term Drag on Growth
Noah Smith (Bloomberg View) Sep 29, 2017
Investor demands for instant returns deter companies from investing in the future.

The Dangers of Demographic Denial
Adair Turner (Project Syndicate) Sep 29, 2017
Political and business leaders in emerging economies frequently boast that their countries' young, fast-growing populations will be a boon for investment and output. But the world young people inhabit is increasingly one in which the jobs they need are being automated away.

Making the Future Work for Us
Ricardo Hausmann (Project Syndicate) Sep 29, 2017
Rapid technology-driven displacement of massive amounts of human labor is not a new occurrence. But while we can't know what opportunities will arise from a such shifts, we do know that most countries should focus on ensuring that they can master every new technology and exploit every new opportunity that comes their way.

How Stable Is the Global Financial System?
Benjamin J. Cohen (Project Syndicate) Sep 29, 2017
There is little disagreement that the immediate response to the 2008 financial crisis averted another Great Depression. But whether the safeguards in place today are enough to prevent a similar large-scale disaster remains an open question.

The signalling content of asset prices for inflation
Leo de Haan and Jan Willem van den End (VoxEU) Sep 29, 2017
High asset prices can foreshadow tail risks in inflation. Based on data from 11 advanced economies since 1985, this column shows that high asset prices usually signal future high inflation episodes, but can occasionally signal low inflation or deflation instead. The transmission time of asset prices to inflation can be quite long. For central banks, this implies that the signalling content of asset prices for inflation is uncertain, both in timing and direction.

Investment and growth in advanced economies: Selected takeaways from the ECB’s Sintra Forum
Vítor Constâncio, Philipp Hartmann and Peter McAdam (VoxEU) Sep 29, 2017
The European Central Bank’s 2017 Sintra Forum on Central Banking built a bridge from the currently strengthening recovery in Europe to longer-term growth issues for, and structural change in, advanced economies. In this column the organisers highlight some of the main points from the discussions, including what the sources of weak productivity and investment are and what type of economic polarisation tendencies the new growth model seems to be associated with.

Preserving Spain
Ana Palacio (Project Syndicate) Sep 30, 2017
Catalonia's proposed independence referendum on October 1 threatens to mire Spain in a constitutional crisis, and could give added momentum to the wave of ethno-nationalism and nativism sweeping Europe and North America. Spain's next move could decide the fate of its own democratic system, as well as others across the Western world.