Anti-globalists: Why they’re wrong
Economist Oct 1, 2016
Globalisation’s critics say it benefits only the elite. In fact, a less open world would hurt the poor most of all.
Making the most of the shale dividend
FT View Oct 2, 2016
The energy landscape after Opec’s concession poses risks and rewards.
Theresa May is right to offer clarity on Brexit timetable
FT View Oct 2, 2016
Speech offered biggest hint yet that UK will not remain in single market.
Theresa May aims for a soft-ish Brexit landing
Iain Martin (FT) Oct 2, 2016
The time for denial is past — moderate Leavers and Remainers need to unite.
Global economic growth ‘sliding back into the morass’
Chris Giles (FT) Oct 2, 2016
Index reinforces fears of economic weakness amid popular discontent and a backlash against openness.
Trump’s Nafta Mistakes Are Huge
Mary Anastasia O'Grady (WSJ) Oct 2, 2016
Thanks to free trade, the U.S. auto industry has become globally competitive again.
The global economy is faltering yet again
Eswar Prasad and Karim Fodak (Brookings) Oct 2, 2016
The newly updated TIGER Index reveals that most of the world’s advanced and emerging economies are still struggling to bounce back from the Great Recession, with little hope for concerted action from national policymakers.
India's Central Bank Grows Up
Mihir Sharma (Bloomberg View) Oct 2, 2016
The post-Rajan RBI will operate on a stronger institutional footing.
Trade policy affects firms’ input and output choices
Hylke Vandenbussche and Christian Viegelahn (VoxEU) Oct 2, 2016
In a world where production is increasingly fragmented across borders, a large number of firms import their raw material inputs from abroad. This column investigates how firms’ input and output choices are affected by import tariffs on inputs that domestic firms use in production. Based on firm-product level data for India, it finds that firms decrease their use of inputs subject to the tariff, relative to other inputs. Firms also decrease their sales of outputs made of these inputs, relative to other outputs.
China’s state-owned enterprises reform still lacking bite | Bruegel
Alicia García-Herrero (NAR) Oct 3, 2016
China has gone through a remarkable transformation in recent decades but tough reforms have become rare, especially since the global financial crisis. Among the many reforms announced since President Xi Jinping's administration took office in March 2013, the most significant for China's economic outlook undoubtedly will be the reform of state-owned enterprises (SOEs).
China’s state-owned enterprises reform still lacking bite | Bruegel
Alicia García-Herrero (NAR) Oct 3, 2016
China has gone through a remarkable transformation in recent decades but tough reforms have become rare, especially since the global financial crisis. Among the many reforms announced since President Xi Jinping's administration took office in March 2013, the most significant for China's economic outlook undoubtedly will be the reform of state-owned enterprises (SOEs).
Are Special Interests Dooming the Euro to Fail?
Asher Schechter (Pro-Market) Oct 3, 2016
As the Eurozone struggles to stave off a lingering economic crisis, four economists debate the measures necessary to ensure its survival and what’s preventing them from being implemented.
Europe on the move: the economics of EU migration
Stefanie Linhardt (Banker) Oct 3, 2016
The EU's right to free movement has been blamed as a key reason behind the UK's vote to leave the union, as well as cited for being a drain on countries that lose their workers to more affluent neighbours. But how accurate or fair is this? Stefanie Linhardt looks at both sides of this increasingly heated debate, and examines the likely fate of refugees into Europe.
German Stubbornness: Why Not Finally Relent on the Trade Surplus?
Martin Hüfner (Globalist) Oct 3, 2016
Why are Germans so enamored with their trade surpluses? When will they see it is against their own, well-understood self-interest?
What Should and Shouldn't Worry Us About Deutsche Bank
Mohamed Aly El-Erian (Bloomberg View) Oct 3, 2016
Threats of a "Lehman moment" are overstated, but there are risks to the system.
There's a Surplus of Worry About Debt
Noah Smith (Bloomberg View) Oct 3, 2016
It's not so much the quantity of debt that's an economic threat, but the quality.
Building Up the BRICS
Jim O'Neill (Project Syndicate) Oct 3, 2016
The BRICS have lately been going through a rough time, causing many to doubt that some members – namely, Russia and Brazil – even belong in the club of "major emerging economies." The skeptics are wrong.
Is the Fed Playing Politics?
Kenneth Rogoff (Project Syndicate) Oct 3, 2016
In his recent debate with Hillary Clinton, Donald Trump pressed his claim that US Federal Reserve Chair Janet Yellen is applying overdoses of monetary stimulus to hypnotize voters into believing that economic recovery is underway. Such political manipulation has occurred before, but there is no evidence of it now.
The New World Order
Matthew Karp (Boston Review) Oct 3, 2016
The 1850s were a turning point for globalization, from the connections forged by telegraph wires to the exploitative networks of colonization.
Crisis-proof services
Andrea Ariu (VoxEU) Oct 3, 2016
During the Global Crisis, trade in goods collapsed dramatically. Surprisingly, however, trade in services continued its upward trend. This column discusses how goods and services exporters reacted to the crisis and suggests that services exports are less sensitive to income shocks in destination countries. During the Global Crisis, trade in goods collapsed dramatically. Surprisingly, however, trade in services continued its upward trend. This column discusses how goods and services exporters reacted to the crisis and suggests that services exports are less sensitive to income shocks in destination countries.
What big data tells us about real income growth
Stephen Redding and David Weinstein (VoxEU) Oct 3, 2016
Big data stands to transform economic measurement in substantial ways. The volume and precision of data available allows economists to revisit the foundational assumptions underpinning common indexes. This column presents a new empirical methodology that leverages big data to translate nominal numbers into real output or welfare. ‘The unified approach’ nests major price indexes and addresses implicit biases in these measures. An examination with barcode data suggests that standard methods of measuring welfare overstate cost of living increases by ignoring new products and demand shifts. Big data stands to transform economic measurement in substantial ways. The volume and precision of data available allows economists to revisit the foundational assumptions underpinning common indexes. This column presents a new empirical methodology that leverages big data to translate nominal numbers into real output or welfare. ‘The unified approach’ nests major price indexes and addresses implicit biases in these measures. An examination with barcode data suggests that standard methods of measuring welfare overstate cost of living increases by ignoring new products and demand shifts.
There is no need to fret about deglobalisation
Dani Rodrik (FT) Oct 4, 2016
Politicians should focus on restoring the domestic social contract.
London’s five stages of baffled Brexit grief
Robert Shrimsley (FT) Oct 4, 2016
Something momentous has happened but nothing has really changed, so we live in a phoney war.
Deutsche Bank offers a tough lesson in risk
Martin Wolf (FT) Oct 4, 2016
The idea that shareholders control banks is a myth. It is management that is responsible.
New acronym helps dismantle emerging markets
James Kynge (FT) Oct 4, 2016
A grouping of commodity-producing countries is devised to help play the resources cycle.
IMF and World Bank Annual Meetings 2016: Leveraging Global Growth in Challenging Times
Alan Gelb (CGD) Oct 4, 2016
Beginning this Friday, the Annual Meetings of the IMF and World Bank will take place against the backdrop of a still-sputtering global economy, a growing number of displaced people, and a warming climate. In the face of these headwinds, a major priority for the multilaterals has to be to energize their members to spur global growth while also helping to address the challenge of global public goods.
IMF Sees Subdued Global Growth, Warns Economic Stagnation Could Fuel Protectionist Calls
IMF News Oct 4, 2016
Global growth subpar at 3.1 percent in 2016, with slight increase to 3.4 percent next year. Persistent stagnation in advanced economies could further fuel anti-trade sentiment, stifling growth. Countries need to rely on all policy levers—monetary, fiscal and structural—to lift growth prospects.
China’s stake in France
Martine Bulard (LMD) Oct 4, 2016
The US is the biggest destination for China’s direct overseas investment, but Europe is now becoming a priority. In France, where China accounts for only 2% of FDI, are concerns justified?
How to Make Trade Work for Everyone
Chrisine Legarde, Jim Yong Kim and Roberto Azevedo (WSJ) Oct 4, 2016
Open markets are essential for a sustained global recovery and equity for years to come.
Theresa May Seems To Opt for Hard Brexit
Holger Schmieding and Kallum Pickering Oct 4, 2016
The UK’s Prime Minister’s emerging strategy for a hard Brexit will mean significantly reduced access to the EU market.
Safeguarding Ukraine’s Progress
Anders Åslund (Project Syndicate) Oct 4, 2016
Ukraine’s immediate economic crisis has been resolved, but its economy remains fragile and needs international support from bodies such as the IMF, which approved a new disbursement for the country last month. Still, if Ukraine's new government becomes complacent, the country’s recent gains could be lost.
IMF: Anti-Trade and Immigration Rhetoric Put the U.S. At Risk
David Francis (FP) Oct 4, 2016
The IMF says anti-trade and immigration rhetoric puts the U.S. on shaky economic ground.
Will the Crisis of Confidence at Deutsche Bank Spread?
K@W Oct 4, 2016
Deutsche Bank's troubles are pressuring global capital markets as liquidity concerns persist. Will it spread?
Abandoning a Currency Peg
Douglas Clement & Solomon Polansky (FRBM Region) Oct 4, 2016
Fear of future loss can convince central banks to loosen a fixed exchange rate
Advanced economies’ progress: Dismal and dazzling
Ian Goldin and Chris Kutarna (VoxEU) Oct 4, 2016
Some economists see currently faltering GDP growth as part of a longer-term trend for advanced economies, reflecting their belief that the bulk of technological innovation is now behind humankind. This column argues that neither history nor the present-day pace of scientific discovery supports the notion of diminishing returns to technological innovation. The challenge for growth economists is that analytic models are poorly suited to capturing and setting society’s expectations for these impending disruptions.
What we really know about the global financial safety net
Beatrice Scheubel and Livio Stracca (VoxEU) Oct 4, 2016
The global financial safety net is one of the key infrastructures of financial globalisation. However, its current constellation does not reflect a coherent design, but rather the interaction of different instruments used for different purposes and developed over time. This column presents the first database that brings together all of the relevant data for assessing the global financial safety net, including foreign exchange reserves, IMF instruments, regional financing arrangements, and central bank swap lines. An analysis shows that the availability of the net helps to cushion the effects of capital flow reversals.
OPEC's Empty Agreement
Jeff Colgan (FA) Oct 4, 2016
Why production cuts won't change much.
The IMF sends a signal on political risk realities
FT View Oct 5, 2016
Boosting economic growth is the best way to encourage global trade.
A shaky trade deal that signals American decline
Jamil Anderlini (FT) Oct 5, 2016
Optimists say Clinton would revive TPP by another name — but by then it will probably be dead.
Hammond is right to cast off a tattered fiscal straitjacket
Chris Giles (FT) Oct 5, 2016
Britian’s forecasts can no longer rest on high estimates of immigration and productivity growth.
African borrowing levels surge anew
Steve Johnson (FT) Oct 5, 2016
Rising interest burden threatens to undo gains from post-millennium debt write-offs.
Low Growth, Interest Rates Impact Financial Stability
IMF News Oct 5, 2016
Short-term risks have declined, medium-term risks building. Banks, regulators need to tackle structural challenges. Low interest rates help emerging market corporations shed debt.
Low Growth, Inflation Hamper Debt Reduction
IMF News Oct 5, 2016
Global debt at record highs, rising. Two-thirds represents private sector liabilities. Fiscal policy can help facilitate private sector deleveraging.
Are the Irish 26.3% better off?
OECD Insights Oct 5, 2016
On 12 July 2016, the Irish Central Statistics Office published data showing that real GDP grew by 26.3% in 2015. This huge leap led many commentators to question the figures and wonder whether GDP adequately reflects economic activity. To answer this, one first has to be clear about what GDP is – what is being captured when one tries to measure Gross Domestic Product.
Navigating the Brexit Maze to Find Development Goodies
Michael Anderson and Matt Juden (CGD) Oct 5, 2016
Love it or hate it, Brexit implies some of the biggest changes to European trade and development policy in a generation. Decisions made over the next three years will have important consequences for people living in developing countries, possibly for decades to come. That is why we are scaling up our work at CGD to assess the policy choices realistically and find new opportunities to improve development outcomes.
Deutsche Bank, Lehman and the End-of-Days Debate
Mark Gilbert (Bloomberg View) Oct 5, 2016
Be wary of scaremongers.
Markets Struggle to Price In Year-End Uncertainties
Mohamed Aly El-Erian (Bloomberg View) Oct 5, 2016
Political turbulence in the U.S. and Europe isn't reflected in investors' assessments of risk.
China’s Experiment in Djibouti
François Dubé (Diplomat) Oct 5, 2016
China’s role in Africa is changing from resource extractor to long-term strategic partner. Djibouti is a prime example.
The EU/Brexit Poker Play: Ten Theses
Paul Goldschmidt (Globalist) Oct 5, 2016
What is really at stake for both the UK and the EU in the forthcoming negotiations over Brexit.
Debating the Supply Side of Growth
Tyler Cowen and Noah Smith (Bloomberg View) Oct 5, 2016
In some cases, government needs to do more. In others, it should get out of the way.
Who Should Lead International Institutions?
Ngaire Woods (Project Syndicate) Oct 5, 2016
At a time when global cooperation is being undermined by conflicts of interest among traditional and rising powers, the question of who leads the international institutions is more important than ever. The traditional approach to selecting them – guided by national rivalries and popularity contests – is no longer good enough.
The Holy Grail of Future Work
Kelli Wells (Project Syndicate) Oct 5, 2016
As technology, globalization, and many other factors continue to redefine work, one constant will be the need for soft skills, or “skills for life.” Seemingly abstract traits like problem-solving ability, work ethic, and self-awareness can be developed in the right setting and with the right tools.
When Globalization Eats Its Young
Harold James (Project Syndicate) Oct 5, 2016
Evidence that globalization is reversing continues to pile up: trade and international capital flows are sluggish, and migration is increasingly being restricted. But these trends emerged in the aftermath of the 2008 financial crisis, so we can’t blame them on a new populist backlash against globalization.
Multinational firms and tax havens
Anna Gumpert and James Hines (VoxEU) Oct 5, 2016
Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. This column uses data on German firms to investigate the motives for tax haven investment. Tax avoidance does appear to be a motive, particularly for manufacturing firms. Policies that raise the costs of reallocating profits maybe be effective in attenuating firms’ use of tax havens. Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. This column uses data on German firms to investigate the motives for tax haven investment. Tax avoidance does appear to be a motive, particularly for manufacturing firms. Policies that raise the costs of reallocating profits maybe be effective in attenuating firms’ use of tax havens.
Regulating banks’ maturity risk: Quantifying the gains (or losses)
Anatoli Segura and Javier Suarez (VoxEU) Oct 5, 2016
The Global Crisis has led many to conclude that maturity and liquidity mismatch in the financial system prior to the Crisis were excessive and not properly addressed by the existing regulatory framework. This column looks at the justification for the new minimum standard aimed at reducing banks' maturity mismatch – the net stable funding ratio – and assesses its likely impact. While the rationale for limiting banks’ maturity mismatch is strong, the reduction in maturity transformation achieved with the new standard is likely to be too drastic, actually implying a net welfare loss. The Global Crisis has led many to conclude that maturity and liquidity mismatch in the financial system prior to the Crisis were excessive and not properly addressed by the existing regulatory framework. This column looks at the justification for the new minimum standard aimed at reducing banks' maturity mismatch – the net stable funding ratio – and assesses its likely impact. While the rationale for limiting banks’ maturity mismatch is strong, the reduction in maturity transformation achieved with the new standard is likely to be too drastic, actually implying a net welfare loss.
Abandon Ship
Marc Levinson (FA) Oct 5, 2016
Crisis and consolidation in global shipping.
The perils of loose talk on monetary policy
FT View Oct 6, 2016
A benign interpretation of UK prime minister’s remarks is possible.
Infrastructure spending endures as economic crutch for China
FT Confidential Research Oct 6, 2016
A survey points to rising investment and easier finance.
Gap widens between China’s ‘old’ and ‘new’ economies
James Kynge (FT) Oct 7, 2016
Divide is broadest since the 2008 crisis, with millennials’ tastes determining winners from losers.
The side of Spain that seeks sound governance
David Gardner (FT) Oct 6, 2016
It is to Spaniards’ credit that they have denied a political market to populist xenophobia.
Global Trade War, Trump Edition
Thomas B. Edsall (NYT) Oct 6, 2016
Why Larry Summers, Robert Reich and other economists think the Republican presidential candidate's trade policies are 'lunatic.'
More Systemic Government Risk
WSJ Oct 6, 2016
Extending the money-fund mistake to other financial markets.
Paris Climate Deal to Enter into Force in November
Bridges, Volume 20, Number 33 Oct 6, 2016
The Paris Agreement on climate change is set to enter into force next month, officials have confirmed, after receiving a series of key ratifications this week. The landmark climate deal has now surpassed the two thresholds needed for its activation, allowing it to enter into force on 4 November.
UK Premier Sets Deadline for Starting EU Exit Negotiations
Bridges, Volume 20, Number 33 Oct 6, 2016
UK Prime Minister Theresa May announced on Sunday that she will formally request the start of negotiations for exiting the European Union by late March of next year, confirming again that the island nation will indeed proceed with a so-called "Brexit" despite some pending domestic legal challenges.
IMF, World Bank Chiefs Call for Addressing Inequality, Protectionism At Annual Meetings
Bridges, Volume 20, Number 33 Oct 6, 2016
Issues relating to inequality will be high on the agenda at this weekend's Annual Meetings of the International Monetary Fund (IMF) and World Bank Group, being held from 7-9 October in Washington.
Azevêdo Urges WTO Members to Deepen Engagement for MC11 Outcomes
Bridges, Volume 20, Number 33 Oct 6, 2016
WTO Director-General Roberto Azevêdo urged members this week to deepen their engagement as they work to determine possible negotiating outcomes for their Eleventh Ministerial Conference (MC11), which will be held in the Argentine capital city of Buenos Aires in late 2017.
Asia Still Growth Champion, But Must Watch Its Step
IMF News Oct 6, 2016
Asia still outperforms global economy, near-term outlook remains strong. Main risks: sluggish global output, weak trade growth, external financing environment. Policies should support more balanced growth and bolster resilience.
Countries Need Smart Policies to Benefit from Technology's Full Potential
IMF News Oct 6, 2016
Technology could bring significant growth to global economy in next decade. New education model needed to help workers adapt. Cultural, organizational changes have to keep pace with technological change.
Repurposing the World Bank and the MDBs to Meet 21st Century Challenges
Nancy Birdsall and Scott Morris (CGD) Oct 6, 2016
Finance and development ministers gathered in Washington this weekend at the World Bank’s annual meetings have an ambitious agenda of topics to discuss. But the truth is, it is not nearly ambitious enough. A new CGD report by a high level commission of development and finance experts explains why and what should happen.
The global economy has lost billions from internet blackouts
Darrell M. West (Brookings) Oct 6, 2016
A new report estimates that the economic impact of 81 internet shutdowns in 19 countries over the last year has amounted to at least $2.4 billion in GDP globally.
Statistical Insights: What does GDP per capita tell us about households’ material well-being?
OECD Statistics Directorate (OECD Insights) Oct 6, 2016
Although GDP per capita is often used as a broad measure of average living standards, high levels of GDP per capita do not necessarily mean high levels of household disposable income, a key measure of average material well-being of people.
Building a Better World Bank, Not a Bigger One
Lawrence H Summers, Montek Singh Ahluwalia and Andres Velasco Branes (Bloomberg View) Oct 6, 2016
Regionally based multilateral development banks can be more flexible in dealing with climate change, pandemic risks and refugees.
Free Trade's Critics Were Once Its Champions
Victoria Bateman (Bloomberg View) Oct 6, 2016
As free-trade's early supporters understood, global integration and social justice don't have to be in conflict.
Central Banks Sow Confusion
Mihir Sharma (Bloomberg View) Oct 6, 2016
From Washington to Mumbai, monetary policymaking is becoming excessively murky.
Restructuring Debt in the Dark
Ricardo Hausmann and Mark Walker (Project Syndicate) Oct 6, 2016
Unlike chess or football, international financing of sovereigns is a game played with ever-changing rules. And, following the success of Argentina's holdout creditors in that country's debt restructuring, other distressed sovereigns face a changed playing field – as Venezuela is likely to be the first to find out.
Returning to Investment
Richard Kozul-Wright (Project Syndicate) Oct 6, 2016
Conventional wisdom holds that household savings will flow to companies that can best put the money to productive use. But in many developing countries, easier access to finance has not led to more financing for long-term investments, because corporations are using profits to please their shareholders by increasing dividends.
Putting the Populist Revolt in Its Place
Joseph S. Nye (Project Syndicate) Oct 6, 2016
The political revolt against the "establishment elites" in many Western democracies over the last year has caused many to declare that globalization is in retreat. But it may be premature to draw such broad conclusions.
Pollution Controls as Infrastructure Investment
Euston Quah and Joergen Oerstroem Moeller (YaleGlobal) Oct 6, 2016
Game theory techniques and regarding pollution control as infrastructure could end haze over Indonesia’s palm oil industry.
The American Brexit Is Coming
James Stavridis (FP) Oct 6, 2016
Why rejecting the Trans-Pacific Partnership would be a colossal mistake.
How not to build a state: Evidence from Colombia
Daron Acemoglu, Leopoldo Fergusson, James Robinson, Dario Romero and Juan F. Vargas (VoxEU) Oct 6, 2016
A major problem in many poor countries is lack of state capacity to control violence, enforce laws, tax and regulate economic activity, or provide public services. This column uses the example of Colombia to assess the effectiveness of top-down state-building strategies that prioritise military objectives ahead of all others. Such approaches may not only fail to develop other crucial aspects of state capacity, but may also lead to deteriorations in these incipient capacities. A major problem in many poor countries is lack of state capacity to control violence, enforce laws, tax and regulate economic activity, or provide public services. This column uses the example of Colombia to assess the effectiveness of top-down state-building strategies that prioritise military objectives ahead of all others. Such approaches may not only fail to develop other crucial aspects of state capacity, but may also lead to deteriorations in these incipient capacities.
Increased Trade: A Key to Improving Productivity
Gary Clyde Hufbauer and Zhiyao (Lucy) Lu (PIIE) Oct 6, 2016
Global trade growth slowed abruptly after 2010, following decades of expansion. Annual world merchandise trade growth stayed below 3 percent for the fourth consecutive year in 2015. As global trade has slowed, the growth rate of productivity—defined as output per hour worked—is declining worldwide.
Europe May Finally End Its Painful Embrace of Austerity
Peter S. Goodman (NYT) Oct 7, 2016
After years of failing to generate economic growth by cutting government spending, Europe is reassessing austerity.
Sending Potatoes to Idaho? How the Free Market Can Fight Poverty
Sendhil Mullainathan (NYT) Oct 7, 2016
The experience of the food distributor Feeding America demonstrates the power of markets when they are used as a tool for fulfilling people's needs fairly.
For Britain’s ‘Brexit’ Bunch, the Party Just Ended
Peter S. Goodman (NYT) Oct 7, 2016
A sickening drop in the pound signals that all the illusions around the vote to leave the European Union have been shattered, and that Britain will pay a price.
A Pound of Warning
WSJ Oct 7, 2016
Brexit reality and a feeble Tory response wear on the markets.
IMF Members Commit US$340 billion in Bilateral Borrowing to Maintain the IMF’s Lending Capacity
IMF News Oct 7, 2016
IMF membership has committed US$340 billion in bilateral borrowed resources with maximum terms through end-2020. Access to bilateral borrowing will be governed by a new framework approved by the IMF’s Executive Board in August 2016. These resources will continue to serve as a third line of defense after quotas and the NAB.
International Monetary System Ill-Equipped to Handle Global Problems, Asian Economists Say
IMF News Oct 7, 2016
India’s Subbarao recalls 'carnage in our external sector’ in 2013. Japan’s Sakakibara: 'secular stagnation’ may have arrived. Need is seen for international monetary arbiter, bilateral swap lines.
Cause, Cure for Inequality Lies in Policies
IMF News Oct 7, 2016
Inequality within countries is on the rise. Policy, trade, technology all play role. Redistribution does not hurt growth.
Theresa May's Reckless Gamble on a "Hard" Brexit
Jacob Funk Kirkegaard (PIIE) Oct 7, 2016
Like Prime Minister David Cameron before her, Britain's Theresa May is guiding the Conservative Party into a reckless political and economic gamble over the issue of membership in the European Union.
How the United States and UK Risk Their Global Goodwill
Shihoko Goto (Globalist) Oct 7, 2016
Britain is not alone in paying a price for its strategic isolationism. International disillusionment with the US has also begun.
Low Rates Are Here to Stay
Noah Smith (Bloomberg View) Oct 7, 2016
Even if the Fed and other central banks wanted higher rates, powerful forces are holding them down.
Currency Vigilantes Pound on Post-Brexit Sterling
Mark Gilbert (Bloomberg View) Oct 7, 2016
Currencies are like share prices for countries; and investors are betting against Britain.
Seven Things to Know About the Pound's Depreciation
Mohamed Aly El-Erian (Bloomberg View) Oct 7, 2016
The "flash crash" extends the response to the U.K. government's signal that it favors a "hard" departure from the EU.
The Cost of Overhyping Globalization
Daniel Gros (Project Syndicate) Oct 7, 2016
As the world’s financial elite converges on Washington, DC, for the annual meetings of the IMF and the World Bank, they cannot escape yet another clarion call to reverse the retreat of globalization. But the assumption that faltering trade is an adverse trend that must be addressed is simplistic, at best.
China’s Evolving Oil Demand
Gabe Collins and Andrew Erickson (China Signpost) Oct 7, 2016
Three key factors characterize the “new normal” of China’s oil demand: (1) overall annual oil products demand growth will likely slow from an average of nearly 5% annually to one closer to 2.8% between now and 2020; (2) the country’s oil demand profile has become primarily gasoline-driven, and (3) oil refinery overcapacity is making China one of the world’s largest net exporters of refined products, a trend likely to continue looking out to 2020.
Globalisation and anti-globalisation voters: Evidence from Germany
Christian Dippel, Robert Gold and Stephan Heblich (VoxEU) Oct 7, 2016
The increasing polarisation of politics in the US in particular has spurred scholarly research on the potential links to increasing globalisation. This column focuses instead on Germany to investigate whether the rise of right-wing populism is associated with increased international trade. Regions most threatened by exposure to imports saw increases in support for far-right parties, while regions that benefited from export opportunities saw decreases. To counter this globalisation backlash, policy should aim to cushion the effects of trade exposure on the losers from globalisation. The increasing polarisation of politics in the US in particular has spurred scholarly research on the potential links to increasing globalisation. This column focuses instead on Germany to investigate whether the rise of right-wing populism is associated with increased international trade. Regions most threatened by exposure to imports saw increases in support for far-right parties, while regions that benefited from export opportunities saw decreases. To counter this globalisation backlash, policy should aim to cushion the effects of trade exposure on the losers from globalisation.
How quantitative easing works
Marco Di Maggio, Amir Kermani and Christopher Palmer (VoxEU) Oct 7, 2016
When the financial sector is constrained and monetary stimulus is needed the most, flattening the yield curve is not enough – quantitative easing affects the real economy through a direct-lending channel that depends crucially on the type of assets purchased. This column argues that the Fed’s decision to purchase mortgage-backed securities (rather than exclusively Treasuries) during its first phase of quantitative easing increased mortgage-refinancing activity by $600 billion and had significant effects on aggregate consumption. It also highlights an important complementarity between quantitative easing and countercyclical macroprudential policies such as loan-to-value ratio caps. When the financial sector is constrained and monetary stimulus is needed the most, flattening the yield curve is not enough – quantitative easing affects the real economy through a direct-lending channel that depends crucially on the type of assets purchased. This column argues that the Fed’s decision to purchase mortgage-backed securities (rather than exclusively Treasuries) during its first phase of quantitative easing increased mortgage-refinancing activity by $600 billion and had significant effects on aggregate consumption. It also highlights an important complementarity between quantitative easing and countercyclical macroprudential policies such as loan-to-value ratio caps.
An Investor's Plan to Transplant Private Health Care in Africa
Landon Thomas Jr (NYT) Oct 8, 2016
A private equity firm is aiming at an emerging middle class that can afford to hire private doctors and avoid the difficult conditions of public hospitals.
Commodities, Rainfall, Instability Biggest Challenges —African Ministers
IMF News Oct 8, 2016
Rising inflation, drops in currency due to political instability. Low commodity prices adding to fiscal pressures. Help from international community “paramount”.
Piketty’s housing capital results: New US facts
Gianni La Cava (VoxEU) Oct 8, 2016
The rising share of income accruing to housing is a key feature of the changing US income distribution. This column examines the determinants of this phenomenon. The rise occurred due to an increasing share of income accruing to owner-occupiers through imputed rent, it is concentrated in states that are constrained in terms of new housing supply, and it is closely associated with the long-run decline in real interest rates and inflation. The rising share of income accruing to housing is a key feature of the changing US income distribution. This column examines the determinants of this phenomenon. The rise occurred due to an increasing share of income accruing to owner-occupiers through imputed rent, it is concentrated in states that are constrained in terms of new housing supply, and it is closely associated with the long-run decline in real interest rates and inflation.
Africa’s trade finance market: Facts and challenges
Eugene Bempong Nyantakyi, Mouna Ben Dhaou, Lamin M Drammeh and Mouhamadou Sy (VoxEU) Oct 8, 2016
Boosting Africa’s intra-regional and international trade requires a good understanding of the African trade finance landscape, including the identification of markets where the need is greatest. This column presents some of the major patterns of the market in Africa using primary survey data from commercial banks. Banks intermediate almost a third of trade activities across the continent, but still reject a significant value of trade finance applications mainly due to weak client creditworthiness and inadequate collateral. Boosting Africa’s intra-regional and international trade requires a good understanding of the African trade finance landscape, including the identification of markets where the need is greatest. This column presents some of the major patterns of the market in Africa using primary survey data from commercial banks. Banks intermediate almost a third of trade activities across the continent, but still reject a significant value of trade finance applications mainly due to weak client creditworthiness and inadequate collateral.
Harness the disruptive effects of artificial intelligence
FT View Oct 9, 2016
Technology groups and policymakers must engage constructively for the benefit of society.
The shock that will shift a nation’s business model
Wolfgang Münchau (FT) Oct 9, 2016
Wartime defeat made Germany and Japan reinvent themselves. Brexit could do so for Britain.
The global economy has entered unexplored, dangerous territory
Lawrence Summers (WP) Oct 9, 2016
In the face of stalled growth, world leaders need to change their approach to the economy.
Emerging Markets Well Prepared for Fed Rate Increase, Say Central Bankers During IMF Panel Discussion
IMF News Oct 9, 2016
Thailand, others have built up currency reserves. Strong U.S. economy seen benefiting emerging markets. Flexible exchange rates help absorb external shocks.
Ditch the 'Hard Brexit' Fallacy
Clive Crook (Bloomberg View) Oct 9, 2016
Leaving the EU's political project won't predetermine the U.K.'s economic future.
Are economists China-blind?
James Laurenceson (EAF) Oct 9, 2016
According to some in Australia’s strategic community, economists just don’t get China. Not in respect to the important stuff anyway.
Global value chains and the competitiveness of Asian countries
Kozo Kiyota, Keita Oikawa, Katsuhiro Yoshioka (VoxEU) Oct 9, 2016
The international competitiveness of industries has received much scholarly attention, but this research has tended to focus on Europe and North America. This column examines the competitiveness of industries in six Asian countries. Global value chain income is increasing in China, India, and Indonesia. And unlike workers in EU countries, workers in the Asian countries have benefited from this increased competitiveness. The international competitiveness of industries has received much scholarly attention, but this research has tended to focus on Europe and North America. This column examines the competitiveness of industries in six Asian countries. Global value chain income is increasing in China, India, and Indonesia. And unlike workers in EU countries, workers in the Asian countries have benefited from this increased competitiveness.
The economic consequences of the 1953 London Debt Agreement
Gregori Galofré-Vilà, Martin McKee, Christopher Meissner and David David (VoxEU) Oct 9, 2016
In 1953, the Western Allied powers approved the London Debt Agreement, a radical plan to eliminate half of Germany’s external debt and create generous repayment conditions for the remainder. Using new data from the historical monthly reports of the Deutsche Bundesbank, this column argues that the agreement spurred economic growth by creating fiscal space for public investment, lowering costs of borrowing, and stabilising inflation. In 1953, the Western Allied powers approved the London Debt Agreement, a radical plan to eliminate half of Germany’s external debt and create generous repayment conditions for the remainder. Using new data from the historical monthly reports of the Deutsche Bundesbank, this column argues that the agreement spurred economic growth by creating fiscal space for public investment, lowering costs of borrowing, and stabilising inflation.
It would be wrong to abandon the policy of negative rates
Kenneth Rogoff (FT) Oct 10, 2016
The alternatives are deeply unattractive.
A Great Cost Migration Is Upending the Financial Industry
Eric Balchunas (Bloomberg View) Oct 10, 2016
Janus’s situation is a microcosm of the entire fund industry’s.
Innovation Falls, and Retirees Pay the Price
Megan McArdle (Bloomberg View) Oct 10, 2016
An aging population becomes risk averse, just when it should gamble on higher productivity.
China’s SDR Distraction
Barry Eichengreen (Project Syndicate) Oct 10, 2016
At the start of October, the renminbi was added to the basket of currencies that make up the IMF’s Special Drawing Rights. But if China wants to transform the renminbi into a first-class global currency, it should focus less on symbols and more on the development of deep, liquid, and stable financial markets at home.
The Political Logic of Hard Brexit
Jacek Rostowski (Project Syndicate) Oct 10, 2016
Little more than three months after the UK’s decision in June to leave the EU, British politics is careening out of control. An almost revolutionary – and very un-British – dynamic has taken hold, because the Brexiteers are desperately seeking to avoid being exposed as having no negotiating power.
Rethinking the Oil Market
Rabah Arezki (Project Syndicate) Oct 10, 2016
Oil prices have plummeted by two-thirds from their peak in June 2014, and there is now intense debate over why. Some factors behind the drop are temporary, but others are structural, making today's price dynamics different from previous episodes.
Smart machines and the future of jobs
Jeffrey D. Sachs (Boston Review) Oct 10, 2016
Will the coming generations of smart machines deliver us leisure and well-being or joblessness and falling wages?
Time for growth
Lars Boerner and Battista Severgnini (VoxEU) Oct 10, 2016
The public mechanical clock, which first appeared in European cities in the late 13th century, was one of the most important innovations in history. This column looks at the impact on growth of the arrival of this general purpose technology. European cities that were quick to install mechanical clocks enjoyed greater growth than late adopters. However, it takes some time for the effects from fundamental innovations of this type to be realised because the technology must be accepted both culturally and socially and then applied to related economic activities. The public mechanical clock, which first appeared in European cities in the late 13th century, was one of the most important innovations in history. This column looks at the impact on growth of the arrival of this general purpose technology. European cities that were quick to install mechanical clocks enjoyed greater growth than late adopters. However, it takes some time for the effects from fundamental innovations of this type to be realised because the technology must be accepted both culturally and socially and then applied to related economic activities.
The costs of cascading trade protection
Aksel Erbahar and Yuan Zi (VoxEU) Oct 10, 2016
Politicians increasingly advocate trade protectionism, although economists argue that this hurts consumers by raising final good prices. This column presents new evidence for ‘cascading protection’ – when output industries, affected by protectionism that raises input prices, petition for import protection for their own products – and shows that consumer welfare losses in the US are economically significant when such protection exists. When all input protection is shut down as a counterfactual exercise, consumer welfare losses are almost halved. Politicians increasingly advocate trade protectionism, although economists argue that this hurts consumers by raising final good prices. This column presents new evidence for ‘cascading protection’ – when output industries, affected by protectionism that raises input prices, petition for import protection for their own products – and shows that consumer welfare losses in the US are economically significant when such protection exists. When all input protection is shut down as a counterfactual exercise, consumer welfare losses are almost halved.
Imagining a Cashless World
Nathan Heller (New Yorker) Oct 10, 2016
Sweden shows us what life without paper currency might be like.
Britain’s raucous negotiating style will not help Brexit
Alan Beattie (FT) Oct 11, 2016
May is falling into the same traps over Europe as past prime ministers.
For Remainers, the only good Brexit is hard Brexit
Janan Ganesh (FT) Oct 11, 2016
Sometimes history throws up ideas that are better tested than forever stymied.
Brazil is on the ascent as investors eye further gains
Joe Leahy (FT) Oct 11, 2016
With its currency and benchmark index surging, the country has become an emerging market favourite.
The IMF should stay in the Greek rescue squad
FT View Oct 11, 2016
The country needs fiscal support as well as structural reform to grow.
Some banks are just too complicated to break up
Simon Samuels (FT) Oct 11, 2016
Yet they appear unable to consolidate towards higher profitability.
Venezuela in a Vise
Francisco Toro (NYT) Oct 11, 2016
The government’s efforts to block a referendum against President Maduro are undemocratic and unconstitutional — and a betrayal of Hugo Chávez.
Seeing China With Fresh Eyes
Howard W. French (WSJ) Oct 11, 2016
The hard work and enterprise of China’s people—not Communist Party policies—have lifted hundreds of millions of people out of poverty.
The pound and the fury
Economist Oct 11, 2016
Brexit is making Britons poorer, and meaner.
Currency devaluation in Egypt is imminent, but when?
Adel Abdel Ghafar (Brookings) Oct 11, 2016
While Egypt’s potential plan to devalue its currency could help jumpstart the economy in the long term, it would have immediate negative consequences for the poor and middle class.
Opportunities for Pro-Poor Growth in South Asia
Kimberly Ann Elliott (CGD) Oct 11, 2016
As China’s growth slowed in recent years, India surpassed it to become one of the world’s fastest growing economies. But can India sustain the pace, and will the rest of the region follow? Here's how South Asia can exploit today’s globalization opportunities more effectively.
$50 Billion and Three Lessons from Development Finance CEOs
Todd Moss (CGD) Oct 11, 2016
Last week, AEI, CSIS, and CGD hosted a terrific forum with the heads of the British, German, Norwegian, and American development finance institutions (DFIs). It was billed as “$50 billion in one room,” a reference to the vast amounts of capital that these organizations bring to the table for development. Here’s what I took away from the session.
Will the EU and UK heed Wall Street's Brexit warnings?
Brian Caplen (Banker) Oct 11, 2016
The CEO of JPMorgan Chase says that the eurozone has been weakened by the Brexit vote, while the head of Morgan Stanley believes New York may be the ultimate victor of the divorce. Brian Caplen explains why both the EU and the UK should heed these warnings.
Don't Be So Sure the Big Tech Breakthroughs Are Behind Us
Noah Smith (Bloomberg View) Oct 11, 2016
New smart machines might eliminate a lot of drudge work, freeing people for more creative tasks or leisure.
Mayday in the UK
Philippe Legrain (Project Syndicate) Oct 11, 2016
British Prime Minister Theresa May has set the stage for a "hard" Brexit, and adopted a deeply illiberal vision for the UK’s post-EU future, featuring economic intervention, political nationalism, and cultural xenophobia. This isn’t just despicable; it is also breathtakingly foolish.
The case for an active fiscal policy
Angel Ubide (VoxEU) Oct 11, 2016
The pre-crisis consensus was, and remains, very strong – the business cycle would be managed by monetary policy, while fiscal policy would focus solely on debt sustainability. In a world of zero interest rates, however, fiscal policy has to contribute to supporting aggregate demand and protecting against deflationary risks. This column outlines three ways in which a well-designed expansionary fiscal policy stance can contribute to better economic outcomes. The pre-crisis consensus was, and remains, very strong – the business cycle would be managed by monetary policy, while fiscal policy would focus solely on debt sustainability. In a world of zero interest rates, however, fiscal policy has to contribute to supporting aggregate demand and protecting against deflationary risks. This column outlines three ways in which a well-designed expansionary fiscal policy stance can contribute to better economic outcomes.
What Is the New Normal for U.S. Growth?
John Fernald (FRBSF Econ Letter) Oct 11, 2016
Estimates suggest the new normal for U.S. GDP growth has dropped to between 1½ and 1¾%, noticeably slower than the typical postwar pace. The slowdown stems mainly from demographics and educational attainment. As baby boomers retire, employment growth shrinks. And educational attainment of the workforce has plateaued, reducing its contribution to productivity growth through labor quality. The GDP growth forecast assumes that, apart from these effects, the modest productivity growth is relatively “normal”—in line with its pace for most of the period since 1973.
India rate cut revives debate on RBI strategy
Simon Mundy (FT) Oct 12, 2016
Questions over whether central bank will ease focus on taming inflation in order to boost growth.
Global trade: blocking moves
Shawn Donnan (FT) Oct 12, 2016
Economists worry that a new wave of protectionism in the digital age is hurting global growth.
The pound’s longer, sharper Brexit shock
John Authers (FT) Oct 12, 2016
Sterling’s sharp sell-off represents a challenge by forex markets to the UK government.
A Pound of Worry
WSJ Oct 12, 2016
Those theories that sterling’s fall will help the U.K. economy? Wrong.
Refusing to ratify TPP risks America’s role as the world leader
John R. Kasich (WP) Oct 12, 2016
The Trans-Pacific Partnership is about more than trade.
Thanks to Central Banks, Saving Rates Are Declining Worldwide
Ryan McMaken (Mises Daily) Oct 12, 2016
Americans are saving very little money for emergencies. Unfortunately, central banks have been encouraging the same thing worldwide.
Preparing for the Post-QE World
Jean-Michel Paul (Bloomberg View) Oct 12, 2016
QE programs will eventually come to an end. There's a way to benefit from the money created.
The Untapped Potential of Sino-European Investment
Zhang Monan (Project Syndicate) Oct 12, 2016
There is far less direct investment between China and the EU than there is between China and its other large trading partners, including the US and Brazil. With trade growth slowing, both sides should seek to exploit opportunities to boost investment flows as quickly as possible.
The Skills Delusion
Adair Turner (Project Syndicate) Oct 12, 2016
Everybody agrees that better education and improved skills, for as many people as possible, is crucial to increasing productivity and living standards and to tackling rising inequality. But what if everybody is wrong?
Hysteresis and fiscal policy during the Global Crisis
Antonio Fatás and Lawrence Summers (VoxEU) Oct 12, 2016
Conventional wisdom on supply and demand suggests that demand shocks are cyclical or transitory, and that only technology shocks are responsible for trend changes. This column argues that cyclical events can have permanent effects on demand, and therefore GDP. It is time for policymakers to start considering the possibility of hysteresis seriously. Conventional wisdom on supply and demand suggests that demand shocks are cyclical or transitory, and that only technology shocks are responsible for trend changes. This column argues that cyclical events can have permanent effects on demand, and therefore GDP. It is time for policymakers to start considering the possibility of hysteresis seriously.
Search for yield
David Martinez-Miera and Rafael Repullo (VoxEU) Oct 12, 2015
Discussions on the connection between the level of interest rates, incentives to search for yield, and financial stability have been prominent over the last ten years or so. More recently, Larry Summers argued in his 2014 secular stagnation address that the decline in the real interest rates would be expected to increase financial instability. This column addresses the challenging issue of providing an explanation for the connection between these phenomena. An increase in the supply of savings that reduces equilibrium real rates can be associated with an increase in the risk of the banking system. This link can explain the emergence of endogenous boom and bust cycles.
Liberal order collides with will to power
Philip Stephens (FT) Oct 13, 2016
The world is at a hinge point and the postwar settlement has been eroded.
Investors are ill equipped for our unfathomable future
Gillian Tett (FT) Oct 13, 2016
The danger in finance is that investment groups will be wiped out by price swings from political shock.
Fast EM growth of recent years ‘an anomaly’ never to be repeated
Jonathan Wheatley (FT) Oct 13, 2016
Capital Economics expects reversion to historic trend, dragging on global economy.
Saudi Arabia, Where Even Milk Depends on Oil, Struggles to Remake Its Economy
Nicholas Kulish (NYT) Oct 13, 2016
Low crude prices and the war in Yemen have sent a shock through the kingdom's budget and forced it to revise its social contract even as it seeks to diversify its businesses.
The Case for Unilateral Free Trade
Louis Rouanet (Mises Daily) Oct 13, 2016
In the 2016 presidential election, Americans have been given a choice between two types of controlled and managed trade. But, there is a third option: unilateral free trade.
China’s Rebalance Reflected in Rising Wage Share of GDP
Zixuan Huang and Nicholas R. Lardy (PIIE) Oct 13, 2016
The rebalancing of China’s economy has been underway for five years. As has been widely noted, services and consumption, rather than industry and investment, are increasingly driving growth. Almost unnoticed, trends in the distribution of national income among workers, enterprises, and the government, also reflect the rebalancing of China’s economy.
World Bank-IMF Annual Meetings Call For Tackling Inequality, Supporting Trade
Bridges, Volume 20, Number 34 Oct 13, 2016
The Annual Meetings of the World Bank Group and International Monetary Fund (IMF) drew to a close on Sunday, following a weekend of intense discussions on how to tackle the challenge of inequality and address a growing distrust in many countries of globalisation, particularly in a context of persistently slow growth.
TTIP Negotiators Conclude Fifteenth Round, Pledge to Push Forward
Bridges, Volume 20, Number 34 Oct 13, 2016
Negotiators for the Transatlantic Trade and Investment Partnership (TTIP) concluded their fifteenth round last week, touting advances and pledging to make additional progress in the coming months, even as the talks' long-term future remains unclear.
Argentina's Macri Faces an Ugly Economic Dilemma
Mac Margolis (Bloomberg View) Oct 13, 2016
Can he reform the economy without triggering a populist backlash?
Europe after Merkel
Ashoka Mody (Project Syndicate) Oct 13, 2016
Even if Angela Merkel remains Germany's chancellor after next year's federal election, she will be unable to exercise the same authority over Europe as she has since 2010. That will profoundly change how the EU works, and the disruption could have a profound effect on the European project's future.
Financial Inclusion and Beyond
Anshul Krishan (Anshul Krishan) Oct 13, 2016
Because traditional financial services are not designed for small depositors and borrowers, several non-traditional models have been able to scale up rapidly in this untapped market. But, without a strategic policy roadmap to guide further financial-technology development, these models could hit a wall.
Panic Over Marmite and Tea as Pound Plummets in Post-Brexit Britain
Kavitha Surana (FP) Oct 13, 2016
As the U.K. doubles down on Brexit, a price war on classic food staples signals the economic changes Brits will soon be facing.
UN Secretary-General Must Manage Trilateral Divergences Over Globalization
Richard Weitz (YaleGlobal) Oct 13, 2016
UN success rests in commitment to common values, but China, Russia and the US differ on globalization
Stress testing the EU fiscal framework
Igor Masten and Ana Grdovic Gnip (VoxEU) Oct 13, 2016
Fiscal policies in European Economic and Monetary Union states are being reinforced. This column argues that the cyclically adjusted budget balance will be an imprecise tool for measuring fiscal discipline, and structural deficit rules limits are too stringent. If the official methodology is used to trigger corrective fiscal contractions, it may increase macroeconomic instability. Fiscal policies in European Economic and Monetary Union states are being reinforced. This column argues that the cyclically adjusted budget balance will be an imprecise tool for measuring fiscal discipline, and structural deficit rules limits are too stringent. If the official methodology is used to trigger corrective fiscal contractions, it may increase macroeconomic instability.
Where Trump is right and wrong on the renminbi
John Authers (FT) Oct 14, 2016
China’s currency has given up its dollar gains, but not for the reasons the candidate suggests
Why the Economy Doesn’t Roar Anymore
Marc Levinson (WSJ) Oct 14, 2016
The long boom after World War II left Americans with unrealistic expectations, but there’s no going back to that unusual Golden Age
Education Needs Social Enterprise
Gordon Brown (Project Syndicate) Oct 14, 2016
With 260 million children not in school worldwide, education needs more champions to match the enthusiasm of, say, global-health and environmental advocates. And, because education has more room for innovation than any other development sector, there is a unique opportunity for social entrepreneurs.
Resolving Europe’s Banking Crisis in Italy
Lucrezia Reichlin and Shahin Vallée (Project Syndicate) Oct 14, 2016
Though the problems confronting Europe's banks are more acute for some countries and financial institutions, the sector runs on a level of profitability that is, on average, lower than its cost of equity and maintains a stock of non-performing loans large enough to undermine its capitalization for years. Italy is a case in point.
No Time for Trade Fundamentalism
Dani Rodrik (Project Syndicate) Oct 14, 2016
Concerns that the current backlash against globalization augurs a surge in growth-hampering protectionism are highly exaggerated. In fact, as was apparent in the 1980s, some tempering of hyper-globalization may be a highly effective way to maintain a reasonably open world economy.
The great normalisation of global trade
Alexander Al-Haschimi, Martin Gächter, David Lodge and Walter Steingress (VoxEU) Oct 14, 2016
Exceptionally weak global trade growth over recent years has presented a puzzle to academics and policymakers alike. This column presents a study by an expert network across European central banks which suggests that it may actually be the past strength of trade which was exceptional, rather than the subsequent slowdown. The recent deceleration of trade growth can thus be seen as a ‘great normalisation’. The important implication is that an upturn in aggregate demand will not necessarily lead to a significant recovery in global trade. Exceptionally weak global trade growth over recent years has presented a puzzle to academics and policymakers alike. This column presents a study by an expert network across European central banks which suggests that it may actually be the past strength of trade which was exceptional, rather than the subsequent slowdown. The recent deceleration of trade growth can thus be seen as a ‘great normalisation’. The important implication is that an upturn in aggregate demand will not necessarily lead to a significant recovery in global trade.
Fiscal crises as pretexts for quantitative easing
Ricardo Reis (VoxEU) Oct 14, 2016
Conventional economic theory predicts that, outside of a financial crisis, quantitative easing should have no effect on real outcomes or inflation. This column proposes two theoretical channels through which quantitative easing might also work in a fiscal crisis. In this case, quantitative easing can be a valuable tool because it can control the path of inflation over time and reduce the distortions to the credit flow in the economy.
Cross-border movement of persons stimulates trade
Emilie Anér, Anna Graneli and Magnus Lodefalk (VoxEU) Oct 14, 2015
A large body of research has established a positive link between immigrants and bilateral trade. However, the temporary movement of people across borders has received less attention. This column uses Swedish data to analyse the impact of temporary cross-border movement on trade. Recently arrived migrants are found to reduce the negative impact of distance on foreign trade, by assisting firms to overcome informal and informational barriers to trade with their origin country. Facilitating movement of people across borders can be a highly useful tool for engaging in and benefitting from specialised and internationalised production networks.
Macro diversification through trade
Francesco Caselli, Miklós Koren, Milan Lisicky and Silvana Tenreyro (VoxEU) Oct 14, 2015
A widely held view in academic and policy circles is that openness to international trade and specialisation leads to higher GDP volatility. This column argues that openness to international trade can also lower a country’s GDP volatility by allowing it to diversify its sources of demand and supply, and hence reduce its exposure to domestic shocks.
Sterling takes a pounding
Economist Oct 15, 2016
The fall in the pound shows how painful a “hard” Brexit would be, and represents a vote of no confidence in the British government’s policies. It is not too late to change course
Meet the Old Energy World’s Kings
Karel Beckman (Globalist) Oct 15, 2016
The participants of the 2016 World Energy Congress in Istanbul largely pretended that the world of energy will not – cannot – change.
Is Populism Being Trumped?
Project Syndicate Oct 15, 2016
The reactionary parochialism embraced by many voters in recent years has shaken political establishments and roiled markets. They needed it, but can policymakers build on recent signs of buyers’ remorse?
Toxic Politics Versus Better Economics
Mohamed A. El-Erian (Project Syndicate) Oct 15, 2016
The relationship between politics and economics is changing. Advanced-country politicians are locked in bizarre, often exceptionally hostile conflicts, instead of acting on a growing economic consensus about how to escape a prolonged period of low and unequal growth.
The natural rate of interest, its measurement, monetary policy and the zero lower bound
Alex Cukierman (VoxEU) Oct 15, 2016
The decline in long-term interest rates has nurtured the view of a persistent shift of the natural rate into negative territory. This column argues that existing estimates of the natural rate, based on the New Keynesian model, are likely to be biased downward. It makes a case for introducing long-term risky natural rates into the analysis of monetary policy, which could shed more light on the role of risk attitudes, the structure of financial institutions, and regulation in the determination of potential output and economic activity. The decline in long-term interest rates has nurtured the view of a persistent shift of the natural rate into negative territory. This column argues that existing estimates of the natural rate, based on the New Keynesian model, are likely to be biased downward. It makes a case for introducing long-term risky natural rates into the analysis of monetary policy, which could shed more light on the role of risk attitudes, the structure of financial institutions, and regulation in the determination of potential output and economic activity.
Mark Carney’s gentle reminder about central bank independence
FT View Oct 16, 2016
The prime minister must take care not to muddy the UK’s monetary framework.
What China can learn from its Venezuela blow
FT View Oct 16, 2016
Its overseas development forays could benefit from the west’s due diligence.
The best answer to Russian aggression is containment
Ivo Daalder (FT) Oct 16, 2016
Its greatest vulnerability is its economy, so strong sanctions will hurt.
The monstrous battle to secure a trade deal
Wolfgang Münchau (FT) Oct 16, 2016
If it cannot strike a pact with Canada, the EU will not be in a position to agree a UK deal.
Financial crisis 2.0?
Robert J. Samuelson (WP) Oct 16, 2016
Global debt has reached an amount much higher than what it was before the 2008 financial crisis.
Everyone’s Worst Investing Fears
Andy Kessler (WSJ) Oct 16, 2016
With assets in a funk, interest rates at zero and IPOs scarce, what’s capital to do?
Can African agriculture significantly contribute towards feeding the world by 2050 and beyond?
Ousman Tall (OECD Insights) Oct 16, 2016
There are growing concerns about the world feeding itself in 2050 and beyond, and many consider that Africa has the potential to positively impact this enormous, though not insurmountable, challenge. Is this wishful thinking or reality based on the success stories of agricultural production and productivity on the African continent? Or, is it based on Africa’s untapped potential and its readiness to ensure that everything is put in place to make this dream a reality?
China's Bad Credit
China's Bad Credit (Bloomberg View) Oct 16, 2016
Unless the government starts letting the market price risk properly, debt will continue to grow.
Persistently low rates and monetary transmission
Carlos Garriga, Finn Kydland and Roman Šustek (VoxEU) Oct 16, 2016
Central banks responded to the financial crisis by cutting policy rates to prevent deflation and curb the decline in economic activity, but these responses have been anything but temporary. This column explores whether the sticky price channel is still relevant in an environment of persistently low rates. Although the effectiveness of the sticky price channel is limited, monetary policy instead transmits through mortgage debt. The recent period of low rates and low inflation has redistributed income and consumption from savers to mortgage borrowers. Central banks responded to the financial crisis by cutting policy rates to prevent deflation and curb the decline in economic activity, but these responses have been anything but temporary. This column explores whether the sticky price channel is still relevant in an environment of persistently low rates. Although the effectiveness of the sticky price channel is limited, monetary policy instead transmits through mortgage debt. The recent period of low rates and low inflation has redistributed income and consumption from savers to mortgage borrowers.
‘The Corruption of Capitalism’, by Guy Standing
Claire Jones (FT) Oct 17, 2016
The book acts as a call to rein in the unfettered forces of finance.
Emerging markets will prosper as ‘peak trade’ proves unfounded
Kamakshya Trivedi (FT) Oct 17, 2016
EM assets are well positioned to benefit when more favourable trade winds return.
In August 2016, the European Competition Commissioner ordered US technology giant Apple Inc. to pay Ireland €13 billion ($14.5 billion) after ruling that the tax breaks Ireland gave the company in 1991 and 2007 breached EU state aid rules. Both Apple and Ireland announced they would appeal.
The markets hold more sway than Theresa May
Janan Ganesh (FT) Oct 17, 2016
If it leaves consumers feeling pinched, the pound’s post-referendum fall will change public opinion.
Emerging markets’ service trade deficit widens
Steve Johnson (FT) Oct 17, 2016
Shift from goods to services tips the balance against developing economies.
Germany appreciates the advice but prefers fiscal discipline
Jens Spahn (FT) Oct 17, 2016
Rather than more debt, the solution lies in maintaining the capacity to tackle future crises.
European Commission shares blame for EU-Canada trade deadlock
Alan Beattie (FT) Oct 17, 2016
This episode shows how Brussels makes trade deals hard.
The sad illusion of India’s demographic dividend
Henny Sender (FT) Oct 17, 2016
The country’s middle class will lack the muscle to help drive the economy forward.
‘Africa Rising’? ‘Africa Reeling’ May Be More Fitting Now
Jeffrey Gettleman (NYT) Oct 17, 2016
Protests, civil war and economic problems are undermining a recent belief that the African continent was in a period of strong economic growth.
Trimming Oil Output Won’t Keep OPEC States Afloat
Gary Sternovitz (WSJ) Oct 17, 2016
American frackers have put petrostates like Saudi Arabia under serious pressure, making reform—or revolution—more likely.
Apple and Donald Trump: Two Sides of a Very Strange Coin
Steven Hill (Globalist) Oct 17, 2016
Another tell-tale chapter about vast abuses and the pressing need for an intense debate about the “winners and losers of globalization.”
Spotlight on Today's Global Challenges
IMF News Oct 17, 2016
Meetings brought together over 11,500 participants. High-level panels discussed key issues ranging from gender equality to technology. Improving economic participation prominent message throughout meetings.
Why They Keep Trade Deals Secret
Claudio Grass (Mises Daily) Oct 17, 2016
The TTIP is the latest agreement in which the voters and taxpayers are prohibited from seeing the laws they will soon be forced to follow.
Will Italy Leave the EU? Follow the Money
Mark Whitehouse (Bloomberg View) Oct 17, 2016
Capital flight suggests that people aren't waiting to find out.
Six Reasons to Be Wary of Brexit Optimism
Six Reasons to Be Wary of Brexit Optimism (Bloomberg View) Oct 17, 2016
The U.K. will have a hard time beating the deal it has with Europe.
Markets Send Theresa May a Message on Brexit
Mohamed Aly El-Erian (Bloomberg View) Oct 17, 2016
The prime minster wants to dismantle longstanding economic arrangements, without saying what will replace them.
The Chimera of Stock-Market Short-Termism
Mark Roe (Bloomberg) Oct 17, 2016
Hillary Clinton has made stopping corporate short-termism part of her platform, proposing to use the capital gains tax to encourage stockholders to hold onto their stock for a longer time. But the plan won’t work, in part because the problem of short-termism itself has been woefully exaggerated
Consequences of Rising Income Inequality
Kevin J. Lansing and Agnieszka Markiewicz (FRBSF Econ Letter) Oct 17, 2016
The increase in U.S. income inequality since 1970 largely reflects gains made by households in the top 20% of the income distribution. Estimates suggest that households outside this group have suffered significant losses from foregone consumption, measured relative to a scenario that holds inequality constant. A substantial mitigating factor for the losses has been the dramatic rise in government redistributive transfers, which have doubled as a share of U.S. output over the same period.
China's great stagnation
Dan Blumenthal and Derek Scissors (National Interest/AEI) Oct 17, 2016
China's economy is stalling. The most likely economic scenario over the course of the next decade is not high growth or an economic collapse, but stagnation. If this occurs, the Chinese Communist Party will have difficulty sustaining its ambitious national development and strategic plans.
Apple’s Tax Dispute With Europe and the Need for Reform
Gary Clyde Hufbauer and Zhiyao (Lucy) Lu (PIIE) Oct 17, 2016
Suddenly everyone wants to be German
Frederick Studemann (FT) Oct 18, 2016
Notebook: What a difference an EU referendum makes.
Frackers profit from shifting fortunes in the oil price war
Ed Crooks (FT) Oct 18, 2016
Opec has moved past hopes of crushing US shale production.
UK inflation rise cannot be blamed fully on pound or Brexit
Chris Giles (FT) Oct 18, 2016
Expect a stronger link between a weak sterling and rising prices.
Not Everyone’s So Sure Low Oil Prices Will Stay Put
Landon Thomas Jr (NYT) Oct 18, 2016
While Goldman Sachs foresees oil remaining flat through most of 2017, some experts think the market has become overly complacent in its outlook.
As China’s Economy Slows, a Look at What Could Happen
Neil Gough (NYT) Oct 18, 2016
Will China collapse or come back? As the world looks for growth drivers, economists parse the data for signs of where the country’s economy is going.
Brexit: The Worst of All Policy Ideas
Stephan Richter (Globalist) Oct 18, 2016
Brexit is the UK equivalent of the United States launching the Iraq War: Noble intentions perhaps, but an utterly self-defeatist move.
Productivity Won’t Save the World
Satyajit Das (Bloomberg View) Oct 18, 2016
Companies and economies aren’t inevitably going to get better and faster.
How to Make Free Trade an Easier Sell
Paula Dwyer (Bloomberg View) Oct 18, 2016
It comes down to protecting U.S. sovereignty and helping the jobless, says Robert Reich.
Who Wins if the U.S. Pulls Back? China
Eswar S Prasad (Bloomberg View) Oct 18, 2016
The country is better positioned than any other to fill the void.
The U.K. Shouldn't Play Confidence Games
Mark Gilbert (Bloomberg View) Oct 18, 2016
The post-Brexit environment is too fragile for political intrigue.
Unlike the West, India and China Embrace Globalization
Bruce Stokes (YaleGlobal) Oct 18, 2016
Pew Global Attitudes Survey: Indians, Chinese are content with growing integration of their nations into world economy
The economics and politics of refugee migration
Christian Dustmann, Francesco Fasani, Tommaso Frattini, Luigi Minale and Uta Schonberg (VoxEU) Oct 18, 2016
The current refugee crisis poses an enormous challenge not only to European countries, but to the fundaments and achievements of the EU as a whole. This column discusses how this latest crisis differs from the crisis in the early 1990s, and argues there is a drastic need for a new regulatory framework to replace dated coordination attempts. The framework should be based on two pillars: a coordinated policy that secures Europe’s outer borders and deals with asylum claims before refugees have (illegally) crossed into mainland Europe, and a more equitable allocation mechanism. The current refugee crisis poses an enormous challenge not only to European countries, but to the fundaments and achievements of the EU as a whole. This column discusses how this latest crisis differs from the crisis in the early 1990s, and argues there is a drastic need for a new regulatory framework to replace dated coordination attempts. The framework should be based on two pillars: a coordinated policy that secures Europe’s outer borders and deals with asylum claims before refugees have (illegally) crossed into mainland Europe, and a more equitable allocation mechanism.
The bond-equity allocation of the Norwegian sovereign wealth fund
Espen Henriksen and Knut Anton Mork (VoxEU) Oct 18, 2016
The ‘Oil Fund’, Norway’s sovereign wealth fund, is the world’s largest at more than $850 billion. The economic gains from the establishment of the fund have come from applying core insights to improve the risk-return trade-off for the nation’s total wealth. This column presents the recommendations of a government-appointed committee for the strategy of the fund going forward that build on the same core principles. The ‘Oil Fund’, Norway’s sovereign wealth fund, is the world’s largest at more than $850 billion. The economic gains from the establishment of the fund have come from applying core insights to improve the risk-return trade-off for the nation’s total wealth. This column presents the recommendations of a government-appointed committee for the strategy of the fund going forward that build on the same core principles.
Five principles to follow for a new fiscal policy
Jason Furman (FT) Oct 19, 2016
The recovery in the advanced economies is incomplete.
Free Lunch: Keep calm and carry on with Ceta
Martin Sandbu (FT) Oct 19, 2016
EU-Canada trade deal will get through current hold-up and be the better for it.
Declining terms of trade drives EM weakness
Steve Johnson (FT) Oct 19, 2016
Stabilisation in commodity prices offers hope, but relief may be two years away.
Britain’s sliding pound reflects a devalued economy
Chris Giles (FT) Oct 19, 2016
Currency depreciation can be a boon but there’s little optimism this time.
Britain must unite to build a new relationship with the EU
Gisela Stuart (FT) Oct 19, 2016
Challenging the referendum result is a waste of time.
The Frail Pillars of China's Economy
Leland R. Miller and Derek Scissors (WSJ) Oct 19, 2016
Investors would be disturbed by the latest GDP numbers if they knew what it rests on.
Challenges for Monetary Policy in Advanced Economies
José De Gregorio (PIIE) Oct 19, 2016
An aggressive central bank response in the form of easier monetary policy was key to containing the global financial crisis in major advanced economies, and it has supported a very slow recovery. Today, however, two interrelated issues have risen to the fore of the policy debate.
Finding Up-to-Date Median Income Data Just Got Much Easier (Thanks, PovcalNet!)
Anna Diofasi and Nancy Birdsall (CGD) Oct 19, 2016
We have long advocated for more widespread use of median income or median consumption to compare individuals’ material well-being between countries and its development over time, and we are happy to report that the World Bank team that manages the (impressive) PovcalNet database has come through: as of October 1, the median monthly per capita income or consumption for each country is now part of the standard indicators displayed for any country query on PovcalNet.
Beyond Brexit: A One-Line Change to Migration to Protect Billions in Exports
Theodore Talbot and Owen Barder (CGD) Oct 20, 2016
Whatever you think about Brexit, it doesn’t make sense to secure Britain’s economic future by adding red tape. Theresa May’s government wants to tamp down net migration. That’s has opened space for some new self-defeating proposals.
Legal Case for Brexit Is Surprisingly European
Noah Feldman (Bloomberg View) Oct 19, 2016
High Court has to weigh modern democracy versus U.K. tradition.
Mess With Central-Bank Independence at Your Peril
Mark Gilbert (Bloomberg View) Oct 19, 2016
Politicians who do little to aid the economy shouldn't bully the people actually running monetary policy.
The ECB Can't Risk a Taper Tantrum
Melvyn Krauss (Bloomberg View) Oct 19, 2016
There's still not enough euro inflation to scale back quantitative easing.
The European Fiscal Board: Questions and Answers
European Commission Oct 19, 2016
Following the Five Presidents’ Report on completing Europe’s Economic and Monetary Union, the Commission decided last October to set up a European Fiscal Board as an independent advisory board on fiscal matters.
A Less-Cash Society, Not a Cashless One
Kenneth S Rogoff (Bloomberg View) Oct 19, 2016
Phase out large-denomination banknotes to fight the underground economy. Coins and small bills aren't the problem.
Why estimates of the trade effects of the Eurozone vary so much
Andrew Rose (VoxEU) Oct 19, 2016
The pro-trade effects of the euro are a clear-cut benefit of Eurozone membership, but scholarly estimates of the size of this effect vary widely. This column uses meta-analysis to argue that the variation stems from inappropriate exclusion of nations and years. When all countries and years available in the data are included, the estimate of the euro trade effect is economically and statistically large, at about 50%. The pro-trade effects of the euro are a clear-cut benefit of Eurozone membership, but scholarly estimates of the size of this effect vary widely. This column uses meta-analysis to argue that the variation stems from inappropriate exclusion of nations and years. When all countries and years available in the data are included, the estimate of the euro trade effect is economically and statistically large, at about 50%.
A new measure of economic asymmetries in the Eurozone
Nauro Campos and Corrado Macchiarelli (VoxEU) Oct 19, 2016
Explanations for the Eurozone Crisis rely on the notion of cross-country asymmetries. The core-periphery pattern to the EU was first established by Bayoumi and Eichengreen in 1993, prior to the Eurozone. This column replicates their approach to explore whether the euro has strengthened or weakened this pattern. A new ‘coreness index’ indicates that the core-periphery pattern has weakened, and that a new, smaller periphery has emerged. Explanations for the Eurozone Crisis rely on the notion of cross-country asymmetries. The core-periphery pattern to the EU was first established by Bayoumi and Eichengreen in 1993, prior to the Eurozone. This column replicates their approach to explore whether the euro has strengthened or weakened this pattern. A new ‘coreness index’ indicates that the core-periphery pattern has weakened, and that a new, smaller periphery has emerged.
Central banking and Bitcoin: Not yet a threat
Dirk Niepelt (VoxEU) Oct 19, 2016
The blockchain technology underlying Bitcoin and other cryptocurrencies is attracting growing interest. This column argues that if transactions facilitated by this technology become pervasive, it will have implications for the conduct (and success) of central bank monetary policy. Central banks should embrace the technologies that underpin cryptocurrencies, or risk being cut out from intermediation and surveillance and also risk payment service providers moving to other currency areas with an institutional environment that is more appealing for buyers and sellers. The blockchain technology underlying Bitcoin and other cryptocurrencies is attracting growing interest. This column argues that if transactions facilitated by this technology become pervasive, it will have implications for the conduct (and success) of central bank monetary policy. Central banks should embrace the technologies that underpin cryptocurrencies, or risk being cut out from intermediation and surveillance and also risk payment service providers moving to other currency areas with an institutional environment that is more appealing for buyers and sellers.
Despite condemnation, Orban’s Hungary attracts investment
Courtney Fingar (FT) Oct 20, 2016
Country may be increasingly xenophobic but economy is increasingly international.
Hard Brexit heralds a closed Britain
Philip Stephens (FT) Oct 20, 2016
An open economy cannot work without welcoming foreign workers.
Norway’s oil wealth swamps innovation
John Gapper (FT) Oct 20, 2016
Norwegians like the idea of creativity but fear disruption.
'Brexit,' Migration, Trade: E.U.'s List of Crises Keeps Growing
James Kanter and Stephen Castle (NYT) Oct 20, 2016
Domestic politics are again undercutting the bloc's sense of common purpose, with a trade deal imperiled by Belgium's small French-speaking Wallonia region.
As EU-Canada Summit Approaches, Pressure Grows to Reach CETA Consensus
Bridges, Volume 20, Number 35 Oct 20, 2016
The European Council is due to begin a two-day leaders' meeting on Thursday, where they are expected to confirm whether they are in a position to sign a negotiated trade deal with Canada. The gathering is being pegged as a pivotal moment for the future credibility of the EU's foreign trade policy and watched as a litmus test for global economic integration more broadly.
USTR Froman Calls for "Pragmatic Multilateralism" in Charting WTO Course
Bridges, Volume 20, Number 35 Oct 20, 2016
US Trade Representative Michael Froman issued a call for fellow WTO members to follow a growing trend of "pragmatic multilateralism," particularly as they work to chart a path toward the organisation’s next ministerial conference in Buenos Aires, Argentina, and beyond.
BRICS Meet in India, Touting Potential of New Development Bank
Bridges, Volume 20, Number 35 Oct 20, 2016
The eighth annual BRICS Summit took place over the weekend, convening the leaders of Brazil, Russia, India, China, and South Africa in Goa under India's chairmanship for discussions touching upon a range of issues, including trade cooperation and the latest progress in the group’s New Development Bank.
China Claims Three Straight Quarters Growth at 6.7%
Gordon G. Chang (WA) Oct 20, 2016
The US media's accommodating coverage of China's absurd claims of economic performance consistency ignores the strong possibility that China's actual numbers are falling far short of its soothing propaganda.
Capital Flows and Financial Crises
Joseph P. Joyce (RGE Economonitor) Oct 20, 2016
The impact of capital flows on the incidence of financial crises has been recognized since the Asian crisis of 1997-98.
Venezuela Exports Its Crisis
Mac Margolis (Bloomberg View) Oct 20, 2016
Is Latin America ready for a flood of Venezuelan refugees?
Asia Remains Vulnerable to Uncertainty in Advanced Economies
Mohamed Aly El-Erian (Bloomberg View) Oct 20, 2016
Political and economic turbulence in Europe and the U.S. could test the thriving region's resilience.
A Tale of Two Stagnations
Noah Smith (Bloomberg View) Oct 20, 2016
It's tough getting consumers to spend again, but it's even harder to find new technologies that boost productivity.
Protectionist Creeps
Otaviano Canuto (Project Syndicate) Oct 20, 2016
Prospects for global trade growth in 2016 and 2017 have been downgraded yet again, with the World Trade Organization estimating that, this year, trade will increase at its slowest pace since the post-2008 global recession. What is going on?
Income distribution and aggregate saving
Peter Bofinger and Philipp Scheuermeyer (VoxEU) Oct 20, 2016
The effect of income distribution on aggregate saving has important implications for aggregate demand and global current account imbalances. Drawing on evidence from a panel of high-income OECD countries, this column documents a hump-shaped relationship between inequality and aggregate saving rates. It also shows that the relationship between inequality and saving depends on financial market conditions. The effect of income distribution on aggregate saving has important implications for aggregate demand and global current account imbalances. Drawing on evidence from a panel of high-income OECD countries, this column documents a hump-shaped relationship between inequality and aggregate saving rates. It also shows that the relationship between inequality and saving depends on financial market conditions.
Africa's prospects for enjoying a demographic dividend
David Bloom, Michael Kuhn and Klaus Prettner (VoxEU) Oct 20, 2016
Africa’s total fertility rate and its dependency ratio have been falling since the 1980s, and are projected to fall further. This column looks at the potential growth effects of the continent's changing demography. The African economy has the potential to grow between 0.5 and 2 percentage points faster over the next five decades than it would without the projected fertility reduction. However, this 'demographic dividend' is dependent on the policies that African governments enact. Africa’s total fertility rate and its dependency ratio have been falling since the 1980s, and are projected to fall further. This column looks at the potential growth effects of the continent's changing demography. The African economy has the potential to grow between 0.5 and 2 percentage points faster over the next five decades than it would without the projected fertility reduction. However, this 'demographic dividend' is dependent on the policies that African governments enact.
Why we fail to prevent civil wars
Hannes Mueller and Christopher Rauh (VoxEU) Oct 20, 2016
Effective forecasting of conflict risk could help prevent civil wars. But resource constraints mean that policymakers rarely act until conflict begins because they fear the number of false positive warnings. This column argues that the policy of reacting to violence instead of preventing it cannot be justified, given the accuracy of simple forecasting models such as news analysis. Effective forecasting of conflict risk could help prevent civil wars. But resource constraints mean that policymakers rarely act until conflict begins because they fear the number of false positive warnings. This column argues that the policy of reacting to violence instead of preventing it cannot be justified, given the accuracy of simple forecasting models such as news analysis.
Beyond Brexit: Which Country has the Best Trade-for-Development Policy in the World?
Lee Crawfurd and Kimberly Ann Elliott (CGD) Oct 21, 2016
If the UK leaves the EU customs union, it will need new trade policies for poor countries as well as with major trading partners. This post kicks off a discussion of what that policy should look like by assessing which country currently has the best trade-for-development policy in the World.
IMF Calls for Prompt Policy Action to Secure a Rebound in Growth
IMF News Oct 21, 2016
Regional Outlook: Sub-Saharan Africa faces slowest growth in 20 years, but quite a few countries still perform well. Sub-Saharan Africa growth in 2016 forecast at 1.4% is well below population growth rate. In African resource exporters’ economies, prompt, sustained policy adjustment is needed; oil producers hardest hit.
Every Trade Deal Needs a Referee
Tyler Cowen (Bloomberg View) Oct 21, 2016
Critics complain that the Trans-Pacific Partnership would give companies too much power. Here's why they're wrong.
The Case for UK Import Substitution
Robert Skidelsky (Project Syndicate) Oct 21, 2016
With Britain’s current-account deficit running at over 7% of GDP – by far the largest since data started being collected in 1955 – sterling's 16% depreciation since the June Brexit vote could be regarded as a boon. But a weakening pound could actually hurt British competitiveness.
The Free-Trade Miracle
Bjørn Lomborg (Project Syndicate) Oct 21, 2016
While there are costs associated with global free trade, they can be mitigated, and they are dwarfed by the benefits. Free trade has already helped lift more than a billion people out of poverty over the past 25 years, and it provides the best opportunity to improve human welfare in the years ahead.
Out of Ammunition to Combat Recession?
Michael J. Boskin (Project Syndicate) Oct 21, 2016
The next recession probably will not be as bad as the last one; but unprecedented long-term monetary stimulus and spikes in public-debt burdens have left governments unequipped to deal with an economic downturn. Gradual monetary-policy normalization and fiscal consolidation are the only prudent options now.
Brexit isn't an economic calamity. Far from it.
Jeff Spross (The Week) Oct 21, 2016
June's Brexit vote brought an avalanche of predictions that leaving the European Union would wreck Britain's economy. But what if, for most British workers, Brexit turns out to be a net plus?
What Does Measured FDI Actually Measure?
Olivier Blanchard and Julien Acalin (PIIE) Oct 21, 2016
Foreign direct investment (FDI)—whether mergers and acquisitions or “greenfield” ventures built from the ground up—is generally thought of as reflecting decisions based on long-run factors. Conventional wisdom on capital flows holds that FDI inflows are “good flows,” while assessments of portfolio and other flows are more ambiguous. When considering restrictions on capital flows, the first reaction of researchers and policymakers is to want to exclude FDI inflows. FDI flows measured in the balance of payments are actually quite different from this depiction of FDI. Their analysis reveals that FDI inflows and outflows are highly correlated, even at high frequency and using different methodologies, and that FDI flows to emerging-market economies appear to respond to the US monetary policy rate, even at high frequency. Based on these findings they reach two conclusions. First, in many countries, a large proportion of measured FDI inflows are just flows going in and out of the country on their way to their final destination, with the stop due in part to favorable corporate tax conditions. Second, some of these measured FDI flows are much closer to portfolio debt flows, responding to short-run movements in US monetary policy conditions rather than to medium-run fundamentals of the country. Both these conclusions have implications for how researchers and policymakers should think about capital controls and the exclusion of measured FDI from such controls.
The trade data gap: Mistake and malfeasance
Derek Kellenberg and Arik Levinson (VoxEU) Oct 21, 2016
A recent UN study claims that a large share of exports from developing countries goes unreported and that smuggling is a likely explanation. But many analysts argue that the discrepancies are statistical errors. This column suggests that although some malfeasance is at play as the trade gap is correlated with tariffs and corruption, this statistical relationship cannot identify countries or shipments that are corrupted. There's smoke, but no smoking gun. A recent UN study claims that a large share of exports from developing countries goes unreported and that smuggling is a likely explanation. But many analysts argue that the discrepancies are statistical errors. This column suggests that although some malfeasance is at play as the trade gap is correlated with tariffs and corruption, this statistical relationship cannot identify countries or shipments that are corrupted. There's smoke, but no smoking gun.
Corruption doesn't grease the wheels in Central or Eastern Europe
Elisa Gamberoni, Christine Gartner, Claire Giordano and Paloma Lopez-Garcia (VoxEU) Oct 21, 2016
Economists have argued that corruption in business can potentially grease the wheels of an economy. This column presents evidence from nine Central and Eastern European countries on the effects of bribes on the efficiency with which production factors are allocated across firms. The impact of corruption on capital and labour misallocation is larger the smaller the country, the lower its political stability and the weaker the quality of its regulation. This is evidence against the ‘grease the wheels’ hypothesis. Economists have argued that corruption in business can potentially grease the wheels of an economy. This column presents evidence from nine Central and Eastern European countries on the effects of bribes on the efficiency with which production factors are allocated across firms. The impact of corruption on capital and labour misallocation is larger the smaller the country, the lower its political stability and the weaker the quality of its regulation. This is evidence against the ‘grease the wheels’ hypothesis.
How import competition from China helped fuel the credit bubble of the 2000s
Jean-Noël Barrot, Erik Loualiche, Matthew Plosser and Julien Sauvagnat (VoxEU) Oct 21, 2016
In the years preceding the Great Recession there was a dramatic rise in household debt in the US, and an increase in import competition triggered by the expansion of China and other low-wage countries. This column uses consumer credit data to argue that these phenomena are intimately linked. Household debt levels increased significantly in counties where US manufacturing jobs shifted overseas, and regional exposure to import competition explains 30% of the cross-regional variation in the growth in household debt. In the years preceding the Great Recession there was a dramatic rise in household debt in the US, and an increase in import competition triggered by the expansion of China and other low-wage countries. This column uses consumer credit data to argue that these phenomena are intimately linked. Household debt levels increased significantly in counties where US manufacturing jobs shifted overseas, and regional exposure to import competition explains 30% of the cross-regional variation in the growth in household debt.
With Europe-Canada Deal Near Collapse, Globalization's Latest Chapter Is History
Peter S. Goodman and James Kanter (NYT) Oct 22, 2016
As the agreement effectively died, it underscored the extent to which trade has become politically radioactive around much of the globe.
Free Trade in Chains
Paola Subacchi (Project Syndicate) Oct 22, 2016
The growing political backlash against trade in the advanced economies has raised a crucial question: does globalization need to be rolled back in order to preserve an open world economy? If policymakers don’t address it now, they are likely to answer for it later.
Hours worked in Europe and the US
Alexander Bick, Bettina Brüggemann and Nicola Fuchs-Schündeln (VoxEU) Oct 22, 2016
Europeans work fewer hours than Americans. This column uses new survey data to disentangle the demographic dimensions and the drivers of this gap. In Eastern and Southern Europe, the gap is driven by lower employment rates, while in Western Europe and Scandinavia it is driven by fewer hours worked per person per week. Europe’s more generous holiday allowance alone accounts for between a third and a half of the gap. Europeans work fewer hours than Americans. This column uses new survey data to disentangle the demographic dimensions and the drivers of this gap. In Eastern and Southern Europe, the gap is driven by lower employment rates, while in Western Europe and Scandinavia it is driven by fewer hours worked per person per week. Europe’s more generous holiday allowance alone accounts for between a third and a half of the gap.
Multinational firms and business cycle co-movement
Javier Cravino and Andrei Levchenko (VoxEU) Oct 22, 2016
Multinational production has become one of the most important means by which firms serve foreign markets. This column examines the role of multinational firms in aggregate business cycle transmission. The results suggest that the combined impact of all foreign multinationals is small but significant, accounting for about 10% of the productivity shocks in a typical country and leading to a somewhat more synchronised international business cycle. Multinational production has become one of the most important means by which firms serve foreign markets. This column examines the role of multinational firms in aggregate business cycle transmission. The results suggest that the combined impact of all foreign multinationals is small but significant, accounting for about 10% of the productivity shocks in a typical country and leading to a somewhat more synchronised international business cycle.
Wallonia’s stand on trade spells trouble for Brexit
FT View Oct 23, 2016
Parliamentary votes on EU-Canada deal set an ominous precedent.
To revive America’s economy, raise interest rates
Tony James (FT) Oct 23, 2016
The longer the low-rate environment lasts, the greater the systemic risk.
The Fed, Not the Market, Is Stifling Growth
Mary Anastasia O'Grady (WSJ) Oct 23, 2016
Trump and Clinton blame economic woes on immigration and trade. They’re wrong.
Fixing China’s overheated property market
Hu Shuli (EAF) Oct 23, 2016
By some measures, property prices in China are already higher than they were in Japan during the asset bubble at the end of the 1980s and are approaching those in the United States just before its subprime collapse.
India's Dangerous Investment Gap
Mihir Sharma (Bloomberg View) Oct 23, 2016
Private investors aren't spending for a reason.
Firm productivity and workers’ wages
Julián Messina, Oskar Nordström Skans and Mikael Carlsson (VoxEU) Oct 23, 2016
While standard microeconomic theory suggests that firms have no power over setting wages when markets are perfectly competitive, this view obviously clashes with the perceptions of the casual observer. This column uses data from Sweden to investigate the extent to which differences in firms’ pay are related to differences in physical productivity. It finds that firms that benefit from positive productivity shocks increase the wages of incumbent workers, and in particular firms among which there is substantial labour mobility. The evolution of productivity among such firms appears to be a crucial determinant of workers’ wages. While standard microeconomic theory suggests that firms have no power over setting wages when markets are perfectly competitive, this view obviously clashes with the perceptions of the casual observer. This column uses data from Sweden to investigate the extent to which differences in firms’ pay are related to differences in physical productivity. It finds that firms that benefit from positive productivity shocks increase the wages of incumbent workers, and in particular firms among which there is substantial labour mobility. The evolution of productivity among such firms appears to be a crucial determinant of workers’ wages.
Choosing a valuation technique: Education versus profession
Lilia Mukhlynina and Kjell G. Nyborg (VoxEU) Oct 23, 2016
The valuation of firms, projects, and transactions directly affects investment decisions and the allocation of resources in the economy. But practitioners often dismiss 'academic' valuation techniques. This column uses a survey of valuation professionals to argue that the real-world choice of valuation methods is often arbitrary, and influenced more by professional subgroup than educational background. In which case, we should ask whether finance education beyond bachelor's degrees is merely a sideshow. The valuation of firms, projects, and transactions directly affects investment decisions and the allocation of resources in the economy. But practitioners often dismiss 'academic' valuation techniques. This column uses a survey of valuation professionals to argue that the real-world choice of valuation methods is often arbitrary, and influenced more by professional subgroup than educational background. In which case, we should ask whether finance education beyond bachelor's degrees is merely a sideshow.
The eurozone economy regains some vitality
FT View Oct 24, 2016
Governments need to support further growth with fiscal easing.
The economy could reshape the UK as the Japan of Europe
Tim Harford (FT) Oct 24, 2016
There are unexpected ways we can pick ourselves up post-Brexit.
In ‘Gaining Currency,’ a Look at China’s Global Ambitions for Its Money
Carlos Tejada (NYT) Oct 24, 2016
Eswar S. Prasad, the International Monetary Fund’s former China chief, explores what Beijing hopes to gain from a more widely used renminbi.
How Transparent Are Development Finance Institutions?
Jared Kalowm, Ben Leo & Todd Moss (CGD) Oct 24, 2016
Foreign assistance has come a long way in becoming much more transparent. The idea, pushed by campaigns like Publish What You Fund and embodied in the International Aid Transparency Initiative, is that being more open about concessional aid will lead to less waste and more accountability. So what about non-concessional development finance? As the importance of development finance institutions (DFIs) grows, how transparent are they?
Verdict on Greenspan: Guilty, But Not as Charged
Prakash Loungani (Globalist) Oct 24, 2016
As Fed Chairman, Greenspan utterly failed to limit leverage and bubbles, and this failure magnified financial fragility.
Europe's Banks Think They're Incredibly Safe
Mark Whitehouse (Bloomberg View) Oct 24, 2016
They see themselves as having the world's least risky assets. Regulators don't buy it.
Brits Start to Count the Cost of Brexit
Mark Gilbert (Bloomberg View) Oct 24, 2016
Pessimism is growing about the economic consequences of leaving the European Union.
The Brexit Paradox
Ana Palacio (Project Syndicate) Oct 24, 2016
This was supposed to be the month when the world would gain more clarity on the terms of the UK's withdrawal from the EU. But all that has been offered, beyond a deadline for the launch of exit negotiations, is dangerous posturing, which is having an adverse impact on both business and politics.
The Creeping Public-Pension Debacle
Bill Emmott (Project Syndicate) Oct 24, 2016
Demographic aging is the social and economic equivalent of climate change – a problem that we all know must be addressed, but which we’d rather leave for future generations to solve. Unfortunately, procrastination on raising the retirement age – though understandable, given our troubled times – will come at a high cost.
The World Economy Without China
Stephen S. Roach (Project Syndicate) Oct 24, 2016
With its debt overhangs and property bubbles, its zombie state-owned enterprises and struggling banks, China is increasingly portrayed as the next disaster in a crisis-prone global economy. If the China bears are right, no country would be spared.
The Return of Dollar Shortages
Carmen Reinhart (Project Syndicate) Oct 24, 2016
Despite the broad global trend toward more flexibility in exchange-rate policy and freer movement of capital across national borders, many countries are lacking dollars. Indeed, in many developing countries, the only thriving market for the past two years or so has been the black market for foreign exchange.
Can Europe’s Banks Save the EU?
Dambisa Moyo (Project Syndicate) Oct 24, 2016
The multi-billion-dollar fine recently imposed by the US government on Germany’s Deutsche Bank has done little to improve confidence in the EU. What the scandal has done is exposed a last-resort option – a kind of “Hail Mary pass,” in American football terms – that could potentially save the European project.
The Failure of the Euro
John Lanchester (NYRB) Oct 24, 2016
By creating a single currency without the institutions to sustain it, the E.U. wound up with low growth, high unemployment, and popular disaffection.
Housing cycles, real estate valuations and economic growth
Joshua Aizenman, Yothin Jinjarak and Huanhuan Zheng (VoxEU) Oct 24, 2016
The booms and busts of real estate prices echo those of the real business cycle. This column looks at the relationship between house price valuations and economic growth in an international context. Taking account of heterogeneity in housing policies across countries, large house price depreciations are found to be positively associated with economic growth. This positive relationship is more pronounced in countries with civil law legal systems. The booms and busts of real estate prices echo those of the real business cycle. This column looks at the relationship between house price valuations and economic growth in an international context. Taking account of heterogeneity in housing policies across countries, large house price depreciations are found to be positively associated with economic growth. This positive relationship is more pronounced in countries with civil law legal systems.
What To Do With the UK? EU Perspectives on Brexit
Charles Wyplosz (VoxEU) Oct 24, 2016
With Britain’s exit from the EU edging ever closer, so too are the negotiations. So far the focus has been on the future position of the UK. Now the time comes for the remaining 27 member states to understand the implications for them, and to establish a strategy for the EU. This new eBook aims at contributing to the extraordinary challenges that lie ahead. With Britain’s exit from the EU edging ever closer, so too are the negotiations. So far the focus has been on the future position of the UK. Now the time comes for the remaining 27 member states to understand the implications for them, and to establish a strategy for the EU. This new eBook aims at contributing to the extraordinary challenges that lie ahead.
Resistance to China’s acquisition spree stiffens
FT View Oct 25, 2016
Beijing needs to take reciprocity for foreign investors more seriously.
A muddle-headed approach to foreign aid
FT View Oct 25, 2016
UK minister risks chipping away at the pledge on development funds.
Sluggish global trade growth is here to stay
Martin Wolf (FT) Oct 25, 2016
Political obstacles to big new liberalising agreements have risen higher.
Britain must pursue a ‘hard Brexit’ to create a more open economy
Ryan Bourne (FT) Oct 25, 2016
Encouraging foreign investment and migration is crucial.
Young people in Nigeria put their dreams on hold
Maggie Fick (FT) Oct 25, 2016
Notebook: It is hard to think of a country in Africa where the youth are not fed up.
Ceta debacle heralds a period of disintegration for the EU
Wolfgang Münchau (FT) Oct 25, 2016
Weak on Putin, absent in Syria, baffled by the eurozone — now it can’t do trade deals.
US election: Mexican peso is worth watching whoever wins
Richard Blackden (FT) Oct 25, 2016
EM investors should recognise that voters’ scepticism about the benefits of globalisation won’t go away.
The oil effect: African economies are growing at very different speeds
Economist Oct 25, 2016
New numbers from the IMF tell a tale of two Africas.
Sub-Saharan Africa: Policy Adjustment Way Out of Growth Slump
IMF News Oct 25, 2016
Growth at lowest level in more than 20 years. Many non-commodity exporters still performing well. Policy adjustment essential to boost growth in most-affected countries.
The Least You Can Do for Global Poverty Is Better than the Best You Can Do
Lant Pritchett (CGD) Oct 25, 2016
Workers with equal intrinsic productivity make higher wages working in a more productive place.
China Can Resist a Crash But Can't Prevent One
Tyler Cowen (Bloomberg View) Oct 25, 2016
The government's brawn lets it overpower economic weaknesses -- for a while.
Taking Monetary Policy to the People
Howard Davies (Project Syndicate) Oct 25, 2016
Central banks’ large-scale quantitative easing takes them into uncharted territory, where the boundary between monetary and fiscal policy is blurred, and where negative interest rates create political pressures and protests from savers. Central bankers will have to address these concerns, or risk a political backlash.
Demographics and Development
Mahmoud Mohieldin (Project Syndicate) Oct 25, 2016
There are major obstacles to achieving the Sustainable Development Goals, ranging from securing enough financing to mitigating climate change to handling macroeconomic shocks. But there is one potential obstacle that could turn out to be a blessing in disguise: demographic shifts.
The Blind Alley of Monetary Populism
Jeffrey Frankel (Project Syndicate) Oct 25, 2016
In the US and elsewhere nowadays, populist politicians often claim that easy monetary policy is hurting ordinary workers, thereby exacerbating income inequality. But while inequality is a problem, raising interest rates is no way to address it.
Biased technical change and labour demand: Evidence from global value chains
Laurie Reijnders, Marcel Timmer and Xianjia Ye (VoxEU) Oct 25, 2016
Offshoring and biases in technical change can have observationally equivalent effects on domestic labour demand, which precludes a quantification of their relative impacts. This column shows how biased technical change can be identified by studying global value chains that include all stages of production, both at home and abroad. It finds that technical change has been strongly biased against less-skilled workers, and in favour of high-skilled labour and capital. Offshoring and biases in technical change can have observationally equivalent effects on domestic labour demand, which precludes a quantification of their relative impacts. This column shows how biased technical change can be identified by studying global value chains that include all stages of production, both at home and abroad. It finds that technical change has been strongly biased against less-skilled workers, and in favour of high-skilled labour and capital.
What the China Trade Warriors Get Wrong
Alan Reynolds (WSJ) Oct 26, 2016
If trade agreements are so lousy, why are our largest deficits with countries that lack a U.S. trade deal?
A Chinese billionaire is staking his legacy — and thousands of American jobs — on this factory in Ohio
Ylan Q. Mui (WP) Oct 26, 2016
Shortly after his private plane landed in Ohio on a recent morning, the Chinese billionaire set off down Interstate 75 to inspect the factory on which he has staked his legacy and the future of this gritty patch of the American Rust Belt.
If Immigration Can't Be Stopped, Maybe It Can Be Managed
Eduardo Porter (NYT) Oct 26, 2016
The United States can choose what kind of low-skilled immigration it will have, legal or illegal, and specialists say legal is undoubtedly better.
Why Is America Not Improving Its Business Regulation?
Simeon Djankov (PIIE) Oct 26, 2016
So much for being the nerve center of global capitalism.
This Is No Way to Mend Europe’s Banks
Bloomberg View Oct 26, 2016
They need capital, not coddling.
Magical Thinking Won’t Stop Climate Change
Mark Buchanan (Bloomberg View) Oct 26, 2016
A recent wave of optimism is based on some wishful assumptions, including about technology.
Imagine Jailing the Central Bankers Who Saved the World
Mark Gilbert(Bloomberg View) Oct 26, 2016
There's no need to second-guess rescuing the financial system. But taxpayers deserve to know how their money was used.
Why This Dollar Surge Is Different for the Fed
Mohamed Aly El-Erian (Bloomberg View) Oct 26, 2016
The currency's increase, which hasn't affected stocks, gives more reason to expect a rate hike in December.
Globalization Goes Into Reverse
Noah Smith (Bloomberg View) Oct 26, 2016
Trade, capital flows and immigration have slowed or declined. Credit the Great Recession, not the protesters.
Manufacturing's Productivity Myth
Justin Fox (Bloomberg View) Oct 26, 2016
Factories are getting by with fewer workers, but aren't really hotbeds of innovation.
The World Is Out of Weapons
Satyajit Das (Bloomberg View) Oct 26, 2016
At this point, a long period of stagnation is inevitable.
China Gets Desperate About Debt
Christopher Balding (Bloomberg View) Oct 26, 2016
Financial engineering can't smooth things over forever.
Making “Made in Africa” Last
Moono Mupotola (Project Syndicate) Oct 26, 2016
Since its implementation in 2000, the African Growth and Opportunity Act has supported a wave of "Made in Africa" success stories. But AGOA will expire in 2025, leaving African countries nine years to consolidate the progress they have made.
The Secret Success of Abenomics
Koichi Hamada (Project Syndicate) Oct 26, 2016
Gloomy reports of anemic GDP growth in Japan have undermined investor confidence and spurred criticism of Prime Minister Shinzo Abe's economic-revitalization efforts. But a more comprehensive look at Japan's economy provides strong grounds for optimism.
Understanding bank payouts during the financial crisis of 2007-2009
Peter Cziraki, Christian Laux and Gyongi Loranth (VoxEU) Oct 26, 2016
Banks' payout decisions at the beginning of the financial crisis of 2007-2009 were particularly controversial as the crisis eroded the capital of many banks. Concerns were raised that banks may have engaged in wealth transfer to shareholders, or that they may have been reluctant to reduce dividends to avoid negative signalling. This column examines these arguments using a large dataset on US bank holding companies. Cross-sectional tests do not provide clear-cut evidence of active wealth transfer. Similarly, the evidence on signalling is mixed. Banks' payout decisions at the beginning of the financial crisis of 2007-2009 were particularly controversial as the crisis eroded the capital of many banks. Concerns were raised that banks may have engaged in wealth transfer to shareholders, or that they may have been reluctant to reduce dividends to avoid negative signalling. This column examines these arguments using a large dataset on US bank holding companies. Cross-sectional tests do not provide clear-cut evidence of active wealth transfer. Similarly, the evidence on signalling is mixed.
Exchange rate predictability in the medium term
Pinar Yesin (VoxEU) Oct 26, 2016
The IMF invests significant resources in developing models to estimate equilibrium exchange rates. This column assesses the predictive power of one vintage of IMF exchange rate models during 2006–2011. The models performed exceptionally well at predicting exchange rate movements over the medium run, which is particularly remarkable given that the period covered the unanticipated Global Crisis and the assessments were not shared publicly at the time. The IMF invests significant resources in developing models to estimate equilibrium exchange rates. This column assesses the predictive power of one vintage of IMF exchange rate models during 2006–2011. The models performed exceptionally well at predicting exchange rate movements over the medium run, which is particularly remarkable given that the period covered the unanticipated Global Crisis and the assessments were not shared publicly at the time.
Why unconventional monetary policy works in theory
Roger Farmer and Pawel Zabczyk (VoxEU) Oct 26, 2016
Ben Bernanke famously quipped that monetary policy works in practice, but not in theory. This column bridges the gap between practice and theory in assessing how central banks can influence both of them by intervening in asset markets. To the extent that asset market volatility is driven by shifts in beliefs, the central bank should aim to eliminate that volatility by engaging in countercyclical unconventional monetary policy, which would end up reducing the risk premium. Ben Bernanke famously quipped that monetary policy works in practice, but not in theory. This column bridges the gap between practice and theory in assessing how central banks can influence both of them by intervening in asset markets. To the extent that asset market volatility is driven by shifts in beliefs, the central bank should aim to eliminate that volatility by engaging in countercyclical unconventional monetary policy, which would end up reducing the risk premium.
British economy sees off Brexit for another day
FT View Oct 27, 2016
Robust economic growth since the vote tells only half the story.
Nissan, Toyota and GDP figures: the Brexit battle is not over
Sebastian Payne (FT) Oct 27, 2016
Remain and Leave backers need to listen to opponents.
If China cannot beat Europe, it will acquire it
John Gapper (FT) Oct 27, 2016
There is no problem in Chinese companies buying abroad — but Beijing sets up big obstacles at home.
America's Dangerous 'China Fantasy'
James Mann (NYT) Oct 27, 2016
Trade and economic growth is making Beijing more repressive, not less.
How to improve productivity? Make sure it’s shared broadly.
Simon Johnson (WP) Oct 27, 2016
The next president should champion an investment in education and promote inclusive technology.
Timing for CETA Signing Unclear as Negotiations Continue in Belgium
Bridges, Volume 20, Number 36 Oct 27, 2016
Efforts to reach a consensus across EU member states on whether to sign on to the Comprehensive Economic and Trade Agreement (CETA), a deal negotiated between the European Union and Canada, have faced a difficult road this past week, as the Belgian federal government attempts to secure the unanimous support of its regional bodies in order to approve the accord.
Four Fallacies About Trade and Globalization
Ajai Gaur and Ram Mudambi (YaleGlobal) Oct 27, 2016
Fear of trade overlooks that most value creation in advanced economies is based on services, not manufacturing
Pensioners and Populism
Anatole Kaletsky (Project Syndicate) Oct 27, 2016
The rise of protectionism and anti-immigrant sentiment in Britain, America, and Europe is widely believed to reflect stagnant incomes, widening inequality, structural unemployment, and even excessive monetary easing. But there are several reasons to question the link between populist politics and economic distress.
How Inequality Found a Political Voice
Michael Spence (Project Syndicate) Oct 27, 2016
It took a long time for widening inequality to have an impact on politics, as it suddenly has done in recent years. Now that it is a central issue, national economic priorities will need to shift substantially to create more equitable, inclusive societies, or electorates could embrace explosive political alternatives.
The Anti-Democratic Heart of Populism
Andrés Velasco (Project Syndicate) Oct 27, 2016
The underlying view is that rising populism in the US and Europe is a straightforward consequence of globalization and its unwanted effects: lost jobs and stagnant middle-class incomes. But populism is not about taxation, lost jobs, or income inequality; It is about who gets to represent the people and how.
Evaluating regional policy and shocks in the real world
Stephen Redding and Esteban Rossi-Hansberg (VoxEU) Oct 27, 2016
Economic geography has typically focused on stylised settings. This column surveys a recent strand of literature that has developed quantitative models of the spatial distribution of economic activity. This ‘quantitative spatial economics’ literature has produced important methodological and theoretical insights that clarify earlier results in stylised settings. The emerging field stands to contribute substantially to economic and public ‘place-based policies’. Economic geography has typically focused on stylised settings. This column surveys a recent strand of literature that has developed quantitative models of the spatial distribution of economic activity. This ‘quantitative spatial economics’ literature has produced important methodological and theoretical insights that clarify earlier results in stylised settings. The emerging field stands to contribute substantially to economic and public ‘place-based policies’.
The danger of Germany's current account surpluses: Results of CFM and CEPR Survey
Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon and Ricardo Reis (VoxEU) Oct 27, 2016
The October 2016 expert survey of the Centre for Macroeconomics (CFM) and CEPR invited views from a panel of macroeconomists based across Europe on Germany’s trade surplus, its impact on the Eurozone economy, and the appropriate response of German fiscal policy. More than two-thirds of the respondents agree with the proposition that German current account surpluses are a threat to the Eurozone economy. A slightly smaller majority believe that the German government ought to increase public investment in response to the surpluses. The October 2016 expert survey of the Centre for Macroeconomics (CFM) and CEPR invited views from a panel of macroeconomists based across Europe on Germany’s trade surplus, its impact on the Eurozone economy, and the appropriate response of German fiscal policy. More than two-thirds of the respondents agree with the proposition that German current account surpluses are a threat to the Eurozone economy. A slightly smaller majority believe that the German government ought to increase public investment in response to the surpluses.
Exchange rate behaviour when interest rates are negative
Allaudeen Hameed and Andrew Rose (VoxEU) Oct 27, 2016
Recently a number of both small and large economies have experienced negative nominal interest rates. This column uses exchange rate data from 2010 to 2016 to demonstrate that negative interest rates seem to have little effect on observable exchange rate behaviour in these economies. While the long-run consequences for the financial sector of negative interest rates are unknown, the short-run effects on exchange rates in the sample are negligible. Recently a number of both small and large economies have experienced negative nominal interest rates. This column uses exchange rate data from 2010 to 2016 to demonstrate that negative interest rates seem to have little effect on observable exchange rate behaviour in these economies. While the long-run consequences for the financial sector of negative interest rates are unknown, the short-run effects on exchange rates in the sample are negligible.
Why the Industrial Revolution didn’t happen in China
Ana Swanson and Joel Mokyr (WP) Oct 28, 2016
There's a reason the Industrial Revolution occurred in Europe and not, for example, in China, which had in previous centuries shown signs of more scientific advancement: Europe developed a unique culture of competitive scientific and intellectual advancement that was unprecedented and not at all predestined.
London and Brussels Can and Should Be Constructive about Brexit
Simeon Djankov (PIIE) Oct 28, 2016
There is a reason they call it the City, capital "C." London accounts for 85 percent of hedge fund assets, 78 percent of foreign exchange turnover, 74 percent of over-the-counter interest rate derivatives, 64 percent of private equity assets, and 59 percent of the international insurance premiums in the European Union.
Beyond Brexit: How Will EU Overseas Development Aid Be Affected?
Michael Anderson (CGD) Oct 28, 2016
The EU faces a substantial drop in its development resources following Brexit. Still, the amount will depend on how “hard” that exit is, and the UK’s ongoing involvement in voluntary EU-level arrangements. Here we assess the potential size of the Overseas Development Aid (ODA) funding drop that EU institutions could face.
A Better CETA: One Big Cheer for Wallonia
Steven Hill (Globalist) Oct 28, 2016
While the rest of Europe ducked, one region stood up for important principles of responsible globalization.
ISDS: Corporations Overpowering Governments and Democracy?
Steven Hill (Globalist) Oct 28, 2016
Investor-state dispute settlement provisions in trade deals have backfired and undercut public confidence in global integration.
Bank of England's Mark Carney Prepares His Own Brexit
Mark Gilbert (Bloomberg View) Oct 28, 2016
The government will have only itself to blame if the top central banker decides not to stay.
Three Threats to China’s Economy
Zhang Jun (Project Syndicate) Oct 28, 2016
China's economy is facing serious challenges, reflected in trends like falling fixed-asset investment and rising credit. But many of those challenges can be addressed with one major initiative: reform and restructuring of the state sector.
Are You a Patriot Or a Nationalist?
Gurcharan Das (Globalist) Oct 29, 2016
Nationalism is on the rise from the United States to India and China. How to rein it in?
Understanding Latin America’s New Political Paradigm
Ernesto Talvi (Project Syndicate) Oct 29, 2016
Latin America's 40-year history of political shifts between center-right and center-left governments is evolutionary: each new stage builds upon the previous one. Much like creative destruction in the economy, this political evolution preserves what works, discards what does not, and sometimes adds new disruptive features.
The Consequences of a Trump Shock
Simon Johnson (Project Syndicate) Oct 29, 2016
With the US presidential election on November 8, and a series of elections fast approaching in Europe, now is a good time to ask whether the global economy is in good enough shape to withstand another major negative shock. A big one – like the election of Donald Trump – would likely plunge the world into recession.
Would Higher Interest Rates Boost US Growth?
J. Bradford DeLong (Project Syndicate) Oct 29, 2016
The Federal Reserve cannot stabilize the economy, create jobs, and avert problems stemming from abnormally low interest rates simply by raising the federal funds rate. Rather, businesses must first create savings vehicles and make investments, to which the Fed can then respond by allowing interest rates to rise.
China’s strongman rule sets a test for the west
FT View Oct 30, 2016
President Xi challenges notion that prosperity leads to liberalism.
The Nissan deal hints at a route for Brexit Britain
Wolfgang Münchau (FT) Oct 30, 2016
The longer the interim period, the softer the Brexit. That might be the face-saving compromise.
A Little-Noticed Fact About Trade: It's No Longer Rising
Binyamin Appelbaum (NYT) Oct 30, 2016
There are signs that the slowdown is becoming structural. Developed nations appear to be backing away from globalization.
The Benefits of a New Atlantic Growth Pact
Kristen Silverberg and Phil Levy (WSJ) Nov 2, 2016
The next president has a chance to restart trade talks with an approach that addresses U.S. needs.
What does Jokowi want for the Indonesian economy?
Eve Warburton (EAF) Oct 30, 2016
Over the past 12 months, a Jokowi-styled developmentalism begun to emerge.
Brexit Britain can balance immigration and single market access
Sunder Katwala (FT) Oct 31, 2016
Leaving EU is a chance to find a migration policy that works.
Chinese investors take a tumble on the global stage
James Kynge (FT) Oct 31, 2016
They are like their western counterparts when it comes to hubris.
Russia’s demographics turn positive
Steve Johnson (FT) Oct 31, 2016
Rising birth rate, tumbling death rate and immigration drives population rebound
Central Banks Weigh Different Policies Under Similar Constraints
Mohamed Aly El-Erian (Bloomberg View) Oct 31, 2016
BOE, BOJ and the Fed meet this week, but their decisions will be limited by forces beyond their control.
TPP Is Exciting. Let's Make the Case for It.
Tyler Cowen (Bloomberg View) Oct 31, 2016
The trade deal's virtues don't make good sound bites. Still, they're compelling.
Is Japan Too Scared to Succeed?
Michael Schuman (Bloomberg View) Oct 31, 2016
The country needs bold new entrepreneurs, not more easy money.
China’s Incomplete Contracts
Andrew Sheng and Xiao Geng (Project Syndicate) Oct 31, 2016
This year’s Nobel Prize in Economic Sciences went to Harvard’s Oliver Hart and MIT’s Bengt Holmström for their pioneering work on the economics of property rights and contracts. At a time when China is attempting the difficult transition to a more market-oriented economy, the value of these contributions could not be clearer.
Overcoming the Public-Sector Coordination Problem
Ricardo Hausmann (Ricardo Hausmann) Oct 31, 2016
Anyone who has worked in government knows that guiding the public and private sectors toward a shared goal, while complicated, is a cakewalk compared to coordinating government agencies. One solution to this problem is to create a market-like mechanism within government to allocate resources efficiently.
The Universal Right to Capital Income
Yanis Varoufakis (Project Syndicate) Oct 31, 2016
The idea that some work hard and pay their income taxes, while others live off their enforced kindness, doing nothing by choice, is untenable. If a universal basic income – liberty's main prerequisite in an age of obsolete labor – is to be legitimate, it cannot be financed by taxing Jill to pay Jack.
Investment for Sustainable Growth
Jeffrey D. Sachs (Project Syndicate) Oct 31, 2016
When the 2008 financial crisis hit, outlays on both consumption and housing plummeted, yet the investment that should have picked up the slack never materialized. It is time to usher in an era of high investment in sustainable development.
Germany Inc. Is Not for Sale to China, Berlin Says
Emily Tamkin (FP) Oct 31, 2016
Concerns are mounting that China’s European investment binge could imperil key strategic sectors, sparking a Teutonic blowback.
Japan Gets Schooled
Devin Stewart (FA) Oct 31, 2016
Why the country's universities are failing.
The fundamental factors behind the Brexit vote
Sascha O. Becker, Thiemo Fetzer and Dennis Novy (VoxEU) Oct 31, 2016
In the Brexit referendum on 23 June 2016, the British electorate voted to leave the EU. The vote is widely seen as a watershed moment in British history and European integration. This column asks why some areas vote to leave the EU, and others voted to remain.
Refugees and Economic Migrants: Facts, policies and challenges
Francesco Fasani (VoxEU) Oct 31, 2016
The migration debate is often harsh and polarised, oscillating from calls for more open borders to promises to build new fences, and contrasting the views of those who emphasise the advantages and benefits from migration flows with those who consider migrants to impose an unnecessary strain on hosting societies. This column introduces a new eBook that offers a brief summary of what economists have learnt about migration in several crucial areas of policymaking, and identifies most of the important questions that still remain to be answered.