News & Commentary:

November 2013 Archives


Will China Reform?
Douglas H. Paal (CEIP) Nov 1, 2013
Reforms to China’s financial sector could be introduced at the upcoming third plenum. But if Xi has a serious political and social reform agenda, it probably will not be implemented before 2017.

Optimism, and Caution, as Spain Attracts Investment New York Times Subscription Required
Raphael Minder (NYT) Nov 1, 2013
Foreign investors are returning, and so is growth. But even the economy minister says it is too early to celebrate.

Disaster-Proof Development
Margareta Wahlström (Project Syndicate) Nov 1, 2013
So far this century, economic losses stemming from natural disasters have amounted to some $2.5 trillion. Unless a serious effort is made to protect economic assets from the increased risks associated with climate change, the costs will skyrocket in the coming decades.

The effect of regulation on banks’ liquidity buffers
Clemens Bonner, Iman van Lelyveld & Robert Zymek (VoxEU) Nov 1, 2013
What are the determinants of banks’ liquidity holdings and how are these reshaped by liquidity regulation? Based on a sample of 7,000 banks in 30 OECD countries, this column argues that banks’ liquidity buffers are determined by a combination of both bank- and country-specific variables. The presence of liquidity regulation substitutes for most of these determinants while complementing the role of size and institutions’ disclosure requirements. The complementary nature of disclosure and liquidity requirements provides a strong rationale for considering them jointly in the design of regulation.

South Korea Risks a Disappointment Trade
William Pesek (Bloomberg) Nov 1, 2013
South Korea is attracting plenty of hot money, which may end up fleeing if the country doesn't bring about economic reforms.

China in Africa – New challenges beyond the commodities supercycle
Hannah Levinger (DB Research) Nov 1, 2013
Following the decline in China's demand for commodities during the summer months, its imports of crude oil, copper and iron ore are slowly beginning to recover again. To this day, China's economic relations with Africa are shaped by securing the supply of resources by financing infrastructure and other major projects. There is indeed much to suggest that China's future activities will be more complex and by no means limited to the commodities sector.

No Need to Dig Economist Subscription Required
Economist Nov 2, 2013
Many of Africa's fastest-growing economies have not relied on oil or mining.

The Transformation of Industry in Northeast Asia
Bok Deuk-ku (SERI Quarterly) Nov 1, 2013
Shifts to mobile computing, a rise in emerging market companies, increased environmental awareness and the arrival of new sources of energy are putting heavy pressure on manufacturers in East Asia to embrace change. East Asian firms are now compelled to increase cooperation within the region, guard against protectionism, and bolster locally developed innovation.

Never Saw It Coming Foreign Affairs Subscription Required
Alan Greenspan (FA) Nov 1, 2013
Why the financial crisis took economists by surprise.

Rankings That Rankle
Steve H. Hanke (SCMP/Cato) Nov 2, 2013
The World Bank has been producing its annual “Doing Business” report since 2004 and its 2014 edition ranking Hong Kong second out of 189 economies surveyed, in contrast to mainland China’s score of 96, hardly seems controversial.

Worry about the euro, not the EU Financial Times Subscription Required
Wolfgang Münchau (FT) Nov 3, 2013
The union, with its treaties and its crisis resolution tactics, is not compatible with a functioning single currency in the long run.

Red flags wave over Asian corporate debt Financial Times Subscription Required
Jeremy Grant (FT) Nov 3, 2013
China’s foreign currency loans are estimated to have grown 35% in the year to March. Some see this as the ‘canary in the coal mine’.

Russia: Nationalism on the march Financial Times Subscription Required
Kathrin Hille (FT) Nov 3, 2013
Growing public anger about immigration from former Soviet states poses a dilemma for Putin as he seeks to build a regional trade bloc.

Those Depressing Germans New York Times Subscription Required
Paul Krugman (NYT) Nov 3, 2013
They are beggaring their neighbors, and the world, by running big trade surpluses.

Why Chinese are anxious
Fred Hiatt (WP) Nov 3, 2013
The deep-seated concern about the next stages of growth.

China: Red restoration Financial Times Subscription Required
Jamil Anderlini (FT) Nov 4, 2013
Foreign companies, buffeted by state investigations and nationalist rhetoric, are looking for signs that tough tactics are merely short-term political moves.

Debt crisis has left Germany vulnerable Financial Times Subscription Required
Satyajit Das (FT) Nov 4, 2013
Continued weakness in the periphery countries will affect Germany’s economic prospects.

For Long-term Investors, Rising Rates Are Nothing to Fear
Jon Short (PIMCO) Nov 4, 2013
Fixed income markets have been unsettled since May, when hints by the Federal Reserve of an eventual reduction in quantitative easing triggered an abrupt rise in rates. Although the Fed ultimately decided not to alter their QE program in September – and more importantly, indicated that it will maintain its near-zero policy rate until at least 2016 – confidence in bonds has yet to be fully restored. Many are left wondering what to make of a period where fixed income returns were generally negative.

Those Pesky German Trade Surpluses
Daniel Stelter (Globalist) Nov 4, 2013
Why it is in Germany's own interest to change course.

Reports of Europe’s Recovery Are Greatly Exaggerated
Bloomberg Nov 4, 2013
Recent stirrings of optimism about Europe’s economy have been interrupted: New jobs figures and signs of a slide into deflation have ended some very premature celebrations. The region’s economic crisis isn’t over. The danger of a relapse into recession is real.

Why Wealth Taxes Are Not Enough
Kenneth Rogoff (Project Syndicate) Nov 4, 2013
The IMF is right – on grounds of both fairness and efficiency – to raise the idea of temporary wealth taxes in many countries. But, as appealing as such taxes may seem at first sight, a closer look reveals that the revenues are lower, and the costs higher, than calculations used to promote them would imply.

Falling for Germany
Harold James (Project Syndicate) Nov 4, 2013
German exceptionalism is obvious. Not only does Germany now seem to be running Europe, but the rest of Europe seems to be falling in love with Germany – not least because, in a time of political confusion and economic instability, Germans are the only Europeans who seem to know what they want.

Inflation Has Not Cured Iceland’s Economic Woes
David Howden (Mises Daily) Nov 4, 2013
No two countries’ responses have polarized commentators over the past five years more than the contrasting post-crisis policies in Iceland and Ireland.

Germany is a weight on the world Financial Times Subscription Required
Martin Wolf (FT) Nov 5, 2013
The US has every right to complain, just as others had the right to complain about US regulatory failures.

Prompt action required on eurozone deflation Financial Times Subscription Required
John Plender (FT) Nov 5, 2013
The eurozone will be forced to confront reality much more quickly than Japan has done.

The U.S. and China Both Need Economic Rehab Wall Street Journal Subscription Required
Niall Ferguson and Moritz Schularick (WSJ) Nov 5, 2013
'Chimerica' has become addicted to ultra-loose financial conditions.

India: Two Theories about Gold
Devesh Kapur, Marla Spivack, Arvind Subramanian, and Milan Vaishnav (PIIE/Business Standard) Nov 5, 2013
Gold has been all over the news in India lately because high and rising imports of the shiny stuff led directly to a deterioration of the current account, which in turn exacerbated the rupee's vulnerability over the past few months. Three intriguing facts about India's gold imports scream for an explanation. First, the increase in gold imports has coincided with a sharp decline in financial savings. Second, a predominant share of India's gold imports originates in Switzerland. And third, there is a large discrepancy in India's gold imports from Switzerland: In recent research we have undertaken, we find that while India claims to import large amounts of gold from Switzerland (more than $26 billion), Switzerland reports that it shipped gold worth less than $6 million (yes, million, not billion) to India, resulting in a large unaccounted trade.

China haunted by demographics Financial Times Subscription Required
David Pilling (FT) Nov 6, 2013
The country faces a gargantuan challenge requiring sweeping reforms that its leaders will struggle to carry out Read more >>

The forex market encourages crime Financial Times Subscription Required
Patrick Jenkins (FT) Nov 6, 2013
The lax structure of the market supplies the opportunity for the criminal act. And the incentive to maximise bonuses creates the motive.

South Africa: Half full glass emptying Financial Times Subscription Required
Andrew England (FT) Nov 6, 2013
Since the end of apartheid, gross domestic product has almost tripled to $400bn, but inequality remains with unemployment still stubbornly high.

Ruble Hopes to Join Ranks of the $ and € New York Times Subscription Required
Andrew E. Kramer (NYT) Nov 5, 2013
Russian officials want to give the ruble a symbol that would become as easily recognizable as those for the dollar and the euro.

Economic complexity pays
Martin Hutchinson (AT) Nov 5, 2013
That societies succeed, not because of their natural resources but because of their knowledge and the economic complexity to which it leads may be an oversimplification, but it does have interesting implications.

Pension systems in declining populations
Euronomist (Pieria) Nov 5, 2013
What are the financial consequences of an ageing and declining population.

High Frequency Traders Are a Little Too Slow
Matt Levine (Bloomberg) Nov 5, 2013
High frequency trading is a wonderful subject for study because nobody agrees on what would make it Good or Bad. So academics and practitioners can write papers about how it is Good, or how it is Bad, and they don't particularly contradict each other.

Of Debt, Growth, Interest Rates and History
Carmen M. Reinhart (Bloomberg) Nov 5, 2013
The blog of New York Times columnist Paul Krugman recently featured a chart plotting the U.K.’s ratio of government debt to gross domestic product against the nominal yield on long-term government bonds from about 1700 to the present.

Is China a Friend of Africa?
Simplice Asongu (Project Syndicate) Nov 5, 2013
While foreign investment can bring cash, skills, technology, and high ethical standards to a host country, it can also bring political meddling, environmental pollution, labor abuses, and other unscrupulous practices. The debate over the benefits and costs is particularly animated with respect to Chinese investment in Africa.

South Africa Breaks Out
Joseph E. Stiglitz (Project Syndicate) Nov 5, 2013
South Africa has decided to stop the automatic renewal of international investment agreements that it signed in the early post-apartheid period, and has announced that some will be terminated. It is right to do so, and other countries, one hopes, will follow suit.

Economic Doghouse: Complaints about German Exports Unfounded
Alexander Jung, Christian Reiermann and Gregor Peter Schmitz (Spiegel) Nov 5, 2013
The US government and European Commission are complaining bitterly about Germany's hefty trade surplus and export orientation. But such criticism fails to consider how much the country's partners benefit from its competitive strength.

Debt and deficit as shock therapy
Ismael Hossein-zadeh (AT) Nov 6, 2013
Using the 2008 financial crash and its fallout, the financial oligarchy and government proxies have imposed austerity on the public. Yet, there is no shortage of financial resources, their apparent lack due to them being concentrated largely in the financial oligarchy's coffers.

Mounting malaise
Robert J. Samuelson (WP) Nov 6, 2013
Developed countries are increasingly pessimistic.

The European Banking Disunion
Daniel Gros (Project Syndicate) Nov 6, 2013
The future of the eurozone depends crucially on whether Europe’s financial markets “renationalize” or become fully integrated. But either outcome would be preferable to partial integration – which is where the eurozone appears to be headed.

The Four “Cs” of Innovation
Sami Mahroum (Project Syndicate) Nov 6, 2013
Innovation is now widely acknowledged to be a prerequisite for sustainable economic growth. But, while this is true of developed and developing economies alike, the tried and tested approaches do not work for all countries.

Understanding Emerging Market Banks: A new eBook
Thorsten Beck, Ralph De Haas & Steven Ongena (VoxEU) Nov 6, 2013
New micro-level data sets allow better testing of existing and new hypotheses on how banks operate in the often challenging environment of emerging markets. This column introduces an eBook that reports on the findings of a recent conference in London on using different research methodologies and data sources in banking research.

Finance: Plugged into the party Financial Times Subscription Required
Henny Sender and Tom Mitchell (FT) Nov 7, 2013
As the Chinese stock market took off, US banks turned to well-connected ‘princelings’ to help win lucrative deals. That era is coming to an end.

A weak euro will strengthen Europe Financial Times Subscription Required
Martin Feldstein (FT) Nov 7, 2013
A lower euro can provide the increased demand that makes it possible to pursue enough fiscal consolidation.

Balancing Act for India’s Top Banker New York Times Subscription Required
Keith Bradsher and Ellen Barry (NYT) Nov 7, 2013
Raghuram Rajan is cutting interest rates to stimulate growth, while talking tough against India’s high inflation rate.

As Plenum Starts, an Economist Sees Crisis Ahead New York Times Subscription Required
Chris Buckley (NYT) Nov 7, 2013
China faces a crisis unless big economic changes are accompanied by a political overhaul, a respected Chinese economist says as Communist Party leaders prepare to meet on the nation’s economic future.

Europe and the Zero Bound Wall Street Journal Subscription Required
WSJ Nov 7, 2013
As in the U.S., another rate cut isn't enough for faster growth.

Engineering change in China
Fareed Zakaria (WP) Nov 8, 2013
The Communist Party seeks social, economic and political reforms.

US Trade Initiatives in the Spotlight as 2015 Export Goal Looms
Bridges Weekly Trade News Digest, Volume 17, Number 37 Nov 7, 2013
Lawmakers in Washington have been gearing up in recent weeks for a battle on whether to renew Trade Promotion Authority, a key provision for advancing initiatives such as the US-EU trade talks and a 12-country pact with a group of Pacific Rim nations.

Greenland Says Yes to Uranium, Rare Earth Extraction
Bridges Weekly Trade News Digest, Volume 17, Number 37 Nov 7, 2013
Greenland’s Parliament on Thursday voted to put an end to a 25-year prohibition on mining for radioactive substances such as uranium, paving the way for further investment in rare earth minerals extraction. The controversial vote – which narrowly passed by a count of 15-14 – was championed by current Prime Minister Aleqa Hammond, elected this year on a pro-mining platform.

China’s Untapped Growth Potential
Zhang Jun (Project Syndicate) Nov 7, 2013
China’s economic slowdown, from a nearly 10% annual output gain in 2007 to below 8% today, has fueled widespread speculation about the country's growth potential. While it is impossible to predict China’s growth trajectory, the large gap between China and advanced economies suggests significant room for continued convergence.

Who Will Run the World’s Deficits?
Sanjeev Sanyal (Project Syndicate) Nov 7, 2013
Periods of global expansion have virtually always been characterized by symbiotic imbalances, with some economies running large current-account surpluses and others running large deficits. But countries' willingness and ability to absorb excess capital is declining, raising the question: Who will run the world's deficits?

China’s Plenum Test
Minxin Pei (Project Syndicate) Nov 7, 2013
Outside China, the prevalent view among business leaders is that President Xi Jinping’s new administration has consolidated its power and acquired enough authority to push through far-reaching economic reforms. Unfortunately, this view is both too sanguine and naïve.

From Unemployment to Entrepreneurship
Dale Mortensen (Project Syndicate) Nov 7, 2013
In order to adapt to a dynamic labor market, workers need insider knowledge and wide-ranging experience that formal education cannot provide. Subsidized entrepreneurial apprenticeships would give both young people and experienced workers the tools they need to grasp the opportunities offered by technological progress.

Higher Education Misconceived
Derek Bok (Project Syndicate) Nov 7, 2013
Ever since economists revealed how much universities contribute to economic growth, politicians have paid close attention to higher education. In doing so, however, they often misconceive the role of universities in ways that undermine their policies.

Cooling-off of Latin America
Ignacio Munyo & Ernesto Talvi (VoxEU) Nov 7, 2013
In recent years, the growth rates of Latin American countries have been cooling-off in comparison to the period of 2004-08. This column argues that the cooling-off is not due to a change in external factors because these have remained favourable. Persistent economic growth can be achieved by internal transformations. It cannot be sustained solely by the external conditions.

The global financial ecosystem
Zoltan Pozsar (VoxEU) Nov 7, 2013
Modern banks operate in a complex global financial ecosystem. This column argues that proper regulation requires an updating of our ideas about how they operate. Modern banks finance bond portfolios with uninsured money market instruments, and thus link cash portfolio managers and risk portfolio managers. Gone are the days when banks linked ultimate borrowers with ultimate savers via loans and deposits. The Flow of Funds should be updated to reflect the new realities.

Stamp duty and informed vs uninformed traders
Yuming Fu, Wenlan Qian & Bernard Yeung (VoxEU) Nov 7, 2013
Financial transaction taxes are designed to raise revenue and stabilise financial markets, but their effect on market volatility is controversial. This column presents evidence from the sudden reintroduction of stamp duty on new housing projects in Singapore. Overall trading volume declined while volatility increased. These effects were strongest for previously underpriced projects, consistent with the hypothesis that informed speculators were more strongly discouraged by the tax than noise traders. This suggests that financial transaction taxes may reduce the informativeness of asset prices.

The OPEC Oil Embargo at 40
Jules Kortenhorst (Project Syndicate) Nov 8, 2013
Forty years ago, when OPEC's Arab members cut off oil supplies to the US and parts of Europe, governments encouraged innovative solutions to reduce oil dependence. Today, as the world's ongoing oil addiction accelerates climate change, it is up to markets to lead the charge toward a more sustainable clean-energy future.

The Capital-Flow Conundrum
Eswar Prasad (Project Syndicate) Nov 8, 2013
Emerging economies have been working to protect themselves from the potentially destabilizing impact of advanced-country monetary policy. But, because their strategies also depend largely on monetary tools, they do not address the underlying problems: market, policy, and institutional failures at the national and global levels.

China’s Quest for Value
Zhang Monan (Project Syndicate) Nov 8, 2013
As some developed countries pursue “re-industrialization” and China’s comparative advantage diminishes, China must establish its competitiveness by positioning itself at the top of the global value chain.The Shanghai free-trade zone will play a vital role in this process.

Chinese Industrialization and its Discontents
Barry Eichengreen (Project Syndicate) Nov 8, 2013
Just as Chinese industrialization is unprecedented – no developing country has grown by more than 10% per year without interruption for two full decades – Britain’s industrialization 200 years ago was similarly unparalleled. For China's leaders, who must confront growing social unrest, the analogy does not end there.

‘Bilateral renaissance’ or multilateralism
Lucian Cernat (VoxEU) Nov 8, 2013
Trade agenda consists of new and old themes, often closely intertwined. Among the new themes, mega-FTAs– in particular the Trans-Pacific and the Trans-Atlantic Trade and Investment Partnership – have been especially popular. This column discusses the nature of mega-FTAs and their relationship with the multilateral rules. The column concludes that such FTAs promote deep regional integration, but also have positive impact on non-members.

Technology transfer for Chinese markets
Thomas Holmes, Ellen McGrattan & Edward C. Prescott (VoxEU) Nov 8, 2013
Why are FDI flows between China and technologically-advanced countries surprisingly small? This column analyses the issue in light of China's quid pro quo policy that makes technology transfer a precondition of foreign firms selling in China. We find that the policy provides significant gains for China, but losses to its FDI partners.

China’s Reform Roadmap
Andrew Sheng and Xiao Geng (Project Syndicate) Nov 9, 2013
At the Third Plenum of the 18th Central Committee of the Chinese Communist Party, President Xi Jinping is unveiling China’s reform blueprint for the next decade. In advance of its release, China's official think tank presented its own proposals in the so-called “383 plan,” which offers a glimpse of the direction that reform will take.

African polygamy: Past and present
James Fenske (VoxEU) Nov 9, 2013
Several theories link polygamy to poverty. Polygamy is concentrated in west Africa and has declined in recent decades. Geographic variation in women’s agricultural productivity does not predict differences in the prevalence of polygamy, but historical inequality and exposure to the slave trade do. Although contemporary female education does not reduce polygamy, areas with more educational investment in the past have less polygamy today. Conflict and lower rainfall lead to small increases in polygamy, whereas lower child mortality leads to a large decrease. National policies appear to have little effect.

Commodities: Destination Africa Financial Times Subscription Required
Javier Blas (FT) Nov 10, 2013
Trading houses are expanding their business away from simply exporting raw materials to tapping the vast potential that lies in meeting surging consumer demand.

The fight for food security in a crowded world Financial Times Subscription Required
Shawn Donnan (FT) Nov 10, 2013
Stefano Liberti has written a rollicking tour of a globalised food chain that asks tough questions about how we handle an increasingly insecure future.

Capital Group urges rethink on indices Financial Times Subscription Required
James Mackintosh (FT) Nov 10, 2013
Inventor of the most widely-used global stock market indices is concerned the standard national, or even regional, benchmarks no longer measure effectively.

Service Sector Gaining Steam in Chinese Economy New York Times Subscription Required
Bettina Wassener (NYT) Nov 10, 2013
As China’s policy makers gather in Beijing this week to discuss how to overhaul the economy, signs abound that the service sector is playing an increasingly important role.

The Plot Against France New York Times Subscription Required
Paul Krugman (NYT) Nov 10, 2013
It’s another case of ideology posing as economic analysis.

Car Crash Test Dummies: Another Transatlantic Divide?
Sabine Muscat (Globalist) Nov 10, 2013
Examining the real-life dimensions of the TTIP trade deal.

Eastern Europe: Which way to turn? Financial Times Subscription Required
Neil Buckley and Roman Olearchyk (FT) Nov 11, 2013
The EU and Russia are vying to persuade former Soviet states to join competing trade blocs. Those that choose the EU’s project risk Moscow’s retaliation.

Investors must starve the hedge funds Financial Times Subscription Required
Jonathan Ford (FT) Nov 11, 2013
They are extraordinarily expensive to run. Huge sums are needed to hire the skilled traders and analysts upon whose judgment they depend.

ECB must prevent euro aping strong yen Financial Times Subscription Required
Mansoor Mohi-uddin (FT) Nov 11, 2013
The European Central Bank must not follow the Bank of Japan’s easing of monetary policy too little too late if it is to avoid an overvalued euro.

CDS spreads widen under central clearing obligation
Orcun Kaya (DB Research) Nov 11, 2013
Among the agreed derivatives market reforms, the central clearing of OTC derivatives contracts has a pivotal role that changes the existing risk management and collateralisation practices tremendously. Nevertheless, to date, there is little empirical evidence on the impact of the new market infrastructure on CDS spreads. Controlling for a number of factors, our results indicate that the costs of central clearing seem to be passed on to end-users in the form of increased CDS spreads.

The Uncertain Future of Central Bank Supremacy
Mohamed A. El-Erian (Project Syndicate) Nov 11, 2013
Advanced countries' central banks were among the first to warn that their ability to compensate for other policymakers’ inaction is neither endless nor risk-free. The trouble is that few outsiders seem to be listening, much less preparing to confront the limits of monetary policy's effectiveness.

Asia exchanges grapple with HFT dilemma Financial Times Subscription Required
Jeremy Grant (FT) Nov 12, 2013
Market makers hope to access Asia as they face a high-frequency trading clampdown in Europe, but exchanges fear the trades could alarm some investors.

Foreign exchange: The big fix Financial Times Subscription Required
Daniel Schäfer, Alice Ross and Delphine Strauss (FT) Nov 12, 2013
Banks fear a repeat of the costly Libor scandal after traders were suspended over currency concerns.

America’s oil finds will be limited Financial Times Subscription Required
Mohammad Al Sabban (FT) Nov 12, 2013
The rise in US output is likely to have little impact because it could be shortlived, and independence is probably a long way off.

China's Leaders Urge More Market Control of Economy New York Times Subscription Required
Chris Buckley (NYT) Nov 12, 2013
Chinese Communist Party leaders vowed on Tuesday to push through changes that will give market competition a “decisive role” in allocating resources, and announced the formation of a new committee to oversee national security.

South Africans Didn't Die for This New York Times Subscription Required
T. O. Molefe (NYT) Nov 12, 2013
The nation is losing sight of its founding ideals 20 years after apartheid.

China: The Next Phase of Reform
Stratfor Nov 12, 2013
The commitment and ability of China's leaders to follow through on new policies and to meet rising expectations will be tested as they strive to balance competing social, economic, political and security challenges. Three decades ago, China embarked on a new path, creating a framework that encouraged the country's rapid economic rise. The successes of those policies have transformed China, and the country's leadership now faces another set of strategic choices to address China's new economic and international position.

Who You Calling a BRIC?
Jim O’Neill (Bloomberg) Nov 13, 2013
I spent last week in Indonesia, working on a series for BBC Radio about four of the world’s most populous non-BRIC emerging economies. The BRIC countries -- Brazil, Russia, India and China -- are already closely watched. The group I’m studying for this project -- let’s call them the MINT economies -- deserve no less attention. Mexico, Indonesia, Nigeria and Turkey all have very favorable demographics for at least the next 20 years, and their economic prospects are interesting.

The Return of Japan
Joseph S. Nye (Project Syndicate) Nov 12, 2013
After several years of political instability and more than two decades of economic stagnation, Japan seems to be on the mend. But whether Japan can maintain its promising trajectory partly depends on how it addresses longstanding tensions with its neighbors.

Latin America’s Irrational Exuberance
Ernesto Talvi (Project Syndicate) Nov 12, 2013
Latin America is coming to the end of an extraordinary cycle of growth that has transformed much of the continent, especially its commodity-exporting countries. But, as the boom recedes, a deep, debilitating weakness is becoming increasingly apparent: the region’s inadequate education systems.

Financial Safety Nets for Asia
Lee Jong-Wha (Project Syndicate) Nov 12, 2013
The impending reversal of the Federal Reserve’s expansionary monetary policy carries serious downside risks for emerging Asian economies. In order to minimize the spillover effects of US monetary policy, these countries should boost their reliance on currency-swap arrangements to strengthen their financial safety nets.

Revisiting sovereign bankruptcy
Lee C. Buchheit, Anna Gelpern, Mitu Gulati, Ugo Panizza, Beatrice Weder di Mauro & Jeromin Zettelmeyer (VoxEU) Nov 12, 2013
Sovereign bankruptcies occur regularly and violently. The nature of sovereign-debt problems has changed in comparison to ten years ago. This column discusses policy proposals to better resolve debt crises and prevent them from happening in the future. Such proposals are given both for the Eurozone, and at a global level.

Iceland’s capital controls
Friðrik Már Baldursson & Richard Portes (VoxEU) Nov 12, 2013
Iceland’s 2008 capital controls are still in place to prevent outflows of domestic holdings in failed cross-border banks. However, it is important for the country’s future economic prosperity to lift the capital controls without endangering financial stability. This column discusses the risks of capital controls and gives policy recommendations for cases of the three former major Icelandic banks.

Monetary policy is weaker in recessions
Silvana Tenreyro & Gregory Thwaites (VoxEU) Nov 12, 2013
Governments wary of fiscal expansion have turned to monetary policy to stimulate slowly recovering economies. This column presents evidence that lowering interest rates is ineffective during recessions – just when fiscal policy would be most effective. If this result is robust, we are seeing recent signs of recovery in spite of austerity, not because of it.

The Hyper-Efficient, Highly Scientific Scheme to Help the World’s Poor Recommended!
Jessica Benko (Wired) Nov 12, 2013
Randomized testing can be expensive and time-consuming. But by surfacing the small details that can determine a campaign’s success or failure, it is potentially saving billions of dollars and years of effort. And it’s providing something invaluable, something beyond intuition and anecdote: hard statistical proof on the most effective ways to change the world.

Crisis response needs to be a science Financial Times Subscription Required
Jimmy Whitworth (FT) Nov 13, 2013
We must help when natural disasters such as the typhoon that debastated the Philippines strike, but we know very little about how best to go about it.

Japan effect eclipses Fed taper concerns Financial Times Subscription Required
David Bowers (FT) Nov 13, 2013
The underperformance of emerging markets this year is in part due to the initial impact of a weaker yen via ‘Abenomics’ being to export deflation.

Time to Give Trade Policy a Digital Upgrade Wall Street Journal Subscription Required
Ron Wyden and John Thune (WSJ) Nov 13, 2013
China, Brazil and even our friends in Europe are increasingly hostile to U.S. Internet companies.

China's market enigma
Pepe Escobar (AT) Nov 13, 2013
The enigma enveloped in a riddle inside a Chinese box that passed as the final communique of the much-anticipated meeting of the Chinese Communist Party Central Committee came as something of an anti-climax. Yet it will take days, weeks and even months for its detailed implications to sink in. What's certain is that the "decisive role" of market reform implies the CCP at the helm, monitoring every step of the process.

Europe's Recovery Not Dead Yet
Barry Ritholtz (Bloomberg) Nov 13, 2013
Perhaps it's my bias -- my clients own Vanguard’s European ETF (VGK) -- but most of you folks now breathlessly declaring Europe’s recovery already over had left them for dead six months ago.

The Real Heroes of the Global Economy
Dani Rodrik (Project Syndicate) Nov 13, 2013
The real heroes of the world economy – the role models that others should emulate – are countries that have done relatively well while running only small external imbalances. These countries do not garner many headlines, but, without them, the global economy would be even less manageable than it already is.

Commodities: A sweet deal Financial Times Subscription Required
Gregory Meyer and Stephanie Kirchgaessner (FT) Nov 14, 2013
Powerful lobbies will ensure that the US sugar industry remains heavily protected in the farm bill negotiations. But political appetite for protectionism is waning.

Europe needs reform for the 21st century Financial Times Subscription Required
Frans Timmermans (FT) Nov 14, 2013
Gains by populist politicians driven by frustrated electorates make the need for focus and balance in EU governance ever more important.

European Banking Unity Is No Easy Target New York Times Subscription Required
Jack Ewing and James Kanter (NYT) Nov 14, 2013
As finance ministers gathered in Brussels to discuss how to fix sick banks, a German report indicated why a uniform remedy might be hard to achieve.

Don't Shoot the Messenger
Joseph E. Gagnon (Economist/PIIE) Nov 14, 2013
The McKinsey report on the distributional effects of ultra-low interest rates makes some fascinating observations on who gains and who loses from the decline in interest rates over the past five years. But many readers are likely to draw the false inference that central banks are free to choose between different levels of interest rates and that the politics of winners and losers can or should be a factor in central banks' choices.

China Pledges to Increase Market Role in Economy
Bridges Weekly Trade News Digest, Volume 17, Number 38 Nov 14, 2013
In a landmark move, Chinese leaders announced on Tuesday that the market will now play a "decisive role" in the economy, following a major meeting that is expected to set the tone for the country's policies in the coming decade.

Azevêdo Extends WTO Negotiating Deadline in Bid to Secure Bali Deal
Bridges Weekly Trade News Digest, Volume 17, Number 38 Nov 14, 2013
Negotiators in Geneva have just a few days left to finish putting together a "Bali package" ahead of next month's WTO ministerial conference, after Director-General Roberto Azevêdo announced on Tuesday that he would be extending their original 12 November deadline.

Russia’s New Stagnation
Sergei Guriev (Project Syndicate) Nov 14, 2013
In early November, the Russian government released its latest macroeconomic forecast. It could not have been an easy decision: Whereas President Vladimir Putin campaigned in 2012 on a promise that long-term annual growth would reach 5-6% by the end of his six-year term, the rate is now expected to average just 2.8% from 2013 to 2020.

Delusional Germany
Marcel Fratzscher (Project Syndicate) Nov 14, 2013
Germany is turning against Europe, exemplified in the rise of an openly anti-euro political party and widespread opposition to the ECB's measures to support the eurozone and stabilize financial markets. Three illusions are responsible for the German public’s growing rejection of European integration.

Are exchange rates predictable?
Barbara Rossi (VoxEU) Nov 14, 2013
Predicting exchange rates is still an inexact science. Economic models perform poorly, and a plethora of alternative methods have been attempted. This column guides the reader through the state of the art, reviewing various predictors, models, and data specifications. Despite a large and divergent literature chasing this holy grail, the toughest benchmark remains the random walk without drift.

Assessing leverage through flow data
Javier Villar Burke (VoxEU) Nov 14, 2013
This column discusses the concept of leverage, its components and how to measure and monitor it. It proposes the marginal leverage ratio – a valuable supplement to the traditional absolute leverage ratio – as an early warning tool to signal episodes of excessive leverage and to determine if and how banks deleverage. By capturing the dynamics of leveraging-deleveraging cycles better than the absolute leverage ratio, the marginal leverage ratio provides an indication of risk that a stable absolute leverage ratio can conceal.

Actually, Economists Can Predict Financial Crises
Mak Buchanan (Bloomberg) Nov 15, 2013
Economists have long argued that they shouldn’t be expected to predict crises, such as the one that almost sank the global economy five years ago.

Rethinking International Institutions
Pascal Lamy and Ian Goldin (Project Syndicate) Nov 15, 2013
Current ecological, health, economic, and cyber threats highlight the need for international institutions to step up and protect the global commons. Unfortunately, the international institutions that we have inherited from the mid-twentieth century are no longer up to the task.

My Best Investment
Dato Sri Dr. Tahir (Project Syndicate) Nov 15, 2013
The Global Fund to Fight AIDS, Tuberculosis, and Malaria has brightened the futures of hundreds of thousands of children across Africa and Asia – a heroic achievement that should make donor countries’ citizens proud. But governments should not be the Global Fund's only financial backers.

Firms trade, not countries
Andrew B. Bernard, Andreas Moxnes & Karen-Helene Ulltveit-Moe (VoxEU) Nov 15, 2013
Discussions of international trade often focus on aggregate trade flows, but it is firms that trade, not countries. This column presents evidence from Norwegian export data showing that larger exporters have more customers and greater dispersion in customer size. Moreover, exporters with many customers tend to sell to importers with few suppliers. These stylised facts are captured by a model in which finding a buyer is costly. The model’s prediction that export responses are amplified in destinations with less buyer dispersion is confirmed in the data.

Inflation expectations and the missing disinflation
Olivier Coibion & Yuriy Gorodnichenko (VoxEU) Nov 15, 2013
During the Great Recession, advanced economies have not experienced the disinflation that has historically been associated with high unemployment. This column shows that using consumers’ (as opposed to forecasters’) inflation expectations restores the traditional Phillips curve relationship for recent years. Consumers’ inflation expectations are more responsive to oil prices than those of professional forecasters. The increase in oil prices between 2009 and 2012 may in fact have prevented the onset of pernicious deflationary dynamics.

Trade talks and national security
Vinod K. Aggarwal & Simon J Evenett (VoxEU) Nov 15, 2013
Revelations about American spying in Europe – and the backlash they have produced – threatens ongoing EU-US trade talks. This column assesses that threat, highlighting often-overlooked factors, not the least of which is the poor record of allowing security policy concerns to influence trade relations.

Success of Chinese Leader’s Ambitious Economic Plan May Rest on Rural Regions New York Times Subscription Required
Chris Buckley (NYT) Nov 16, 2013
The success of an economic overhaul could hinge on policy battles over land, money and a fiscal system that has bred public discontent and financial hazards.

Africa’s Green Shoots
Donald Kaberuka (Project Syndicate) Nov 16, 2013
Typhoon Haiyan, which has so ravaged the Philippines, reminds us how vulnerable parts of the world are to the vagaries of weather. Although climate change is not believed to have caused the typhoon, similar levels of devastation will become commonplace if nothing is done to slow the warming of the planet.

Accounting for the great divergence
Stephen Broadberry (VoxEU) Nov 16, 2013
The economic divergence we observe today was existent even a thousand years ago. Thanks to recent work on historical data, we can now trace the economic development of different countries centuries back in the past. This column discusses the roots of the Great Divergence between European and Asian economies. The column argues that divergence is due to the differential impact of shocks that hit economies with different structural features.

The mindfulness business Economist Subscription Required
Economist Nov 16, 2013
Western capitalism is looking for inspiration in eastern mysticism.

Europe needs to try unconventional policy Financial Times Subscription Required
Wolfgang Münchau (FT) Nov 17, 2013
The eurozone needs all the help – if Mario Draghi, the ECB president, wants to make a real difference, he should contemplate quantitative easing.

Sharing knowhow crucial to Mexican growth Financial Times Subscription Required
John Authers (FT) Nov 17, 2013
Country’s base of transferable knowhow will not translate into growth unless politicians can break its oligarchic rigidity and become more competitive.

Playing to the cheap seats Financial Times Subscription Required
Stephen Foley (FT) Nov 17, 2013
Hedge funds are moving downmarket to tap $27tn-worth of mutual fund business, raising fears that retail investors may be unprepared for a move into more aggressive strategies.

It’s Fed Versus Moody’s for ‘Most Wrong’ Crown
Simon Johnson (Bloomberg) Nov 17, 2013
Who was more wrong in the run-up to the financial crisis of 2008: the Federal Reserve or Moody’s Investors Service? This isn’t an academic question; both organizations are still hugely relevant to shaping the way we see our financial system and the risks it contains. And both are now apparently underestimating the dangers again.

Who Pays When India’s Billionaires Don’t Go Bust?
Pankaj Mishra (Bloomberg) Nov 17, 2013
Last month, the business empire of Eike Batista, once the world’s seventh-richest man and a mascot of economically resurgent Brazil, collapsed. The disaster ought to focus our minds on the perils of credit-fueled economic growth and highly leveraged corporations not just in Brazil but also in other BRICS countries.

Analysts Hail China's Plan to Overhaul Economy New York Times Subscription Required
Bettina Wassener (NYT) Nov 17, 2013
A longer outline has swept away the ambiguity about the initial communiqué from the meeting of top party policy makers.

Debt and growth: No ‘tipping point’
Markus Eberhardt & Andrea F Presbitero (VoxEU) Nov 17, 2013
The idea that there is a common tipping point in the relationship between public debt and economic growth is still widespread. However, this is likely due to a misinterpretation of the existing evidence. Once we allow for the relationship between debt and growth to be country-specific, there is limited evidence supporting the presence of a within-countries debt threshold.

Democracy in Africa
Thorvaldur Gylfason (VoxEU) Nov 17, 2013
Based on statistical measures of different degrees of democracy vs. autocracy, this article briefly reviews the progress of democracy around the world during the past 212 years, and places democratic developments in Africa since 1960 in that context. Democracy is positively associated with education, which in turn is associated with lower fertility and greater longevity. Democracy is also associated with reduced corruption. Together, these effects suggest democracy should be good for growth – a hypothesis that is borne out by the data.

S Korean groups: Needed on the home front Financial Times Subscription Required
Simon Mundy (FT) Nov 18, 2013
The chaebol, conglomerates that helped lift the country out of poverty, are now creating more opportunities abroad than domestically.

Investment is Germany’s big problem Financial Times Subscription Required
Marcel Fratzscher (FT) Nov 18, 2013
The economic challenge for the new government is to reduce the private investment gap, even though it is tempting to turn a blind eye.

Attack on German economic boom will fail Financial Times Subscription Required
Tony Barber (FT) Nov 18, 2013
As certain as day follows night, nothing will come of the European Commission’s ‘in-depth analysis’ of the German surplus.

In the Middle of Mexico, a Middle Class Is Rising New York Times Subscription Required
Damien Cave (FT) Nov 18, 2013
In Guanajuato, Mexico, foreign investment and local enrichment is creating a young, upwardly mobile middle class.

Rigidity of global supply chains
Masahisa Fujita (VoxEU) Nov 18, 2013
A major feature of globalisation in the last decades has been the emergence of global supply chains, especially in Asia. This column explains how supply chains may increase the risks of shock contagion across countries. It shows how the earthquake and tsunami in Japan, and the floods in Thailand had ripple effects on the Japanese automobile industry across countries. It suggests that greater international cooperation, such as the development of sister industrial clusters, is one way to mitigate the risks.

Trade unions in Europe
Claus Schnabel (VoxEU) Nov 18, 2013
Though trade union density and its trends vary considerably across Western European countries, in most of them the current density has fallen down in comparison to 30 years ago. This column reviews some explanations for the decline of unionisation and discusses some of the challenges unions need to face. Union membership could still be stabilised because it is embedded in social, economic, and political structures of the western European countries.

Yellen shows Fed to stay markets’ friend Financial Times Subscription Required
Mohamed El-Erian (FT) Nov 19, 2013
Investors may well need an increasingly differentiated approach if they are to continue to benefit from the ‘central bank put’.

Why the future looks sluggish Financial Times Subscription Required
Martin Wolf (FT) Nov 19, 2013
The glut of savings has become a constraint on current demand – but it is connected to weak investment, so also implies slow growth.

Freeing Europe’s Small Businesses New York Times Subscription Required
Jeffrey Anderson and John Ott (NYT) Nov 19, 2013
Over-regulation is impeding job growth and slowing economic recovery.

Are Bubbles Caused by Psychological Problems?
Frank Shostak (Mises Daily) Nov 19, 2013
According to the popular way of thinking, bubbles are an important cause of economic recessions. The main question posed by experts is how one knows when a bubble is forming. It is held that if the central bankers knew the answer to this question they might be able to prevent bubble formations and thus prevent recessions.

Two Schools of Thought on China - Both Wrong
Eric X. Li (YaleGlobal) Nov 19, 2013
China’s Communist Party has concluded its Third Plenum, and analysts in the West scrutinize details, hoping to pinpoint the direction of the world’s largest emerging power. Two theories on China’s rise have dominated since 1989, and both are wrong.

Growth still is good for the poor
David Dollar, Tatjana Kleineberg & Aart Kraay (VoxEU) Nov 19, 2013
A key Millennium Development Goal was to halve the number of people living on less than $1.25 a day. This was met five years ahead of schedule, and the World Bank is promoting a new goal of ‘shared prosperity’ defined in terms of the growth rate of incomes in the bottom 40% of households. This column discusses research showing that there is a strong one-for-one relationship between overall growth and average income growth in the poorest quintiles. Overall growth is thus still important.

China will keep its leaders busy Financial Times Subscription Required
David Pilling (FT) Nov 20, 2013
In setting out ‘the Decision’, the country’s leaders have set themselves a formidable task that will have far-reaching consequences.

Greece sheds incentives for reform Financial Times Subscription Required
Peter Spiegel (FT) Nov 20, 2013
Stand-offs between Athens and bailout monitors have become so commonplace that they have stopped registering on most official radars.

Germany’s “Dangerous” Current Account Surplus
Frank Hollenbeck (Mises Daily) Nov 20, 2013
The US government and the European Commission (EC) recently slammed Germany for running large current account surpluses.

Wine, Cheese And Trade: What’s in a Name?
Sabine Muscat (Globalist) Nov 20, 2013
European gourmet food, geographical indications and transatlantic trade.

India: Modi muscles in Financial Times Subscription Required
Victor Mallet and Lionel Barber (FT) Nov 21, 2013
Bitter enemies and fanatical supporters alike are mesmerised by the politician. But even those who admire him admit he could be a risky choice for prime minister.

America should share its shale gas bounty Financial Times Subscription Required
Bill Richardson (FT) Nov 21, 2013
The US has everything to gain by extending the benefits of its newfound energy reserves to hungry markets in Europe and elsewhere.

Trade trumps missiles in power plays Financial Times Subscription Required
Philip Stephens (FT) Nov 21, 2013
China is waking up to realisation that it is being left behind in a series of negotiations in which the west is striving to hold on to economic power.

WTO Ag Talks: Negotiators Close to Final Bali Deal
Bridges Weekly Trade News Digest, Volume 17, Number 39 Nov 21, 2013
Trade officials are close to clinching a final deal on agriculture for the WTO's ninth ministerial conference in Bali, Indonesia, sources confirmed to Bridges this week. However, a few key issues remain to be resolved in the coming days and could still affect the final outcome for the December conference, they warned.

ITA Expansion Talks Make Final Bali Push; GPA Ratification Set for 2014
Bridges Weekly Trade News Digest, Volume 17, Number 39 Nov 21, 2013
Talks to finalise a list of products to add to the WTO's Information Technology Agreement (ITA) have now been extended through the end of this week, in the hopes of giving participants more time to clinch a deal ahead of next month's ministerial conference in Bali, Indonesia. Separately, sources confirm that the process to bring the revised WTO Government Procurement Agreement into force – while making some headway in recent weeks – will not be completed ahead of the December gathering.

US-EU Trade Talks "Back on Track," Officials Say
Bridges Weekly Trade News Digest, Volume 17, Number 39 Nov 21, 2013
Negotiators for the planned US-EU trade agreement concluded their second round of talks last week in Brussels, with officials from both sides reporting "good and steady progress." With the discussions reportedly back on their original timetable after a brief delay in October, both parties are now aiming to make enough headway in the talks to hold a political review in early 2014.

EU, Japan Aim to Speed Up Trade Talks
Bridges Weekly Trade News Digest, Volume 17, Number 39 Nov 21, 2013
EU and Japanese officials are hoping to speed up negotiations for a bilateral trade pact, officials said this week, ahead of a key April deadline for reviewing the talks' progress.

CEO Pay: A Swiss Rebellion
Beat Guldimann & Stephan Richter (Globalist) Nov 21, 2013
What will be the ramifications of a Swiss referendum on executive compensation?

Bretton Woods
Jamie Martin (LRB) Nov 21, 2013
Over the course of several meetings from the summer of 1942, John Maynard Keynes and his American counterpart, Harry Dexter White, traded blows over how to rewrite the monetary rules of the international economy. They made curious sparring partners. White remarked to the British economist Lionel Robbins, ‘your Baron Keynes sure pees perfume.’

Dreams of a Different China
Ian Johnson (NYRB) Nov 21, 2013
China’s leader, Xi Jinping, has declared, “I think that achieving the great rejuvenation of the Chinese nation is the greatest Chinese dream in modern times.” Xi’s definition of China’s dream has caused much discussion. While the slogan seems to directly mimic the term “American dream,” it is almost the antithesis of that dream of life, liberty, and the pursuit of happiness.

Which India Matters?
Pankaj Mishra (NYRB) Nov 21, 2013
Jagdish Bhagwati and Arvind Panagariya claim that India has been transformed “from a basket case into a powerful engine of growth.” They are convinced that faster growth and freer markets remain the best remedy for poverty, inequality, pollution, and ill-health. A contrasting view—that “there is something defective in India’s ‘path to development’”—and a very different list of priorities appear in Amartya Sen and Jean Drèze’s An Uncertain Glory: India and Its Contradictions.

Whatever happened to Japanese electronics?
Steven K Vogel (AT) Nov 22, 2013
The same control structures that helped Japanese firms take a global lead in electronics have become a liability as worldwide manufacturing patterns change and fluid labor markets threaten the country's dwindling market share.

Growing out of corruption
Jie Bai, Seema Jayachandran, Edmund J. Malesky and Benjamin Olken (VoxEU) Nov 22, 2013
Eliminating corruption is a central policy goal of policymakers around the globe. It is known that corruption is a barrier to economic development because it increases the costs and risk of business activity, and deters investment. This column discusses a new study analysing the opposite causal relationship – the effect of economic growth on corruption. Both theoretical and empirical evidence show that economic growth causes the amount of corruption to fall.

You break it, you own it Economist Subscription Required
Economist Nov 23, 2013
America should give global banking rules—and Europe’s dilatory regulators—one last chance

A World in Change Requires a Change in Solutions: A Roadmap for Going Global
Craig A. Dawson (PIMCO) Nov 23, 2013
An essential function of asset managers is to develop new and innovative investment solutions that not only meet but, more importantly, anticipate and respond to the evolving market conditions and changing client needs. The frequency with which new investment strategies and solutions have been developed in recent years reflects the speed at which the industry has been required to respond to the rapidly changing and dynamic global investment landscape since the start of the financial crisis in 2008.

Macro imbalances and culture
Sascha Bützer, Christina Jordan & Livio Stracca (VoxEU) Nov 23, 2013
Since the advent of the Eurozone sovereign-debt crisis, economic commentators have drawn attention to macroeconomic imbalances within the Eurozone. This column presents evidence on the link between macroeconomic imbalances and differences in culture – or more specifically, interpersonal trust. A conservative estimatation suggests that a one standard-deviation increase in trust reduces macroeconomic imbalances by about a quarter of a standard deviation. Moreover, differences in interpersonal trust can explain a fifth of the variation in intra-Eurozone imbalances.

Does policy uncertainty reduce economic activity?
Kyle Handley & Nuno Limão (VoxEU) Nov 23, 2013
The impact of policy uncertainty on economic activity is potentially important, but controversial because it is hard to identify and quantify. Recent research provides a framework to identify the impacts of policy uncertainty on firm decisions, and finds it has strong effects in the context of international trade. China’s WTO accession secured its most-favoured nation status in the US, and the evidence shows this reduction in uncertainty can explain a significant fraction of its export boom to the US.

Europe will struggle even to disintegrate Financial Times Subscription Required
Wolfgang Münchau (FT) Nov 24, 2013
All the radical options – a dissolution of the eurozone, a formal default or renationalisation – require a consensus that does not exist.

Where India has an advantage over China Financial Times Subscription Required
James Crabtree (FT) Nov 24, 2013
McKinsey’s ‘Reimagining India’ portrays a country which, for all its flaws, is at least able to discuss its future in full public view.

China at a crossroads
Robert J. Samuelson (WP) Nov 24, 2013
Its growth is in peril, and so it its economy.

China’s Xi Is No Gorbachev
Nicolas Berggruen and Nathan Gardels (Bloomberg) Nov 24, 2013
Western analysts have been scratching their heads trying to figure out if China’s new leader, Xi Jinping, can properly be labeled a “reformer.”

An Independent Scotland’s New Currency
Bloomberg View Nov 24, 2013
In less than a year, Scotland will hold a referendum on whether to remain part of the United Kingdom. Soon after that, it may face an even more consequential decision: what to call its new currency.

Design of preferential trade agreements
Leonardo Baccini, Andreas Dür & Manfred Elsig (VoxEU) Nov 24, 2013
Preferential trade agreements have been proliferating since the 1990s. However, research that focuses on differences of design of such agreements is scarce. This column analyses whether this is the case by exploring the effect of depth of preferential trade agreements on trade flows. It concludes that deep agreements have larger trade flow effects than shallow ones.

Oil industry sums do not add up Financial Times Subscription Required
Mark Lewis (FT) Nov 25, 2013
Behind the hubbub of market hype about a new age of oil abundance, the toil for oil is in fact now more arduous and back-breaking than ever

Chinese Reform, U.S. Stasis New York Times Subscription Required
Stephen S. Roach (NYT) Nov 25, 2013
Changes suggested by the Third Plenum could be useful for America’s ailing economy.

Currency wars and the euro
Jens Nordvig (VoxEU) Nov 25, 2013
Having promised to do ‘whatever it takes’ to ensure the survival of the euro, the ECB now faces the problem of record high unemployment combined with a strong currency. There is accumulating evidence that the ECB is more willing to fight currency appreciation than the Bundesbank would have been. Capital inflows have been a key source of recent upward pressure on the euro. Should this continue, the ECB may need to intervene more aggressively in order to promote economic recovery in the Eurozone.

Build For the Future (Part I)
Daniel Stelter (Globalist) Nov 25, 2013
Ten steps Western economies must take. Part one focuses on education, asset bases and labor scarcity.

Build For the Future (Part II)
Daniel Stelter (Globalist) Nov 25, 2013
Ten steps Western economies must take. Part two focuses on immigration, government efficiency, use of raw materials and global cooperation.

Build For the Future (Part III)
Daniel Stelter (Globalist) Nov 25, 2013
Ten steps Western economies must take. Part three focuses on political action needed to handle the effects of major development waves, globalization and long-term debt burdens.

Dark side of housing-price appreciation
Indraneel Chakraborty, Itay Goldstein and Andrew MacKinlay (VoxEU) Nov 25, 2013
Higher asset prices increase the value of firms’ collateral, strengthen banks’ balance sheets, and increase households’ wealth. These considerations perhaps motivated the Federal Reserve’s intervention to support the housing market. However, higher housing prices may also lead banks to reallocate their portfolios from commercial and industrial loans to real-estate loans. This column presents the first evidence on this crowding-out effect. When housing prices increase, banks on average reduce commercial lending and increase interest rates, leading related firms to cut back on investment.

Movement in Europe needs to be less free Financial Times Subscription Required
David Cameron (FT) Nov 26, 2013
Vast migrations caused by income disparities extract talent from countries that need to retain their best people and place pressure on communities.

Investors misprice political risk Financial Times Subscription Required
Ralph Atkins (FT) Nov 26, 2013
Political risks is likely to emerge as a bigger theme during 2014 as the US Federal Reserve starts to scale down its asset purchases.

China's Coming One-Child Crisis Wall Street Journal Subscription Required
Nicholas Eberstadt (WSJ) Nov 26, 2013
A minor tweak in Beijing's population controls will not prevent a demographic crash.

Foreign-currency loans and systemic risk in Europe
Pinar Yesin (VoxEU) Nov 26, 2013
Before the onset of the financial crisis, European households and non-financial firms were borrowing heavily in lower-yielding foreign currencies to finance their home mortgages or business investments, even though they did not necessarily have a steady income in the currency concerned. Five years after the financial crisis, banks still hold a substantial amount of foreign currency loans to unhedged borrowers on their balance sheets. This column quantifies the systemic risk that these foreign currency loans pose to the European banking sector.

On the impossible trinity
Stephen Grenville (VoxEU) Nov 26, 2013
The views and theories on the impossible trinity are conflicting. This column discusses some of the theories and their potential drawbacks. It points out that the impossible trinity has policy relevance for advances economies because their currencies are often close substitutes, and exchange rates follow expectations. For emerging economies, however, the policies implied by the impossible trinity could not be sustained due to the instability of their financial markets.

Europe's re-industrialisation: The gulf between aspiration and reality Adobe Acrobat Required
Eric Heymann and Stefan Vetter (DB Research) Nov 26, 2013
The EU Commission's stated aim of increasing the industrial sector's share of gross value added in the European Union to 20% by 2020 is extremely ambitious and, in our view, cannot be achieved in the foreseeable future. Nonetheless, it sends out the right political signal that Europe is to be strengthened as an industrial location. Rather than focusing on purely industry-specific measures, the attainment of this goal will ultimately require supportive conditions for companies – those from both the industrial and service sectors – to ensure that they can compete against non-European rivals. This in turn will necessitate investment in education, research and infrastructure as well as a benign investment climate, affordable energy prices and intelligent regulation.

Time banks kicked the easy money habit Financial Times Subscription Required
Patrick Jenkins (FT) Nov 27, 2013
Without the fixes provided by the European Central Bank, many bankers reckon that near normal funding would have resumed.

China’s Limited Influence New York Times Subscription Required
Ian Bremmer (NYT) Nov 27, 2013
Its economic clout is growing, but few countries truly depend on Beijing.

The World’s Most Over-Optimistic Country
Akash Kapur (VoxEU) Nov 27, 2013
What a difference a couple of months can make. In September, India’s growth rate had slowed to its lowest in a decade, inflation was high, and the rupee ranked as one of the worst-performing currencies in Asia.

Monetary policy will never be the same
Olivier Blanchard (VoxEU) Nov 27, 2013
The global crisis changed the face of monetary policy. This column, written by the IMF’s chief economist, reviews the main changes. It draws on contributions to a recent IMF conference on the topic.

Putin in denial about Russia’s enemy within Financial Times Subscription Required
Ben Judah (FT) Nov 28, 2013
The president must break the cycle of corruption, heroin and HIV gripping the country. His war on imaginary enemies only makes matters worse.

Bali to showcase WTO’s changing dynamics Financial Times Subscription Required
Shawn Donnan (FT) Nov 28, 2013
With the organisation on course for the first global trade deal in its history, the traditional ‘north-south’ division among members is being eroded.

WTO Ministerial: Bali Package Hanging in the Balance
Bridges Weekly Trade News Digest, Volume 17, Number 40 Nov 28, 2013
Geneva-based preparations for the WTO's Ninth Ministerial Conference were declared at an impasse earlier this week, just days before the conference is meant to kick off in the Indonesian island province of Bali. This Bridges Special Edition examines in-depth the various Doha Round topics that have dominated the Geneva trade discussions in the lead-up to next week's conference, outlining their history, respective mandates, and current state of play.

Trade Facilitation: Reducing Border Inefficiencies
Bridges Weekly Trade News Digest, Volume 17, Number 40 Nov 28, 2013
This backgrounder provides an update on some of the main advances reached in the trade facilitation negotiations over the last few months before the 26 November impasse.

Agriculture: Small Steps Forward on Farm Trade?
Bridges Weekly Trade News Digest, Volume 17, Number 40 Nov 28, 2013
A series of agriculture-specific proposals, put forward by two different developing country coalitions, have been under consideration these past several months for the Bali conference. This backgrounder outlines where these issues stood ahead of the ministerial.

Special & Differential Treatment: Ensuring Flexibilities for Developing Countries
Bridges Weekly Trade News Digest, Volume 17, Number 40 Nov 28, 2013
This backgrounder provides a recap of the Special & Differential Treatment component of the Bali preparations, in particular the advances seen with the proposed Monitoring Mechanism.

LDC Issues: Poor Countries Look for Progress in Bali
Bridges Weekly Trade News Digest, Volume 17, Number 40 Nov 28, 2013
Least developed country members had outlined four areas as "priority issues" for consideration in Bali. This backgrounder provides a brief history on these topics and an update on the draft texts reached before the Geneva process ended.

Debt crises forewarned: Stochastics matter
Jasper Lukkezen, Hugo Rojas-Romagosa & Casper van Ewijk (VoxEU) Nov 28, 2013
The sustainability of government debt cannot be determined with certainty. This column presents an early warning indicator to predict sovereign debt crises using a stochastic simulation framework. What counts is the risk of a significant rise in public debt, more so than the expected evolution of the debt level. A key determinant of the indicator is the quality of budgetary policies in controlling the government budget in the event of adverse shocks.

Biggest-city agglomeration: Historical trends
Takatoshi Tabuchi (VoxEU) Nov 28, 2013
Two important long-run trends in economic geography are steady urbanisation and agglomeration to the big cities. This column presents recent research on population trends focusing on fixed regions over time. In seven of the eight countries studied, the region containing the largest metropolitan area significantly increased in population share at the expense of the rest of the country over the past few centuries. A ‘new economic geography’ model with multiple, asymmetric regions can replicate this new stylised fact.

The new market-risk regulations
Jon Danielsson (VoxEU) Nov 28, 2013
Basel III is coming into focus. The fundamental logic of the regulatory changes seems sensible, but the devil is in the detail – empirical implementation. This column discusses a detailed quantitative study, incorporating analytical calculations, Monte Carlo simulations and results from observed data. It concludes that the Basel Committee has taken three and a half steps backwards and half a step forward. If implemented, the framework is likely to lead to less robust risk forecasts than current methodologies.

Government and spatial inequality
Roberto Ezcurra & Andrés Rodríguez-Pose (VoxEU) Nov 29, 2013
Does government quality affect the size and evolution of regional inequality? This column approaches this question using regional data for 46 countries with different degrees of economic development over the period 1996-2006. We find that there is a strong negative association between quality of government and within-country disparities. Countries with better quality of government register lower levels of spatial inequality.

The euro and price convergence
Alberto Cavallo, Brent Neiman & Roberto Rigobon (VoxEU) Nov 29, 2013
During the recent turmoil in the Eurozone, little attention has been paid to one of the euro’s founding objectives – price convergence. This column argues that the euro has in fact been very successful in this regard. In a study of the pricing behaviour of Apple, IKEA, H&M, and Zara, the authors find that price dispersion is 30–50% lower for countries in a currency union than for those with a fixed exchange rate.

Oil prices and food prices
Christiane Baumeister & Lutz Kilian (VoxEU) Nov 30, 2013
Recently, there has been great concern among policymakers worldwide about rising food prices and increased food-price volatility. It is widely believed that oil and food prices have become closely linked after 2006, owing in part to a shift in US biofuel policies. This column presents evidence that challenges this conventional wisdom.

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