Oil supply: The cartel’s challenge
Ajay Makan and Neil Hume (FT) Dec 1, 2013
The shale gas revolution and the easing of sanctions against Iran will test Opec’s organisational abilities to curb production and buoy prices.
Wealth of detective work on China’s data
John Authers (FT) Dec 1, 2013
Reforms announced at the Communist party’s plenum are an invitation to analysis and to a renewed push for further statistical detective work.
Consumption and credit constraints during financial crises
Petra Gerlach-Kristen, Rossana Merola & Conor O'Toole Dec 1, 2013
Households tend to smooth their consumption and that’s why expenditures do not display a large variability over time. However, the recent financial crisis has been associated with a large decrease in consumption in certain countries. This column presents evidence that a drop in income during a crisis leads to a lower short-run consumption. Furthermore, micro data analysis shows that some households are affected more than others. Thus, policy recommendations can be made only after taking household heterogeneity into account.
Central banks need a new plan for 2014
John H. Makin (AEI) Dec 1, 2013
Fear of quantitative easing–generated inflation has veiled the actual trend of falling inflation (disinflation) in the United States and Europe. Europe is leading the disinflation trend, which could reduce investment, spending, lending, and employment in the eurozone. Europe's accelerating movement from disinflation to negative inflation should encourage the Fed to prioritize its role of ensuring price stability.
Lessons from Asia’s reversal of fortunes
Gwen Robinson (FT) Dec 2, 2013
In the greatest irony perhaps, Myanmar’s emergence on the international stage is now stealing some of Thailand’s thunder.
Investor exuberance is still rational
Richard Madigan (FT) Dec 2, 2013
In 1999, the forward price/earning multiple on the S&P 500 was in excess of 24 times; currently, it is about 15 times.
WTO: Up in the air
Shawn Donnan (FT) Dec 2, 2013
A failure to reach an agreement in Bali would threaten the future of multilateral trade.
Deflating German Excuses
Simon Tilford and John Springford (NYT) Dec 2, 2013
Germany's trade surplus beyond Europe adds to pressure on the euro zone.
The U.S. Abandons the World's Poor at the WTO
Kevin P. Gallagher (Globalist) Dec 2, 2013
Does allowing India and other poor countries to help farmers and consumers really distort global markets?
Europe Really Doesn't Like Ratings Agencies
Matt Levine (Bloomberg) Dec 2, 2013
One worry that people have about ratings agencies is that they have conflicts of interest in which they are paid by bond issuers to rate bonds. But not by European governments. Which is its own conflict? Maybe?
Finance: Main Street fights back
Gina Chon (FT) Dec 3, 2013
America’s community banks are wielding newfound political clout to try to hammer Wall Street and lobby for tiered regulation.
Rising bond yields herald China’s transition
Simon Rabinovitch (FT) Dec 3, 2013
The rise in yields over the past six months is one of the clearest signs that the financial system is finally operating a little more like those in developed economies.
The Human Wealth of Nations
WSJ Dec 3, 2013
The latest Program for International Student Assessment global education scores are a warning to both parties.
The Coming Global Wealth Tax
Romain Hatchuel (WSJ) Dec 3, 2013
Indebted governments may soon consider a big one-time levy on capital assets.
Agglomeration and exports
Banri Ito, Zhaoyuan Xu & Naomitsu Yashiro (VoxEU) Dec 3, 2013
Fixed and sunk costs are widely accepted as important determinants of export behaviour. This column argues that such costs may be shared by agglomerated collections of firms, and presents evidence of agglomeration’s effects on exporting in China. Agglomeration is more effective in low-tech sectors and land-locked areas. Surprisingly, the effect of agglomeration is different for indigenous and foreign firms.
India is out of the woods but far from safe
David Pilling (FT) Dec 4, 2013
The starry-eyed optimism of just a few years ago when Indians talked about growing faster than China is as though from another era.
Innovation requires state support
Mariana Mazzucato (FT) Dec 4, 2013
Growth and innovation require the kind of committed finance that lay behind Silicon Valley companies, and is today behind the likes of Huawei.
US faces cash flood from world’s savers
Charles Dumas (FT) Dec 4, 2013
Too much saving means too much investment for the world as a whole: no export surplus can serve as a safety valve, as it can for individual countries.
Time to create a new oil major
Nick Butler (FT) Dec 4, 2013
Given decent assets and good management a competitor would attract capital because energy remains a fundamentally strong business which will not go away.
Iran’s Economic Crossroads
Vali R. Nasr (NYT) Dec 4, 2013
Tehran is weighing the relative benefits of deal-making and economic reform, and is experimenting with both.
The Future of OPEC
Stratfor Dec 4, 2013
The prospect of revitalized oil production in Iraq and Iran may add to tensions between those two countries and Saudi Arabia over export quotas. On Dec. 4, representatives of the Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna to discuss a number of topics. OPEC is facing two challenges. First, OPEC's historically biggest consumer -- the United States -- is rapidly increasing its own domestic production. At the same time, OPEC must deal with plans to expand oil production envisioned both by Iraq and Iran, which could lead to lower prices than the cartel desires. Ultimately, however, emerging markets in Asia will set global demand, and their energy thirst will determine the scale of the problem OPEC faces
WTO urged to tread carefully on water
Carey L Biron (AT) Dec 4, 2013
As what could be final negotiations towards a global trade agreement under the World Trade Organization get underway in Indonesia, negotiators are being urged to specify that water resources cannot be treated as commodities. Big business has other views on the matter.
ICT benefits some and hurts others
Nicholas Bloom, Luis Garicano, Raffaella Sadun & John Van Reenen (VoxEU) Dec 4, 2013
The profound impact of the ICT revolution on the job market have been widely studied, but the effects of different types of technology can be heterogeneous and even contradictory. This column presents evidence that technologies providing access to stored data tend to empower front line workers, while communicative technologies put more power in the hands of managers.
High-quality exports: Macro implications
Julien Martin & Florian Mayneris (VoxEU) Dec 4, 2013
While quality upgrading is always viewed positively in both policy and academic circles, little is known about the macro implications for countries of specialising in high-end varieties. This column presents evidence that high-end variety exporters are less sensitive to trade costs. This implies a greater geographic diversification of exports, which compensates for their higher sensitivity to demand shocks and smoothes aggregate volatility. It also increases export growth when business opportunities arise in distant markets.
Rebalancing and belt-tightening
FT Dec 5, 2013
The risk from a consumer-led recovery is that a better fiscal position will be accompanied by rises in already stratospheric household indebtedness.
Future demands new-style growth
Johan Galtung (AT) Dec 5, 2013
Americans beware: the global economy is heading East and South, with China leading the way in showing how to improve social conditions along with production. That future means growth with distribution, not stagnation with inequality.
To Save Liberal Trade, Reboot the WTO
Clive Crook (Bloomberg) Dec 5, 2013
When the world’s trade ministers wrap up their meeting in Bali this week, we’ll know whether the World Trade Organization is seriously injured (success) or critically injured (failure). In either case, governments face a clear imperative: The WTO can no longer perform its mission and must be reinvented.
The WTO’s Last Stand in Bali
Paul Blustein (Bloomberg) Dec 5, 2013
In speeches, press briefings and published commentaries, proponents of global free markets are proclaiming that a really big deal is on the table this week at the World Trade Organization meeting in Bali, Indonesia.
Peter Pomerantsev (LRB) Dec 5, 2013
There are any number of paths into sistema, the liquid mass of networks, corruptions and evasions which has ordered the politics and social psychology of Russian civilisation since tsarist times. My initiation took the form of a driving test. I would never pass, my instructor explained, if I didn’t pay a bribe. When I protested that I wanted to pass the test for real he said the traffic police would fail me until I paid up. I gave him the money and he made the deal. More
The Enduring Ratings Racket
WSJ Dec 6, 2013
Regulators sue the credit raters whose profit margins they guarantee.
The dollar’s international status
Jeffrey Frankel (VoxEU) Dec 6, 2013
Except for the period 1992-2000, the dollar’s role as an international currency has been slowly declining since 1976. Since 2010, there has been another pause in this decline – somewhat surprising, given that the financial crisis began in the US, and given Congress’ recent flirtations with default. The dollar’s resilience as the world’s reserve currency is due to a lack of good alternatives – the euro has its own problems, and the yuan only accounts for 2.2% of forex transactions.
Historic Bali Deal to Spring WTO, Global Economy Ahead
Bridges Daily Update Dec 7, 2013
Ministers formally signed off on their first multilateral trade deal in nearly two decades on Saturday morning in Bali, after several suspenseful days – and nights – of meetings that had often seemed too close to call.
Asset-price booms and the composition of capital inflows
Eduardo Olaberría (VoxEU) Dec 7, 2013
Policymakers have long been concerned that large capital inflows are associated with asset-price booms. This column presents recent research showing that the composition of capital inflows also matters. The association between capital inflows and asset-price booms is about twice as strong for debt-related than for equity-related investment. Policymakers should therefore pay attention to the composition of capital inflows, since debt-related inflows may still undermine financial stability even if they do not result in an overall current-account deficit.
School league tables: Finn-ished
Economist Dec 7, 2013
The fall of a former Nordic education star in the latest PISA tests is focusing interest on the tougher Asian model instead
Emirates: In a sweet spot
Andrew Parker and Simeon Kerr (FT) Dec 8, 2013
With two-thirds of the world’s people living within eight hours of Dubai, the main challenge to the airline’s growth is the emirate’s infrastructure.
Reasons not to fear superchildren
Sam Freedman (FT) Dec 8, 2013
Pisa tests make grim reading in the west but are only one measure of school performance and the link between education and economic success is unclear.
Inflation should be India’s priority
Ruchir Sharma (FT) Dec 8, 2013
The country appears to be catching the Latin American disease – a destructive combination of rising prices and falling growth.
Mexico Nears an Energy Breakthrough
Mary O'Grady (WSJ) Dec 8, 2013
A proposed change to the nation's law could free private capital to develop the country's vast oil and gas reserves.
Cheer Up: World Growth Is Accelerating
Jim O’Neill (Bloomberg) Dec 8, 2013
Current pessimism about the world economy is overdone. The world’s three biggest economies -- the U.S., China and Japan -- are all in decent shape. Barring a major new deterioration in Europe and unforeseen calamities in the rest of the developing world, a moderate acceleration of global growth looks likely.
Are towns stuck in the wrong places?
Guy Michaels & Ferdinand Rauch (VoxEU) Dec 8, 2013
The world is urbanising quickly but many cities are poorly located. Such misplacement is associated with bad access to the world markets and frequent natural disasters. This column explores historical evidence of French and English towns during the Roman Empire and in the Middle Ages. Path-dependency in the city locations explains the difference in their development and suggests relevant policymaking lessons.
Trade protectionism since the crisis
Georgios Georgiades & Johannes Gräb (VoxEU) Dec 8, 2013
Existing data show that the historically well-documented relationship between growth, competitiveness, and trade protectionism does not hold in the context of the recent financial crisis. This column presents new evidence that this relationship, in fact, holds. G20 governments continue to pursue trade-restrictive policies in a recession, or when their competitiveness deteriorates. This holds for a wide array of trade policies, including ‘murky’ protectionism.
The west is losing faith in its future
Gideon Rachman (FT) Dec 9, 2013
It would be morally dubious to bolster western living standards by ditching a trend that has dragged hundreds of millions out of poverty.
Low inflation is becoming a major headache
Gavyn Davies (FT) Dec 9, 2013
In most countries, headline inflation has been falling significantly since the end of 2011.
How Fed Policy Roils Emerging Markets
Benn Steil and Dinah Walker (WSJ) Dec 9, 2013
Taper talk stirs fresh anxiety, but there will be life after QE3. Some countries, though, will fare better than others.
Greece's Dismal Demographics
Nikos Konstandaras (NYT) Dec 9, 2013
Despite projections of a smaller, older population, there is reason for hope.
The LIBOR scandal and reform
Vincent Brousseau, Alexandre Chailloux & Alain Durré (VoxEU) Dec 9, 2013
In the aftermath of the LIBOR scandal, it is important to re-establish a credible reference rate for the pricing of financial instruments and of wholesale and retail loans. The new candidate must meet the five criteria suggested by the Bank for International Settlements – reliability, robustness, frequency, availability, and representativeness – in all circumstances. This column argues that strengthening governance and/or adopting a trade-weighted reference rate is probably the fastest approach, but not necessarily sufficient for a resilient reference rate in the long run.
Asset managers could blow us all up
Martin Wolf (FT) Dec 10, 2013
The next round of global illiquidity may well derive from foreign currency bonds of non-financial companies of emerging economies.
Return of boom-era debt deals raises alarm
Ralph Atkins (FT) Dec 10, 2013
Are fears of an alphabetic apocalypse caused by price bubbles in complex markets little understood beyond world of finance overdone.
Breaking the Great Firewall
Marcus W. Brauchli and Lee C. Bollinger (WP) Dec 10, 2013
Trade deals with China should insist on protections for journalism, academia and digital information.
Currency War Means Currency Suicide
Patrick Barron (Mises Daily) Dec 10, 2013
What the media calls a “currency war,” whereby nations engage in competitive currency devaluations in order to increase exports, is really "currency suicide."
Bali Boost: WTO Lives, Snatched for Now From Jaws of Defeat
Jean-Pierre Lehmann (YaleGlobal) Dec 10, 2013
Bali agreement, with many promises, is a start, but leadership and reform are required.
FDI in Africa
Holger Görg, Christiane Krieger-Boden & Adnan Seric (VoxEU) Dec 10, 2013
An expansion in the scope of foreign direct investment in sub-Saharan Africa promises to promote development in one of the poorest regions of the world. This column investigates the extent to which working with foreign multinationals enhances the capabilities of African firms. Acting as a supplier to a multinational enterprise improves a firm’s labour productivity, product and process innovation, while buying from a multinational improves only labour productivity. Governments should take advantage of these spillovers by promoting trade.
European Central Bank: Credibility test
Sam Fleming and Alex Barker (FT) Dec 11, 2013
Having botched previous banking health checks, the eurozone has an opportunity to create one regulator to help glue the single currency together.
A safer system is now within our grasp
Paul Volcker and John Reed (FT) Dec 11, 2013
We have come too close to the brink of financial disaster to turn our backs on a measure that will reduce the risks of leverage and underpin the system.
No one is immune from Beijing’s power
David Pilling (FT) Dec 11, 2013
Foreign companies once had much leverage, but the new reality seems to be that China, the world’s biggest consumer market, now has the whip hand.
Risk from bubble trouble is overblown
Alexander Friedman (FT) Dec 11, 2013
Equity valuations are probably now fair to slightly high. Investors should not expect a repeat of the expansion in multiples that led recent performance.
Big Change for China and the World
Didi Kirsten Tatlow (NYT) Dec 11, 2013
Is China, emboldened by its economic power, asserting itself in ways that mean the world is at an “inflection point,” as Vice President Joseph R. Biden Jr. said in Beijing last week?
China: the politics of economic adjustment
Michael Pettis (AT) Dec 11, 2013
Political turmoil in China over the past two years came as something of a surprise to many. Yet historical precedents suggest it should have surprised no one, as the country had exhausted its growth model of 30 years.
Soft Power Doesn't Exist
Denis MacShane (Globalist) Dec 11, 2013
A decade after "soft power" came to the fore, it is time to assess its effectiveness.
The Need for Hard Diplomacy
Denis MacShane (Globalist) Dec 11, 2013
The need for professional diplomacy has never been greater, even in an era of softer “cultural diplomacy."
The Rise of the Resource Curse
William Pesek (Bloomberg) Dec 11, 2013
By 2030, roughly half of the world's economies will become giant filling stations for developing superpowers. Instead of the world moving toward greater transparency and freer markets, we could see rising corruption levels and greater income inequality.
Europe faces a bigger threat than German caution
Philip Stephens (FT) Dec 12, 2013
The continent suffers from an excess of caution in response to globalisation, and a chronic aversion to risk stunts its decision-making.
Time to take Chinese creativity seriously
John Howkins (FT) Dec 12, 2013
To say China is a nation of copiers is only half-true.
Forget the Fed, prepare for Tokyo ‘taper’
Gillian Tett (FT) Dec 12, 2013
The Bank of Japan has recently conducted policies that make the Fed’s experiments look almost tame and have had a big impact on Asian markets.
The Mexican Model
WSJ Dec 12, 2013
A new energy law will be a boon to all of North America.
TPP Talks Report Progress, While Missing Year-End Target
Bridges Weekly Trade News Digest, Volume 17, Number 41 Dec 12, 2013
The twelve countries negotiating the Trans-Pacific Partnership Agreement will be extending their talks into 2014, ministers announced on Tuesday, despite having achieved "substantial progress" during an intensive series of talks in Singapore.
Success in Bali Sparks Questions over Doha, WTO Future
Bridges Weekly Trade News Digest, Volume 17, Number 41 Dec 12, 2013
Trade ministers meeting in Bali last week formally agreed on the WTO’s first multilateral pact in nearly 20 years, in a feat that has been broadly welcomed as an "historic" achievement. In addition to the economic benefits that such a deal could provide – with some estimates placing its value at US$1 trillion in global GDP – the news has also sparked renewed interest and debate over what 2014 may bring for the international organisation.
Fallout Escalates From Ukraine’s EU Trade Pact Reversal
Bridges Weekly Trade News Digest, Volume 17, Number 41 Dec 12, 2013
Three weeks after Ukraine withdrew from signing a trade deal with the EU, the political crisis it sparked continues to grip the country. Leaders from Kiev and Brussels were originally set to ink an association agreement, including a free trade pact, in late November at the third Eastern Partnership (EaP) summit in the Lithuanian capital of Vilnius.
Why Only the Foolhardy Scorn Treasuries
A. Gary Shilling (Bloomberg) Dec 12, 2013
In May, when the Federal Reserve first started talking about reducing its $85 billion monthly purchases of Treasuries and mortgage-backed securities, yields jumped, to 2.72 percent in early July from 1.64 percent on May 1 for the 10-year note, and to 3.68 percent from 2.83 percent for the 30-year bond.
IMF Agenda to Focus on Strong, Balanced, and Inclusive Growth
IMF Survey Dec 12, 2013
The IMF’s top priority in the coming months is to break the cycle of subdued growth and recurrent market jitters and move toward securing strong, sustainable, balanced, and inclusive growth, according to the institution’s latest work program.
Structural Reforms Are Key to Sustained Growth, IMF Study Says
IMF Survey Dec 12, 2013
Dynamic emerging market and developing countries can continue their strong growth going forward if they boost productivity through structural reforms. Such a strategy would allow them to further narrow the gap in living standards with the advanced economies, a new IMF study says.
Irrational Exuberance Overtakes Asia
William Pesek (Bloomberg) Dec 12, 2013
What does Alan Greenspan have to do with rallies in Indian stocks, hopes for a resurgent Japan and the blind faith that China can grow at a rate of 7 percent forever? More than you’d think.
Rethinking Foreign Aid: Five Ways to Improve Development Assistance
Paul Farmer (FA) Dec 12, 2013
Helping people living in extreme poverty through better public health, public education, and public works by definition requires building public-sector capacity. Yet most foreign aid from major donors to fragile countries still bypasses local public institutions....
Global Experts Still Need Local Knowledge
Pranab Bardhan (YaleGlobal) Dec 12, 2013
International organizations must avoid ignoring area studies, getting caught up in sweeping global generalizations
WTO agreement: The Bali Ribbon
Richard Baldwin (VoxEU) Dec 12, 2013
The WTO signed a mini-package of trade initiatives in Bali last week. This column argues that the ‘Bali package’ is welcome but not enough. Without some new initiative or direction, the WTO looks set to drift for the next few years. The WTO cannot move ahead until the trans-Pacific and trans-Atlantic ‘mega-regionals’ are done or dead. In the meantime, the WTO should promote research and discussion on how 21st-century trade issues could be brought into the WTO when the time is ripe.
Sovereign default and state-contingent debt
Martin Brooke, Rhys Mendes, Alex Pienkowski & Eric Santor (VoxEU) Dec 12, 2013
Recent Eurozone events have changed the perception that sovereign debt is a problem of emerging-market economies. This column highlights some major deficiencies of the current framework, and proposes two new and complementary types of state-contingent debt contracts. The first – sovereign cocos – are designed to tackle liquidity crises. The second – GDP-linked bonds – help prevent solvency crises.
Mandela's Unfinished Revolution
T. O. Molefe (NYT) Dec 13, 2013
The rainbow nation ideal failed to redress rampant inequality.
Love Yourself Some Treasuries
A. Gary Shilling (Bloomberg) Dec 13, 2013
The Federal Reserve usually starts to raise its federal funds rate before economic expansions are very old. This time, however, any move toward higher rates will probably have to wait until the wave of deleveraging, and the related slow growth, has ended.
The Eurozone: If only it were the 1930s
Nicholas Crafts (VoxEU) Dec 13, 2013
This column argues that the legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. For some countries, a ‘subservient’ central bank might be preferable to the ECB.
Combining ‘hard’ and ‘soft’ global governance
Nemat Shafik (VoxEU) Dec 14, 2013
Crises expose weaknesses in rules and institutions, and provide impetus for reform. Macroeconomic policy coordination was strong early in the financial crisis, but momentum slowed. There has been significant progress on financial regulation, yet major challenges remain. International safety nets have been reinforced – including a trebling of IMF resources. This column argues that ensuring the future effectiveness and legitimacy of the IMF, its member countries will need to agree on greater voice and representation for emerging market countries in the interest of a better managed global economy.
US Federal Reserve: The Bernanke years
Robin Harding (FT) Dec 15, 2013
Assessing the chairman’s legacy has to start with a hard look at his culpability for the crisis.
Stagnation could be the new normal
Lawrence Summers (FT) Dec 15, 2013
Unsustainable bubbles and loosening of credit standards in the past decade were only sufficient to drive moderate economic growth.
This is not the banking union for Europe
Wolfgang Münchau (FT) Dec 15, 2013
As conceived now, the resolution fund is a kitty useful if a bank manager runs off with the till, but not a crisis policy tool.
Globalisation turns west against elites
Ian Baruma (FT) Dec 15, 2013
Sermons on the richness of immigrants’ cultures are not enough – the borderless economy must become more equitable to shield the vulnerable.
Africa and the Chinese Way
Murithi Mutiga (NYT) Dec 15, 2013
A group of African leaders has emerged that openly declares its admiration for authoritarian government.
On the Innovation of Nations
Klaus Schwab (NYT) Dec 15, 2013
A country's economic success will be increasingly determined by how it can leverage its potential for innovation.
Exporting American Oil
WSJ Dec 15, 2013
Moniz breaks the taboo against selling U.S. crude overseas.
What the Rest Really Should Learn From the West
Pankaj Mishra (Bloomberg) Dec 15, 2013
In “Free to Choose,” Milton and Rose Friedman first posed the binary of private markets versus state intervention, which would come to underpin World Bank and International Monetary Fund reports, policies and prescriptions for the next two decades. According to the Friedmans, places such as Japan, South Korea, Taiwan, Hong Kong and Singapore had succeeded due to their reliance on “private markets.” India, China and Indonesia had stagnated after “relying heavily on central planning.”
Supply-chain vulnerability: Fukushima evidence
Yukiko Umeno Saito (VoxEU) Dec 15, 2013
Natural disasters severely disrupt supply chains. This article presents evidence from the Great East Japan Earthquake that the spillover effects on disaster-hit firms’ suppliers were worse than those on their customers. For those firms that shut down, however, the effects on their customers were worse, and were transmitted along the supply chain. Firms with partners inside the affected area were more likely to form new business relationships, but those whose partners shut down were not. This suggests disaster relief should be targeted to the hardest-hit firms.
A chance to beat currency manipulation
Fred Bergsten (FT) Dec 16, 2013
Intervention in forex markets costs the US millions of jobs, weakens the countries of Europe’s periphery and deepens the eurozone crisis.
Bulls put trust in Fed, not the economy
George Magnus (FT) Dec 16, 2013
The bullish case for stocks is largely down to the continued issue of easy money by central banks.
Haruhiko Kuroda, the outsider
Martin Wolf, David Pilling and Jonathan Soble (FT) Dec 16, 2013
Haruhiko Kuroda, the outsider who took over the Bank of Japan this year, says he has a plan to finally end the country’s battle with deflation. The markets still have doubts.
European banking sector: Finally heading for better times?
Jan Schildbach (DB Research) Dec 16, 2013
Following years of struggle and having seen their world turned upside down, European banks may finally be heading for a (somewhat) smoother ride in 2014. Profitability is returning, though so far this is mainly driven by lower extraordinary charges rather than improvements in revenues and costs. Pressure to build capital may lessen thanks to significant progress over the past two years, yet currently banks are still shrinking relentlessly. Much will also depend on regulatory and supervisory actions, especially on how the EU Banking Union is implemented.
WTO After Bali: Should the WTO Follow Brazil's Trade Strategy?
Lori Wallach and Ben Beachy (Globalist) Dec 16, 2013
To reform the WTO, the director-general can take a cue from his home nation, Brazil.
Small Business and the WTO
Edward Gresser (Globalist) Dec 16, 2013
Why small businesses are likely to benefit from the WTO's new agreement.
Can we move beyond the Maastricht orthodoxy?
László Andor (VoxEU) Dec 16, 2013
Today's Eurozone operates in a way that is momentarily advantageous for capital-owners in the surplus countries and creditors at large, but damaging for workers and entrepreneurs, debtors of all types and most users of public services. This column argues that this is unsustainable. The Eurozone must be reformed to avoid the risk that the EU itself could be destroyed by political conflict among the winners and losers. 2014 is a window of opportunity for seriously re-considering the Eurozone's functioning and for moving away from the 'Maastricht orthodoxy'. To recover from stagnation and regain citizens’ trust, Europe needs a genuine paradigm shift on the Eurozone.
Basel risk weights can’t be trusted
Jens Hagendorff & Francesco Vallascas (VoxEU) Dec 16, 2013
Recent research shows that capital requirements are only loosely related to a market measure of bank portfolio risk. Changes introduced under Basel II meant that banks with the riskiest portfolios were particularly likely to hold insufficient capital. Banks that relied on government support during the crisis appeared to be well-capitalised beforehand, suggesting they engaged in capital arbitrage. Until the regulatory concept of risk better reflects actual risk, the proposed increases in risk-weighted capital requirements under Basel III will have little effect.
Pisa tests lean in the right direction
John Kay (FT) Dec 17, 2013
Examiners have faced comparable problems since education began. No doubt, many of Plato’s classmates resented his high marks.
Follow ‘#tpp’ into the trade netherworld
Shawn Donnan (FT) Dec 17, 2013
Pressure is mounting for more transparency in the politically sensitive and mind-numbingly detailed work of trade negotiations.
Global Protests Won’t Power New Democratic Wave
Richard Youngs (Bloomberg) Dec 17, 2013
This year has been one of vibrant and daring social protest, closing with the tumult in Ukraine and Thailand. Disturbances have taken place even in ultra-stable Singapore. Protests have rumbled on intermittently in several austerity-afflicted European countries, and during the summer mass demonstrations in Turkey and Brazil filled the media. Citizens across the world, it seems, are bravely taking up W.H. Auden’s famous injunction “to undo the folded lie ... the lie of Authority/Whose buildings grope the sky.”
Richard Schiffman (FP) Dec 17, 2013
How big agriculture is carving up Africa for industrial farmland.
Investment after crises: Asia 15 years later
Carmen M Reinhart & Takeshi Tashiro (VoxEU) Dec 17, 2013
Financial crises cast a long shadow on investment. For nine major Asian economies, average investment as a share of GDP declined sharply during 1998-2012 from its average in the decade before the Asian crisis (if China and India are excluded, the estimated decline exceeds 9%). This column suggests that there is a connection between the sustained reserve accumulation and the significantly lower levels of investment in the region.
Six events that shook Asia
David Pilling (FT) Dec 18, 2013
As one nation strives to regain economic strength, others struggle with poverty, corruption and the ravages of nature. And the newly powerful show their might.
End of QE will test diversification faith
Ewen Cameron Watt (FT) Dec 18, 2013
The monetary stimulus tide will not last forever, and when it dwindles, bonds or equities may no longer be an effective diversifier of portfolio risk.
Finance: Shrunken ambition
Tom Braithwaite, Camilla Hall and Stephen Foley (FT) Dec 18, 2013
Citi’s cost-cutting drive has delighted investors but how much more can America’s most international bank retrench before it squanders its global advantage?
Stumbling Toward the Next Crash
Gordon Brown (NYT) Dec 18, 2013
Most of the problems that caused the 2008 financial crisis have not gone away.
A Conversation With: Robert van Zwieten, C.E.O. of Emerging Markets Private Equity Association
Rakesh Mani (NYT) Dec 18, 2013
Mr. van Zwieten discussed the outlook for investor appetite in Indian private equity in the coming year.
Behind Mexico's Oil Revolution
Daniel Yergin (WSJ) Dec 18, 2013
The country's leaders saw America's energy boom and didn't want to be left behind.
The New Silk Road to Nowhere
Eugene Imas (Diplomat) Dec 18, 2013
U.S. post-2014 development plans for Central Asia are worthy, but at risk of strategic failure.
The Celtic Cougar
Sean Kay (FP) Dec 18, 2013
Why Ireland's economy only looks good from afar.
Global value chains, interdependence, and the future of trade
Pascal Lamy (VoxEU) Dec 18, 2013
The emergence of intra-firm trade as the primary component of international trade reflects a global interdependence in the production process. In this column the former Director-General of the WTO argues that this necessitates a re-examination of how we think about – and how we measure – trade between nations. Interdependence allows different sectors to add value, and complicates the implementation of trade barriers. Only with a modern perspective can effective trade policy be conducted.
The real lessons of the crisis
Martin Wolf (FT) Dec 19, 2013
Fiscal deficits are too obvious a target when the real work that needs to be done is recovering lost output and productivity.
North and south must reform together
Mario Monti (FT) Dec 19, 2013
The differences between the economic and fiscal concepts of the two parts of the continent are far narrower than we think.
Taper in a teapot: The Fed’s tweak of QE
Barry Eichengreen (FT) Dec 19, 2013
The value of Ben Bernanke’s gesture is mainly symbolic, a signal to detractors that the Fed desires a return to business as usual.
Banking union is a sham that solves nothing
Sony Kapoor (FT) Dec 19, 2013
Never mind the fanfare for progress on a package that is at best a distraction from more pressing issues confronting the eurozone.
The Fed swaps course of monetary drugs
Stephen King (FT) Dec 19, 2013
Just as quantitative easing came with side-effects, might we eventually discover that forward guidance also has its problems?
Inequality, Indian Style
Roger Cohen (NYT) Dec 19, 2013
The epiphany of one Indian who fled the greed-is-good fast track to help the poorest.
Venezuela Is the Next Zimbabwe
Leopoldo Martinez (WSJ) Dec 19, 2013
As inflation rages, Nicolás Maduro seizes private farms and companies, arresting businessmen for 'speculation.'
World Bank raises record amount for poorer countries
Carey L Biron (AT) Dec 19, 2013
The World Bank has raised a record US$52 billion for development in the poorest countries, prompting a welcome for the amount along with concern at the extent to which loans make up the total and how it will be spent.
China manages soft end to slowdown
Michael Lelyveld (AT) Dec 19, 2013
China appears to have managed a soft landing to its slowdown in economic growth - which might be as low as 5% this year, with big question marks over the official figures - but reforms will be needed if the government is to pick up the pace of expansion.
The global economy in 2014 – Heading towards trend growth
Stefan Shneider (DB Research) Dec 19, 2013
Seven years after the onset of the global economic and financial crisis the global economy should start to post trend growth of 3 ½% to 4% again in 2014. Following several years in which hopes of an economic upturn have been dashed the interplay of five drivers may finally effect a turnaround for the eurozone economy. The growth is, however, likely to end up being a very modest 1% following a contraction of 0.4% in the current year on account of the deleveraging that still has to occur in the private sector and over the medium term also in the public sector
Fed tapering and emerging markets
Barry Eichengreen & Poonam Gupta (VoxEU) Dec 19, 2013
Fed tapering has started. A revival of last summer’s emerging economy turmoil is a real concern. This column discusses new research into who was hit and why by the June 2013 taper-talk shock. Those hit hardest had relatively large and liquid financial markets, and had allowed large rises in their currency values and their trade deficits. Good macro fundamentals did not provide much insulation, nor did capital controls. The best insulation came from macroprudential policies that limited exchange rate appreciation and trade deficit widening in response to foreign capital inflows.
Do trade agreements increase trade? Evidence from the Zollverein
Wolfgang Keller & Carol H Shiue (VoxEU) Dec 19, 2013
Estimating the trade effect of trade agreements is no easy task. Agreements with higher trade returns may be formed before agreements with lower returns, and comparing these naïvely could bias our estimates of the true effects. This column studies the case of the German Zollverein of 1834 to show that it is important to examine the sequence of membership to estimate the effects of trade agreements.
Andrew Haldane: The Banker Who Cried 'Simplicity'
Raymond Zhong (WSJ) Dec 20, 2013
Regulators need to watch for the next thunderstorm, not catch every raindrop, says the man who has changed the world financial debate.
How Turkey's Troubles Could Spread in Emerging Markets
Landon Thomas Jr (NYT) Dec 20, 2013
Turkey’s latest political crisis coincides with Fed decisions pointing to higher interest rates, a combination that has caused a plunge in the Turkish currency that could be replicated elsewhere.
India can weather Fed's taper, but then ...
Kunal Kumar Kundu (AT) Dec 20, 2013
India's economy, with some thanks to Reserve Bank of India governor Raghuram Rajan, appears able to weather the impending taper of the US Federal Reserve's quantitative easing policy. That good work will then have to survive the aftermath of India's general election next year.
Obstacles to international macro policy coordination
Olivier Blanchard, Atish R Ghosh & Jonathan D Ostry (VoxEU) Dec 20, 2013
The world has just been through a period of unprecedented macro policy activism. More is set to come as central banks exit unconventional policies, governments fix their fiscal positions, and financial regulations are reformed. These national policies have undeniable international spillovers. This column argues that the setting is ripe for more cooperation and suggests some ways forward, even if international macro policy coordination may continue to be heard about more often than it is seen.
Regulation, supervision and the role of central banks
Richard Baldwin (VoxEU) Dec 20, 2013
Maintaining financial stability is a major concern and central banks have been increasingly involved in assuring it. This column introduces a CEPR Policy Insight written by Italy’s central bank governor on the post-Crisis role of central banks in financial regulation and supervision.
Worries About the World Economy for 2014
David Dapice (YaleGlobal) Dec 20, 2013
Growth limps along, at an uneven pace, as governments tackle big problems with uncertainty.
Sovereign Debt Restructuring: Red Herrings Swimming in a Sea of Confusion
Anna Gelpern (PIIE) Dec 20, 2013
You may have read about those radical plans by the International Monetary Fund (IMF) to force governments to default on their debts as a condition of IMF support. Debates over the place of sovereign debt restructuring in a financial crisis are getting more muddled and acrimonious, in no small part because no one wants to face the underlying governance challenge: political pressure to lend public money to contain the crisis, even if it means paying private creditors in full and adding to a sky-high pile of sovereign debt.
Banking union: ECB independence at risk?
Donato Masciandaro & Francesco Passarelli (VoxEU) Dec 21, 2013
During the Great Moderation, central banks focused on price stability, and independence was seen as crucial to limit inflation bias. Since the Global Financial Crisis, emergency support measures for banks, and central banks’ increasing involvement in supervision, have called central bank independence into question. This column argues that the literature has overlooked the distributional effects of the tradeoff between monetary and financial stability. In a political economy framework, heterogeneity in voters’ portfolios can cause the degree of central bank independence to differ from the social optimum.
The Trade in Services Agreement
Juan A. Marchetti & Martin Roy (VoxEU) Dec 21, 2013
One of the important trade talks going on outside the WTO is the Trade in Services Agreement, involving nations that account for around 70% of world services trade. China’s request to join has greatly heightened policy interest in the talks. This column explains the initiative and argues that the current negotiations must be broadened if participants' key export interests are to be addressed. This involves either changing some existing PTA commitments, or expanding the number of participants in the negotiations.
How to prolong a banking credit crunch
Wolfgang Münchau (FT) Dec 22, 2013
The lousy agreement on banking union – the one Schäuble always wanted – will produce the financial sector equivalent of austerity.
Better, fairer lending sacrificed for liquidity
John Authers (FT) Dec 22, 2013
One size fits all solutions produced by computer models might make for liquid markets but could mean money is allocated to the wrong borrowers.
The elites are rising up
Jackson Diehl (WP) Dec 22, 2013
From Bangkok to Kiev, economic winners seek democracy.
The Young, the Restless and Economic Growth
Edward Lazear (WSJ) Dec 22, 2013
Countries with a younger population have far higher rates of entrepreneurship.
India’s New Watchdog Still Needs Watching
Bloomberg Dec 22, 2013
A half-century after the idea was first raised, India finally has its “Lokpal,” or “protector” in Hindi. The term refers to the anti-corruption watchdog body, approved by Parliament last week, whose Herculean task it will be to root out public corruption that saps billions of dollars from the exchequer, extorts bribes from ordinary citizens when they need anything from a land-use permit to a driver’s license, and has almost obliterated Indians’ faith in their once-proud democracy.
In search of balance
John Gapper (FT) Dec 23, 2013
While the income gap in industrialised societies grows inexorably wider, global inequality is shrinking.
Cash crunch shows PBoC quandary
George Magnus (FT) Dec 23, 2013
The immediate outlook is probably manageable but the crunch in financial markets symbolises a major and unpredictable medium-term policy struggle.
The importance of Asia
Aidan Foster-Carter (AT) Dec 23, 2013
At the close of 2013, still early in what many see as Asia's century, there is cause to rejoice at how well the region is doing on several counts, not least the spread of prosperity even as some of Asia risks regressing into needless conflict. One way to try to avoid disaster is to create and hold fast to a sense of something bigger and more important - a vision of unity across a fractured landscape.
Labor Markets in the Global Financial Crisis
Mary C. Daly, John Fernald, Òscar Jordà, and Fernanda Nechio (FRBSF Letter) Dec 23, 2013
The impact of the global financial crisis on labor markets varied widely from country to country. In the United States, the unemployment rate nearly doubled from its pre-recession level. The rate rose much less in the United Kingdom and barely changed in Germany, despite larger declines in gross domestic product. Institutional and technological changes since the 1970s had previously made relationships between output and unemployment more homogeneous across countries. But the global financial crisis undid much of this convergence as countries adopted different labor market policies to adjust output.
The evolution of the global FX market
Dagfinn Rime & Andreas Schrimpf (VoxEU) Dec 23, 2013
Trading in the FX market reached an all-time high of $5.3 trillion per day in April 2013 – a 35% increase relative to 2010. Smaller banks, institutional investors, and hedge funds have grown to become the largest counterparty segment, surpassing the inter-dealer segment. Facilitated by prime brokerage arrangements, these financial customers have become more active market participants, contributing further to a concentration of volume in financial centres like London and New York. A new form of ‘hot potato’ trading has emerged where dealers no longer play an exclusive role.
China's Credit Crunch- and Prospects for Cash
Gordon G. Chang (World Affairs) Dec 24, 2013
Concerns about Chinese debt usually focus on out-of-control municipalities and their notorious financing, but corporate debt might be the real sickness that brings on an equity crash.
Policymaking in crises: Pick your poison
Kristin Forbes & Michael W. Klein (VoxEU) Dec 24, 2013
Government interventions to control capital flows and reduce exchange-rate volatility have long been controversial. The Global Financial Crisis has made the debate more urgent. This column discusses recent research that evaluates such policies against the counterfactual of no intervention. Depreciations and reserve sales can boost GDP growth during crises, but may also substantially increase inflation. Large increases in interest rates and new capital controls are associated with reductions in GDP growth, with no significant effect on inflation. When faced with sudden shifts in capital flows, policymakers must ‘pick their poison’.
The Ukraine-Russia deal
Charles Wyplosz (VoxEU) Dec 24, 2013
The Ukraine-Russia deal involves politics as much as economics. This column argues that the economics of the deal will eventually lead to problems for one or both.
'Influence Peddling' Makes the World Go Round
Arthur Levitt (WSJ) Dec 25, 2013
The SEC's attack on American companies' hiring practices in China is scurrilous and hypocritical.
How Government Cutbacks Ended Sweden’s Great Depression
Per Bylund (Mises Daily) Dec 25, 2013
During the recent financial crisis, Sweden has emerged as one of very few financially sound economies. The country’s strong position, setting it apart from most Western nations, makes it an interesting example of what could — or should — have been done. Indeed, Paul Krugman, the former economist and Nobel Prize laureate, has repeatedly pointed approvingly at how the Swedes handled their depression in the early 1990s as the reason for their recent success. Specifically, he notes the nationalization of some banks at the time of the crisis. While he misses the point by focusing exclusively on a narrow selection of short-term measures rather than longer-term changes, as is the hallmark of a Keynesian, Krugman is right that Sweden has done some things right.
Africa’s Middle Class Spearheads Economic Growth
IMF Survey Dec 26, 2013
Africa’s economic growth should be more inclusive, and the middle class has a strong role to play in strengthening this growth, says economist Mthuli Ncube, who also gives his thoughts on the state of data in Africa and the continent’s stellar economic performance.
Insurers pose risk for next big crisis
Patrick Jenkins (FT) Dec 26, 2013
As banks have found various forms of business rendered punitively expensive by new capital regulations, insurance companies are moving in
Mexico's Economic Reform Breakout
Pierpaolo Barbieri and Niall Ferguson (WSJ) Dec 26, 2013
More than two million jobs have been created in Mexico since early 2010. Illegal immigration to the U.S. may soon be history.
Is India Reinventing Politics?
Chandrahas Choudhury (Bloomberg) Dec 27, 2013
An emerging markets political model takes shape.
Africa’s Poverty Amid Plenty
Mzukisi Qobo (Project Syndicate) Dec 27, 2013
Foreign investors now view Africa as their next frontier, with household consumption in some parts of the continent now higher than that of the world's major emerging economies. But, amid Africa’s new growth and dynamism, too many of its people continue to suffer from poverty, unemployment, illiteracy, and curable diseases.
Hope and Hurdles in 2014
Pingfan Hong (Project Syndicate) Dec 27, 2013
While the global economic outlook for 2014 has improved, policymakers worldwide must remain vigilant about downside risks and strengthen international cooperation. Developments in 2013 provide reasonably strong grounds for confidence that they will do so.
Don’t fret about soaring asset prices
Wolfgang Münchau (FT) Dec 29, 2013
With all the changes in global banking supervision and regulation it is hard to imagine even a remote rerun of the US subprime crash
Stockpickers await their day with Godot
John Authers (FT) Dec 29, 2013
Investment managers have been waiting since before the credit crisis for the end of the ‘risk-on, risk-off’ sentiment that has driven all stocks. Will 2014 be the year?
Your jobs. Give them to me. Now
Tim Harford (FT) Dec 29, 2013
In future, there may be people who – despite being willing and fit to work – have no economic value as employees as they are replaced by machines.
Latin America Leans Forward
Enrique Krauze (NYT) Dec 29, 2013
The region is showing a maturity without precedent in its turbulent history.
Japan no longer a backwater for investors
Trevor Greetham (FT) Dec 30, 2013
With a wide range of one-off stimulus measures in force to counter a shock that may not come, growth could surprise significantly to the upside.
Three big macro questions for 2014
Gavyn Davies (FT) Dec 30, 2013
US supply constraints and the euro’s zero lower bound could take centre stage, but China’s excess credit growth remains the most worrying trend.
How to Overhaul Your Portfolio for 2014
Burton Malkiel (WSJ) Dec 30, 2013
Despite the risks, there are bonds and bond funds, foreign and even domestic, that are worth a serious look.
Mexico’s Second Revolution
Jorge G. Castañeda (Project Syndicate) Dec 30, 2013
Mexico, a stagnant and violence-plagued country in recent years, finally began to overcome its malaise in 2013, thanks to an activist president and a coalition of political parties determined to move the country forward. But, alongside substantive changes, there is considerable uncertainty and hyperbole.
The Specialization Myth
Ricardo Hausmann (Project Syndicate) Dec 30, 2013
Many believe that cities, regions, and countries should specialize: they cannot be good at everything, so they must concentrate on their comparative advantage. But, while this idea seems obvious, it is both wrong and dangerous.
A year in a word: Taper
Robin Harding (FT) Dec 31, 2013
To the Fed the word was a catachresis: the wrong one for the context. It wanted to adjust its asset purchases to economic conditions, but it entered the market lexicon.
Monetary Policy in Japan: Finally on Track
Phillip Swagel (NYT) Dec 31, 2013
Japan’s monetary expansion is an overdue effort to revive the economy and should be welcomed by the United States, even if it poses a challenge for some American companies, an economist writes.
Welcome to the End of the End of History
Pankaj Mishra (Bloomberg) Dec 31, 2013
The past 12 months have been bewildering, at least for those who assumed after 1989 that the world could look forward to a future of unequaled prosperity. Protests, often led by middle classes, erupted or intensified not only in economically damaged countries such as Greece, Spain and Thailand. They rattled relatively competent stewards of globalized economies in Chile, Brazil and Turkey.
Mexico’s Amazing Year
Bloomberg Dec 31, 2013
Spare a thought for Mexico’s President Enrique Pena Nieto. After engineering an ambitious reformist pact among Mexico’s three major political parties, he whirled through his first year in office rewriting laws on everything from energy to television and education to elections. Yet Mexico’s economic performance in 2013 was disappointing, and Mexico’s businesses and foreign investors aren’t exactly exuberant. It’s enough to damp a reformer’s spirits.
The Eurozone’s Crossroad
Jean Pisani-Ferry (Project Syndicate) Dec 31, 2013
Heading into 2014, financial markets are quiet and Europe’s politicians are relieved, but the fundamental problems that have driven the euro crisis for the last four years remain. That is why complacency is misguided – and why the current respite should be used to address the eurozone's permanent architecture.
Slow Growth and Short Tails
Nouriel Roubini (Project Syndicate) Dec 31, 2013
The global economy will grow faster in 2014 than it did in 2013, while tail risks will be lower. But, with the possible exception of the US, growth will remain anemic in advanced economies, and emerging-market fragility – including China’s uncertain efforts at economic rebalancing – could become a drag on global growth.
China’s Policy Disharmony
Stephen S. Roach (Project Syndicate) Dec 31, 2013
China was hardly lacking in policy pronouncements in the final months of 2013. Given the likely tradeoffs between strategy and tactics – that is, between long-term reforms and short-term growth – can Chinese policymakers really accomplish all of their objectives?
Looking Up in 2014?
Martin Feldstein (Project Syndicate) Dec 31, 2013
The US economy will continue to face considerable risks in 2014, owing to the effects of higher interest rates and uncertainty about taxes. But the US now has a better chance of achieving significantly higher real GDP growth than at any time since the downturn began.
New Approaches to Inequality
Hazel Henderson (Globalist) Dec 31, 2013
Thinking beyond traditional economics perspectives to address inequality.