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You searched for: Content Type Policy Brief Remove constraint Content Type: Policy Brief Publishing Institution Peterson Institute for International Economics Remove constraint Publishing Institution: Peterson Institute for International Economics Topic International Trade and Finance Remove constraint Topic: International Trade and Finance
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  • Author: Edwin M. Truman
  • Publication Date: 01-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: After the Obama administration's four failed attempts to win congressional approval of the 2010 quota and governance reform for the International Monetary Fund (IMF), it is time to recognize that implementation of the agreement may be indefinitely delayed. The international community must therefore prepare for the likelihood of a new world order in which the IMF augments its funding and reforms its governing structure without US participation. This Policy Brief examines four options for the IMF: First, wait for the US Congress to pass the necessary legislation. Second, complete a new, augmented IMF quota and governance package and again wait for the United States to give its formal approval. Third, bypass the US Congress and risk losing the US veto over a few important decisions on the structure of the IMF. Fourth, let the Fund adopt a reform and financing package within a structure that potentially excludes US participation and eliminates the US veto in the new entity.
  • Topic: Economics, International Trade and Finance, International Monetary Fund, Governance, Reform
  • Author: Ryan Rutkowski
  • Publication Date: 01-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Faced with slowing economic growth, Chinese policymakers now recognize that the service sector of the economy—transportation, communications, finance, and health care—could spur economic activity and employment. The catch is that China must reform these and other areas to accomplish this goal. Chinese leaders have outlined an ambitious agenda for reform, but myriad vested interests could slow or block their plans. This Policy Brief evaluates the steps taken so far and the difficulties that lie ahead in implementing them. If policymakers fail to reform and open up the service sector, they run the risk of seriously impairing China's growth prospects.
  • Topic: Economics, International Trade and Finance, Labor Issues, Financial Crisis, Reform
  • Political Geography: China
  • Author: Avinash D. Persaud
  • Publication Date: 04-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Solvency II, which the European Parliament adopted in March 2014, codifies and harmonizes insurance regulations in Europe to reduce the risk of an insurer defaulting on its obligations and producing dangerous systemic side effects. The new directive tries to achieve these aims primarily by setting capital requirements for the assets of insurers and pension funds based on the annual volatility of the price of these assets. Persaud argues that these capital requirements will impose an asset allocation on life insurers and pension funds that does not serve the interests of consumers, the financial system, or the economy. The main problem with Solvency II is that the riskiness of the assets of a life insurer or pension fund with liabilities that will not materialize before 10 or sometimes 20 years is not well measured by the amount by which prices may fall during the next year. Solvency II fails to take account of the fact that institutions with different liabilities have different capacities for absorbing different risks and that it is the exploitation of these differences that creates systemic resilience. To correct this problem, Persaud offers an alternative approach that is more attuned to the risk that a pension fund or life insurer would fail to meet its obligations when they come due and less focused on the short-term volatility of asset prices.
  • Topic: Economics, International Trade and Finance, Budget
  • Author: Jose De Gregorio
  • Publication Date: 04-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Latin America's recent economic performance has been disappointing. After a very strong recovery from the Great Recession, growth has slowed considerably, and prospects for 2015 are dim. Among the seven largest economies in the region, output is expected to contract in Argentina, Brazil, and Venezuela, and Chile, Colombia, Mexico, and Peru are projected to grow by only about 3 percent. The decline was not caused by external factors but was mostly cyclical in nature and a result of low productivity. Although monetary and fiscal policies may still have a role in supporting demand in some instances, the main problem in the region is not a lack of demand but low productivity growth. Efforts must be made to foster productivity. Institutional weakness must be addressed and inequality reduced if sustainable high growth is to resume.
  • Topic: Economics, International Trade and Finance, Monetary Policy, Financial Crisis
  • Political Geography: Latin America
  • Author: William R. Cline
  • Publication Date: 06-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: For nearly three decades, the dominant view on the role of the financial sector in economic development has been that greater financial depth facilitates faster growth. However, the Great Recession has shaken confidence in that view because of the contributing role of high leverage and such financial innovations as collateralized subprime mortgage-backed assets and derivatives on them. Recent studies from the International Monetary Fund and Bank for International Settlements have argued that "too much finance" reduces growth. In an environment of new doubts about finance following the Great Recession, these studies finding that there can be too much of it seem to have struck a responsive chord. Cline warns that these findings should be viewed with considerable caution. He first shows that correlation without causation could similarly lead to the conclusion that too many doctors spoil growth, for example. He the demonstrates algebraically that if the variable of interest, be it financial depth, doctors, or any other good or service that rises along with per capita income, is incorporated in a quadratic form into a regression of growth on per capita income, there will be a necessary but spurious finding that above a certain point more of the good or service in question causes growth to decline. In some situations, finance can become excessive; the crises of Iceland and Ireland come to mind. But it is highly premature to adopt as a new stylized fact the recent studies' supposed thresholds beyond which more finance reduces growth.
  • Topic: Economics, International Trade and Finance, International Monetary Fund, Financial Crisis
  • Author: Caroline Freund, Sarah Oliver
  • Publication Date: 06-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Regulatory standards protect consumers from defective products, but they impede trade when they differ across countries. The Transatlantic Trade and Investment Partnership (TTIP) seeks to reduce distortions in the automobile and other industries. Freund and Oliver evaluate the equivalence of automobile regulations in the United States and the European Union in terms of catastrophe avoidance and estimate the trade gains from harmonization. The UN 1958 Agreement on automobiles, which harmonizes regulations among signatories, is used to quantify the trade effect of regulatory convergence. The removal of regulatory differences in autos is estimated to increase trade by 20 percent or more. The effect on trade from harmonizing standards is only slightly smaller than the effect of EU accession on auto trade. The large economic gains from regulatory harmonization imply that TTIP has the potential to improve productivity while lowering prices and enhancing variety for consumers.
  • Topic: Economics, International Trade and Finance, Treaties and Agreements, European Union
  • Political Geography: Global Focus
  • Author: Lindsay Oldenski
  • Publication Date: 09-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Reshoring—when firms shift manufacturing production back to the United States—has been getting a great deal of publicity lately. Oldenski examines the most recent data on the global operations of US firms and concludes that although some companies have reversed their previous offshoring decisions, there is no evidence of a widespread reshoring trend. But this should not be considered a defeat for US competitiveness. US multinationals continue to move operations offshore, but they also continue to grow stronger, producing more in their US operations and adding more to total US exports. The structure of US manufacturing has changed, but the ability to adapt to the changing nature of global business has been and will continue to be crucial to the continued growth of US manufacturing.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Monica de Bolle
  • Publication Date: 09-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Public lending by the Brazilian Development Bank (BNDES) may have done more harm than good in Brazil, adversely affecting real interest rates and productivity growth. Specifically, BNDES's large amounts of subsidized lending are responsible for substantial credit market segmentation, choking off monetary policy transmission. As a result, to maintain price stability the Central Bank of Brazil is forced to raise interest rates more than it might do otherwise in the absence of BNDES lending. Restoring Brazil's capacity to grow in the medium term requires a thorough rethinking of the role of BNDES. In particular, the bank's lending rates should be aligned with market prices, term and risk premia, while taking into account that, with an adequate transparency framework, public development banks can increase private sector participation instead of crowding it out.
  • Topic: Development, Economics, International Trade and Finance, Markets
  • Political Geography: Brazil, Latin America
  • Author: Jeffrey Schott, Eujiin Jung, Cathleen Cimino-Isaacs
  • Publication Date: 12-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Of all the free trade agreements (FTAs) concluded by Korea with its major trading partners since the turn of the century, the Korea-China FTA may be the largest in trade terms. It is, however, far from the best in terms of the depth of liberalization and the scope of obligations on trade and investment policies. Korea and China agreed to liberalize a large share of bilateral trade within 20 years, but both sides incorporated extensive exceptions to basic tariff reforms and deferred important market access negotiations on services and investment for several years. Political interests trumped economic objectives, and the negotiated outcome cut too many corners to achieve such a comprehensive result. The limited outcome in the Korea-China talks has two clear implications for economic integration among the northeast Asian countries. First, prospects for the ongoing China-Japan-Korea talks will be limited and unlikely to exceed the Korea-China outcome. Second, Korea and Japan need to strengthen their bilateral leg of the northeast Asian trilateral and the best way is by negotiating a deal in the context of the Trans-Pacific Partnership.
  • Topic: Economics, International Trade and Finance, Politics, Bilateral Relations
  • Political Geography: United States, China, Asia, Korea
  • Author: Tomas Hellebrandt, Paolo Mauro
  • Publication Date: 12-2015
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: In the next two decades, hundreds of millions of people in emerging economies are projected to reach income levels at which they will be able to afford cars and air travel. As purchasing power increases worldwide, people will spend proportionately less on food and beverages and more on transportation. Higher spending on transportation, especially in China, India, and Sub-Saharan Africa, will increase pressures on the infrastructure in these economies and aggravate global climate change. Governments will need to respond to these challenges in a fiscally sustainable and environmentally responsible way.
  • Topic: Emerging Markets, International Trade and Finance, Politics, Economies
  • Political Geography: Global Focus