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Begin New Search Topic Markets Political Geography Global Focus Content Type Policy Brief

1. Green Hydrogen Industrial Value Chains: Geopolitical and Market Implications

Author:
Nicola De Blasio and Laima Eicke
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
The global transition to a low-carbon economy and adopting the needed clean energy technologies at scale will significantly impact existing value chains1 and transform production-to-consumption lifecycles. Regulatory and business models will need to rapidly evolve to manage the resulting substantial cost challenges and dramatic shifts in stakeholder interactions while continuing to create value. Green hydrogen2 is likely to play a pivotal role in a carbon-free future, as its adoption will enable the decarbonization of energy-intensive industrial processes whose emissions are hard to abate through simple electrification—such as steel and cement production. However, to take advantage of the economic opportunities created by its adoption at scale, countries will need to rethink the roles they could play in a new energy landscape and define strategic industrial policies accordingly. Our research3 shows how successful industrial policies must reflect a country’s potential value chain positioning in future green hydrogen markets and elucidates macro geopolitical trends that could reshape international relations as countries compete for industrial leadership, market shares, and opportunities for job creation.
Topic:
Markets, Economy, Carbon Emissions, Value Chains, Hydrogen, and Green Economy
Political Geography:
Global Focus

2. Energy investment in a time of inflation

Author:
Charles Lichfield and Joseph Webster
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
High rates of inflation across the world are forcing central banks to reluctantly tighten monetary policy despite accompanying recession risks. Moreover, restricted credit access could jeopardize energy investments, particularly for capital-intensive clean energy projects, potentially rendering the world more vulnera­ble energy to price shocks, which are a significant contributor to the current crisis. This paper briefly considers the macroeconomic drivers of inflation in late 2022, including Russia’s war in Ukraine and uncertainties around energy supply, supply-chain resets, and lingering COVID-19 disruptions, before examining the persistent energy underinvestment of the past decade and how this has left markets exposed to varying degrees. As such, this paper also considers how private capital can accelerate cleaner energy adoption, suited to different markets’ unique conditions and needs. Bor­rowing costs will rise, but this doesn’t have to bring the transition to a standstill. With the Great Moderation of low volatility, interest rates, and inflation perhaps a relic of the past, assets offering inflation protection, such as infrastructure, may become increas­ingly attractive to investors. There is a fear that global inflation will sharply curtail energy investment into emerging markets. The fear is justified. Higher interest rates in developed markets mean higher rates of return which will lure emerging markets investors back to the US and Europe. Still, it’s not all bad news for emerging markets. Quasi-state actors like Pension and Sovereign Welfare funds are interested in very long term, high-yield projects—two criteria to which emerging market energy infrastructure correspond. Disruptions to interest rates and inflation, triggered in part by energy underinvestment, will cause disparate impacts in different markets. Inflation is not, perhaps, everywhere and always a mone­tary phenomenon. Energy investment faltered from 2014 to 2020, despite low interest rates. Meanwhile, aggre­gate supply shocks—first due to COVID, then from Putin’s invasion of Ukraine—have pressured energy production and prices, raising inflation and necessitating interest rate hikes. The consequences of persistent energy underinvest­ment are now becoming apparent. The need for new energy infrastructure cannot be met without private investment. This was the case when infla­tion was lower; it is even more important now.
Topic:
Environment, Markets, Oil, Governance, Gas, Economy, Investment, Inflation, and Energy
Political Geography:
Global Focus

3. How best to ensure international digital competition cooperation

Author:
Christophe Carugati
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Large digital firms pose similar competition issues worldwide, such as promoting their own services over those of rivals, or imposing unfair terms and conditions. Competition authorities have opened several antitrust investigations and policymakers have proposed digital competition regulations to tackle these issues. G7 competition authorities have called for several years for international cooperation on digital markets. They want competition cases and laws around the world that are consistent and work together. However, the question of how this can be done remains. A toolbox for international cooperation in competition enforcement already exists, but it does not provide for cooperation in competition policy and has shortcomings in relation to competition enforcement. Current and proposed legislation targets the largest digital firms to tackle the characteristics of digital markets, such as multi-sidedness, and the same or very similar behaviours, such as self-preferencing. Legislation in different jurisdictions addresses these issues with similar rules. While there is some convergence, some rules diverge in substance and some are at high risk of divergence in interpretation. Inconsistency is thus likely to arise from a divergence of interpretation rather than substance. The solution would be to ensure a coherent approach to competition in digital markets. This could be done by developing a framework based on four elements: (1) adoption of common legal phases for future digital competition laws to ensure clarity; (2) adoption of a common legal interpretation through guidance drafted by international forums, such as the International Competition Network (ICN); (3) adoption of common technical requirements developed in the context of ICN technical workshops, when the rules require it; and (4) the implementation of an international monitoring committee within the ICN to evaluate whether competition authorities and courts enforce the rules consistently. The impact of the framework might be limited because of the non-binding nature of the approach, and the focus on specific competition-related legislation, excluding laws that can also address the issues, such as civil law. Countries can overcome these limitations if they are willing to cooperate to ensure a consistent approach.
Topic:
Markets, Digital Economy, Digital Cooperation, and Competition
Political Geography:
Global Focus

4. Boom-bust Cycles Revisited: The Role of Credit Supply

Author:
Hyo Sang Kim, Sangyup Choi, and Yuri Kim
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study investigates the impacts of credit supply on economic growth and financial crisis. Excess credit supply can make the economy and financial markets more vulnerable. While credit supply can drive economic growth by reallocating resources, it can also make the economy and financial markets more fragile. Asset prices sharply fall when deleveraging occurs in the case of a negative shock to the financial or real sector in a system where credit is excessively supplied. Furthermore, economic activity might be substantially reduced, extending the length and breadth of the recession.
Topic:
Markets, Financial Crisis, Economy, Economic Growth, and Credit
Political Geography:
Global Focus

5. Exchange Rate Predictability Based on Market Sentiments

Author:
Hyo Sang Kim, Eunjung Kang, Yuri Kim, Seongman Moon, and Huisu Jang
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
It is well-known that exchange rates are difficult to forecast using observed macro-fundamental variables. This discrepancy between economic theory and empirical results is called the Meese and Rogoff puzzle. The purpose of this study is to address this puzzle from a new approach. Rather than pursuing a linkage between macro-fundamentals and exchange rates, we focus on the market sentiment index as a factor that could possibly enhance exchange rate predictability. The analysis folds into three phases. First, we conducted an assessment of the traditional exchange rate predictability model, as well as the augmented traditional model incorporating the market sentiment index. Second, we predicted the exchange rate by applying the market sentiment index, based on the contrarian opinion investment strategy commonly used by foreign exchange dealers. Finally, we analyzed if the machine learning model incorporating both economic fundamentals and market sentiment index could enhance the predictability of the exchange rate.
Topic:
Economics, Markets, and Exchange Rates
Political Geography:
Global Focus

6. Slippery Fish: Enforcing Regulation under Subversive Adaptation

Author:
Andres Gonzalez-Lira
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Correcting market failures and improving economic efficiency often require curbing undesirable behaviors of market agents who act to maximize their private benefits. Examples include actions that affect ecosystems, such as deforestation, pollution, and overexploitation of natural resources; actions that affect community health, such as drunk driving and open defecation; or actions that undermine government performance, such as corruption and tax evasion. Enacting and enforcing regulations is the most direct strategy to deter such behaviors. Implementing this strategy requires strong institutions to enforce laws, plus sophisticated policing to track agents’ reactions to enforcement so that rules are robust enough to curb the undesirable behavior even when regulated agents try to game the new system.
Topic:
Environment, Government, Markets, Regulation, and Adaptation
Political Geography:
Global Focus

7. Sovereign wealth funds are growing more slowly, and governance issues remain

Author:
Julien Maire, Adnan Mazarei, and Edwin M. Truman
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In the last two decades, sovereign wealth funds (SWFs)—funds accumulated by a government that are invested in whole or in part abroad to benefit the country in the future—have faced increased public scrutiny over their investment patterns, financial results, and governance. This Policy Brief updates and expands a prototype scoreboard rating the transparency and accountability of SWFs, which Truman established in 2007. This fifth edition of the scoreboard shows that the average scores continued to improve for the 64 SWFs examined, but governance issues remain. New funds have emerged—many of them government holding companies or strategic investment funds—but the growth of assets under management by SWFs has slowed, in some cases partly because of withdrawals to help finance expenses related to the COVID-19 pandemic, raising questions about their future role.
Topic:
Government, Markets, Sovereign Wealth Funds, Governance, Regulation, and Capital
Political Geography:
Global Focus

8. Using Advance Market Commitments for Public Purpose Technology Development

Author:
Alan Ho and Jake Taylor
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
Over the last year, there has been a renewed focus on improving American competitiveness in key fields of science and technology. Numerous bills and executive initiatives have been implemented or proposed to dramatically increase investment into science and technology. Recent examples, including the Endless Frontiers and the Clean Futures Act, use a wide variety of policy tools to advance research and development (R&D) along multiple axis. Here we consider the free market portion of these tools, in which the private sector plays a key role in determining topic and direction, while the public sector supports these activities through high-level directives, conditional contracts, and other mechanisms. While other approaches such as public purpose consortia and R&D tax credits have been considered elsewhere, here we focus on Advance Market Commitments. Advance Market Commitments (AMCs)are a powerful policy tool that can be used to ensure that America can retain leadership in technology fields such as climate change, computing, and medicine. In an AMC, a U.S. agency commits to buying some specified new technology before that technology exists. This provides a price, specification, and framework for evaluation that can streamline decision making and funding approaches in the private sector and accelerate progress towards well defined technical outcomes without being directed about the underlying solution and steps along the path. As such, AMCs represent a powerful option for ground-up technological building where private investment replaces the role of more traditional, blue sky government funding, and the larger market for the resulting product is jump-started by an initial government market.
Topic:
Markets, Science and Technology, and Vaccine
Political Geography:
Global Focus

9. Analysis of Determinants of Foreign Capital Flow: Focused on Interest Rate and Exchange

Author:
Deok Ryong Yoon, Wongho Song, and Jinhee Lee
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
As the linkage between domestic and foreign financial markets grows stronger, concerns have been raised about the inflow and outflow of foreign investment capital as a source of financial instability whenever the financial market becomes unstable. Considering that opening the capital market is not an option, it becomes essential to examine the determinants of foreign investment to maximize the benefits of foreign capital inflows and outflows for sound growth in the real sector as well as the financial sector. Accordingly, this study attempts to produce evidence-based policy implications by empirically analyzing the determinants of the inflow and outflow of foreign investment funds.
Topic:
Foreign Exchange, Markets, Capital Flows, Investment, and Interest Rates
Political Geography:
Global Focus

10. How IP Rights Keep Markets Free

Author:
Jonathan M. Barnett
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Hudson Institute
Abstract:
It is elementary that secure protection of property rights is a necessary precondition for efficient markets that drive economic growth. Yet this principle is not always recognized in the case of markets for intangible goods. Rather, intellectual property rights are often characterized as a monopoly franchise that stands at odds with free-market competition. Following this view, IP rights at best provide a justifiable means to incentivize innovation but are prone to abuse by incumbents seeking to block entrants. This standard narrative overlooks an inconvenient fact. As I show in a new book, Innovators, Firms, and Markets: The Organizational Logic of Intellectual Property, incumbents and other large firms in US technology markets have regularly advocated against stronger forms of patent protection and, in certain industries, have resisted patent protection entirely. This lobbying strategy poses a puzzle: Why would dominant firms resist the opportunity to operate under the umbrella of a legal monopoly? This policy memo analyzes the counterintuitive IP policy preferences of large technology firms and, in resolving this apparent anomaly, shows that patents tend to enhance competitive intensity by enabling idea-rich but capital-poor innovators to challenge idea-poor but capital-rich incumbents. Contrary to widespread assumptions, IP rights are far closer to the familiar property rights that support tangible goods markets rather than the monopoly grant to which they are often (and misleadingly) analogized. These insights, which are based on over a century’s worth of US innovation history, raise significant concerns about the IP-skeptical trajectory that policymakers have pursued since the mid-2000s.
Topic:
Markets, Intellectual Property/Copyright, Law, and Criminal Justice
Political Geography:
Global Focus