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2. The OECD's "Action Plan" to Raise Taxes on Multinational Corporations
- Author:
- Gary Clyde Hufbauer, Eujiin Jung, Tyler Moran, and Martin Vieiro
- Publication Date:
- 09-2015
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Hufbauer and colleagues critically evaluate the Organization for Economic Cooperation and Development’s ambitious multipart project titled Base Erosion and Profit Shifting (BEPS), which contains 15 "Actions" to prevent multinational corporations (MNCs) from escaping their "fair share" of the tax burden. Spurred by G-20 finance ministers, the OECD recommends changes in national legislation, revision of existing bilateral tax treaties, and a new multilateral agreement for participating countries. The proposition that MNCs need to pay more tax enjoys considerable political resonance as government budgets are strained, the world economy is struggling, income inequality is rising, and the news media have publicized instances of corporations legally lowering their global tax burdens by reporting income in low-tax jurisdictions and expenses in high-tax jurisdictions. Given that the US system taxes MNCs more heavily than other advanced countries and provides fewer tax incentives for research and development (R&D), implementation of the BEPS Actions would drive many MNCs to relocate their headquarters to tax-friendly countries and others to offshore significant amounts of R&D activity.
- Topic:
- Development, Economics, International Political Economy, and International Trade and Finance
- Political Geography:
- Global Focus
3. Assessing Potential Inflation Consequences of QE after Financial Crises
- Author:
- Samuel Reynard
- Publication Date:
- 11-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Financial crises have been followed by different inflation paths which are related to monetary policy and money creation by the banking sector during those crises. Accounting for equilibrium changes and non-linearity issues, the empirical relationship between money and subsequent inflation developments has remained stable and similar in crisis and normal times. This analysis can explain why the financial crisis in Argentina in the early 2000s was followed by increasing inflation, whereas Japan experienced deflation in the 1990s and 2000s despite quantitative easing. Current quantitative easing policies should lead to increasing and persistent inflation over the next years.
- Topic:
- Development, Economics, Emerging Markets, Monetary Policy, and Financial Crisis
- Political Geography:
- Latin America
4. Performance of the Services Sector in Korea: An Empirical Investigation
- Author:
- Donghyun Park and Kwanho Shin
- Publication Date:
- 10-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- There is a widespread perception that Korea's services sector lags behind its dynamic world-class manufacturing sector. This paper empirically analyzes the past performance of Korea's services sector in order to assess its prospects as an engine of growth. The analysis resoundingly confirms the conventional wisdom of an underperforming service sector. In light of Korea's high income and development level, the poor performance of modern services is of particular concern. The authors identify a number of factors underlying the poor performance and set forth policy recommendations for addressing them. Overall, Korea faces a challenging but navigable road ahead in developing a high value-added services sector.
- Topic:
- Development, Economics, Emerging Markets, Industrial Policy, and International Trade and Finance
- Political Geography:
- Israel and Korea
5. The Renminbi Bloc Is Here: Asia Down, Rest of the World to Go?
- Author:
- Arvind Subramanian and Martin Kessler
- Publication Date:
- 10-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- A country's rise to economic dominance tends to be accompanied by its currency becoming a reference point, with other currencies tracking it implicitly or explicitly. For a sample comprising emerging market economies, we show that in the last two years, the renminbi has increasingly become a reference currency which we define as one which exhibits a high degree of co-movement (CMC) with other currencies. In East Asia, there is already a renminbi bloc, because the renminbi has become the dominant reference currency, eclipsing the dollar, which is a historic development. In this region, 7 currencies out of 10 co-move more closely with the renminbi than with the dollar, with the average value of the CMC relative to the renminbi being 40 percent greater than that for the dollar. We find that co-movements with a reference currency, especially for the renminbi, are associated with trade integration. We draw some lessons for the prospects for the renminbi bloc to move beyond Asia based on a comparison of the renminbi's situation today and that of the Japanese yen in the early 1990s. If trade were the sole driver, a more global renminbi bloc could emerge by the mid-2030s but complementary reforms of the financial and external sector could considerably expedite the process.
- Topic:
- Development, Economics, Emerging Markets, Foreign Exchange, and Monetary Policy
- Political Geography:
- China and Asia
6. Developing the Services Sector as Engine of Growth for Asia: An Overview
- Author:
- Marcus Noland and Donghyun Park
- Publication Date:
- 10-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The maturing of the manufacturing sector in many Asian countries, combined with the relative backwardness of its services sector, has made services sector development a top priority for developing Asia. The authors' central objective is to broadly survey and analyze the current landscape of the region's services sector so as to assess its potential to serve as an engine for inclusive economic growth. Their analysis indicates that services are already an important source of output, growth, and jobs in the region. However, its productivity greatly lags that of the advanced economies, which implies ample room for further growth. The impact of the services sector on poverty reduction is less clear but the authors do find some limited evidence of a poverty reduction effect. One key challenge for all Asian countries is to improve the quality of services sector data. Overall, while services sector development is a long and challenging process, creating more competitive services markets by removing a wide range of internal and external policy distortions is vital for improving services sector productivity. As important as such policy reforms are, complementary investments in physical infrastructure and human capital will also be necessary to achieve a strong services sector.
- Topic:
- Development, Emerging Markets, and Industrial Policy
- Political Geography:
- Israel and Asia
7. Prospects for Services Trade Negotiations
- Author:
- Jeffrey J. Schott, Julia Muir, and Minsoo Lee
- Publication Date:
- 10-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Trade and investment in services are difficult to measure, and the regulatory barriers that inhibit the free flow of services are hard to quantify. As a result, very little attention has been paid to dismantling barriers to services trade and investment. Rather, free trade negotiations tend to focus on liberalizing merchandise trade. This paper examines what has been achieved in both regional and multilateral compacts by surveying international precedents involving Asian countries in which services reforms have been included in bilateral and regional trade pacts. The authors then assess the prospects for services trade negotiations and explore how services trade negotiations could be pursued over the next decade through two distinct channels: the Trans-Pacific Partnership (TPP) and a plurilateral approach among groups of WTO countries. The authors find that in the case of developing Asia, free trade agreements have largely excluded services or have only committed to "lock in" current practices in a narrow subset of service sectors. This is also the case in agreements negotiated between developing countries, which have produced less substantial commitments to liberalize services than those negotiated between developing and developed countries. Multilateral negotiations on services have also underperformed, as substantive negotiations on services in the Doha Round never really got underway. To that end, the authors advocate a stronger effort by developing Asian countries to prioritize services negotiations in their regional arrangements and to expand coverage of services in those pacts to a broad range of infrastructure services that are included in other FTAs in force or under construction in the Asia-Pacific region.
- Topic:
- International Relations, Development, Economics, Globalization, International Trade and Finance, Markets, and World Trade Organization
- Political Geography:
- Asia
8. Choice and Coercion in East Asian Exchange Rate Regimes
- Author:
- C. Randall Henning
- Publication Date:
- 09-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper examines the exchange rate regimes of East Asian countries since the initial shift by China to a controlled appreciation in July 2005, testing econometrically the weights of key currencies in the implicit baskets that appear to be targeted by East Asian monetary authorities. It finds, first, that Malaysia, Thailand, Singapore and the Philippines have formed a loose but effective “renminbi bloc” with China, and that South Korea has participated tentatively since the global financial crisis. Second, the emergence of the renminbi bloc in terms of the exchange rate has been facilitated by the continued dominance of the US dollar as a trade, investment, and reserve currency. Third, exchange rate stabilization is explained by the economic strategies of these countries, which rely heavily on export development and financial repression, and the economic rise of China. Fourth, analysts should specify the exchange rate preferences of these emerging market countries carefully before drawing inferences about Chinese influence within the region.
- Topic:
- Development, Emerging Markets, Foreign Exchange, and International Trade and Finance
- Political Geography:
- China, Malaysia, Asia, South Korea, Philippines, Singapore, and Thailand
9. Capital Account Policies and the Real Exchange Rate
- Author:
- Olivier Jeanne
- Publication Date:
- 09-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper presents a simple model of how a small open economy can undervalue its real exchange rate using its capital account policies. The paper presents several properties of such policies, and proposes a rule of thumb to assess their welfare cost. The model is applied to an analysis of Chinese capital account policies.
- Topic:
- Development, Economics, Emerging Markets, and Monetary Policy
- Political Geography:
- China
10. Transportation and Communication Infrastructure in Latin America: Lessons from Asia
- Author:
- Barbara Kotschwar
- Publication Date:
- 04-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In Latin America, inadequate transportation infrastructure has been identified as an increasingly important impediment to the region's further integration in global trade and a significant factor preventing countries from properly taking advantage of the multitude of regional, plurilateral, and bilateral trade agreements signed in the past decade and a half. This paper examines transport and communications infrastructure initiatives in Latin American and Asian regional trade arrangements and finds several lessons Asia can teach Latin America.
- Topic:
- Development, Economics, International Trade and Finance, Communications, and Infrastructure
- Political Geography:
- Asia and Latin America