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382. EU Accession and the Euro: Close Together or Far Apart?
- Author:
- Peter B. Kenen and Ellen E. Meade
- Publication Date:
- 10-2003
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In May 2004, ten countries are due to join the European Union. They are therefore obliged to join the European Monetary Union (EMU) and adopt the euro as their national currency. Most of them, moreover, have been eager to do that. None of them sought an opt-out of the sort that Britain and Denmark obtained in 1991, when the Maastricht Treaty was drafted. Membership in EMU is not automatic, however, because the accession countries must first satisfy the preconditions contained in the Maastricht Treaty. Although those preconditions are rigorous, and some of the accession countries are still far from meeting them, most of those countries have indicated that they want to enter EMU at the earliest possible date.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- Britain, Europe, and Denmark
383. More Pain, More Gain: Politics and Economics of Eliminating Tariffs
- Author:
- Gary Hufbauer and Ben Goodrich
- Publication Date:
- 06-2003
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- A good proposal to eliminate tariffs must take into account both the pain and gain that developing countries are likely to experience. The authors take the measure of these costs and benefits and urge rich countries to maximize the benefits to developing countries while giving them ample time to accept, and adjust to, the changes that trade liberalization will require. But trade liberalization should not stop with tariff proposals. The United States and other industrial countries should generously reduce subsidies to farmers and eliminate nontariff barriers on agricultural imports. The United States should offer more concessions on services trade, particularly in its allowances for temporary foreign workers. Unless rich countries put more on the table, a WTO agreement to eliminate tariff barriers may be postponed for years.
- Topic:
- Economics, International Trade and Finance, Political Economy, and Third World
- Political Geography:
- United States
384. Rules Against Earnings Stripping: Wrong Answer to Corporate Inversions
- Author:
- Gary Hufbauer and Ariel Assa
- Publication Date:
- 05-2003
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The tax-driven expatriation of US corporations is a troubling phenomenon. In a “corporate inversion,” a new foreign corporation, typically located in a low-tax or no-tax country, replaces the existing US parent corporation of a multinational enterprise (MNE). The US corporation then becomes a subsidiary of the new foreign parent. Since the US tax treatment of an MNE operating in the United States is significantly less favorable when the top-tier parent corporation is a domestic rather than a foreign corporation, the inversion transaction averts a substantial amount of US tax. Inversions have attracted adverse attention from tax specialists, media, the US Treasury Department, and Congress. In the wake of September 11, it seemed downright unpatriotic for US firms to invert as a way of skimping on their tax payments.
- Topic:
- Economics, Government, and International Trade and Finance
- Political Geography:
- United States
385. The Impact of Economic Sanctions on US Trade: Andrew Rose's Gravity Model
- Author:
- Gary Clyde Hufbauer and Barbara Oegg
- Publication Date:
- 04-2003
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- With the end of the Cold War, the focus of US foreign policy changed—and so did that of economic sanctions. Partly because of increased cooperation within the UN framework, economic sanctions were imposed so routinely in the early 1990s that scholars called that period the sanctions decade. This proliferation sparked intense debate about the effectiveness of sanctions as a policy tool and moved US sanctions policy to the center of public discourse.
- Topic:
- Economics, International Trade and Finance, and Political Economy
- Political Geography:
- United States
386. Economic Leverage and the North Korean Nuclear Crisis
- Author:
- Kimberly Ann Elliott
- Publication Date:
- 04-2003
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Almost a decade ago, as the last nuclear crisis with North Korea was reaching a peak, I concluded the following about the potential utility of economic sanctions: The debate over US policy toward North Korea boils down to one deceptively simple question: what does Kim Il-sung want? No one can be sure of the answer and different interpretations have quite different policy implications. If the Great Leader views a nuclear weapons option as important to the survival of his regime, economic sanctions are unlikely to force him to give it up. But if he views the threat of developing nuclear weapons as a bargaining chip, some combination of carrots and sticks may induce him to trade it away.
- Topic:
- Diplomacy, Economics, and International Trade and Finance
- Political Geography:
- Israel, East Asia, and North Korea
387. The Difficulties of Discerning What's Too Tight: Taylor Rules and Japanese Monetary Policy
- Author:
- Adam S. Posen and Kenneth N. Kuttner
- Publication Date:
- 12-2003
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Observers have relied increasingly on simple reaction functions, such as the Taylor rule, to assess the conduct of monetary policy. Applying this approach to deflationary or near-zero inflation environments is problematic, however, and this paper examines two shortcomings of particular relevance to the Japanese case of the last decade. One is the unusually high degree of uncertainty associated with potential output in an environment of prolonged stagnation and deflation. Consequently, reaction function-based assessments of Japanese monetary policy are so sensitive to the chosen gauge of potential output as to be unreliable. The second shortcoming is the neglect of policy expectations, which become critically important as nominal interest rates approach zero. Using long-term bond yields, we identify five episodes since 1996 characterized by abrupt declines in Japanese inflation expectations. Policies undertaken by the Bank of Japan during this period did little to stabilize expectations, and the August 2000 interest rate increase appears to have intensified deflationary concerns.
- Topic:
- Climate Change, Economics, and International Trade and Finance
- Political Geography:
- Japan, Israel, East Asia, and Asia
388. Empirical Investigations of Inflation Targeting
- Author:
- Yifan Hu
- Publication Date:
- 07-2003
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- A growing number of countries have anchored their monetary policy to an explicit numerical rate or range of inflation since such an inflation targeting framework was first adopted by New Zealand in 1989. This paper empirically investigates issues associated with inflation targeting using a dataset of 66 countries for the 1980–2000 period.
- Topic:
- Development, Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- New Zealand
389. Revitalizing the Economies of Japan and the United States
- Author:
- C. Fred Bergsten
- Publication Date:
- 06-2003
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The United States and Japan are the two largest national economies in the world. Since the early 1990s, they have been moving in opposite directions. The United States enjoyed an expansion of record duration from the end of the Gulf War in 1991 until early 2001, growing much faster than any other G-7 country and much faster than it had at any time since the Second World War. Japan's economy, by contrast, has been virtually stagnant since its financial bubble burst in the early 1990s and has clearly experienced its worst performance since its recovery from the ravages of the Pacific War.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- United States, Japan, Israel, and East Asia
390. NAFTA Dispute Settlement Systems
- Author:
- Gary Hufbauer and Jeffrey J. Schott
- Publication Date:
- 06-2003
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Drawing on the 1989 Canada-US Free Trade Agreement (CUSFTA), the North American Free Trade Agreement (NAFTA) extended dispute settlement provisions to cover more ground. In fact, within NAFTA there are six dispute settlement systems. NAFTA Chapter 11 is designed to resolve investor-state disputes over property rights; Chapter 14 creates special provisions for handling disputes in the financial sector via the Chapter 20 dispute settlement process (DSP); Chapter 19 establishes a review mechanism to determine whether final antidumping (AD) and countervailing duty (CVD) decisions made in domestic tribunals are consistent with national laws; and Chapter 20 provides government-to-government consultation, at the ministerial level, to resolve high-level disputes. In addition, the NAFTA partners created interstate dispute mechanisms regarding domestic environmental and labor laws under the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAAL C), respectively. This chapter examines the first four dispute settlement systems; the NAAEC and NAALC systems are evaluated elsewhere in this book.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- United States, Latin America, and North America
391. Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants
- Author:
- J. Bradford Jensen, Andrew B. Bernard, and Peter K. Schott
- Publication Date:
- 05-2003
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper examines the role of international trade in the reallocation of U.S. manufacturing activity within and across industries from 1977 to 1997. It introduces a new measure of industry exposure to international trade, motivated by the Heckscher-Ohlin model, which focuses on where imports originate rather than their overall level. Results demonstrate that plant survival as well as output and employment growth are negatively associated with the share of industry imports sourced from the world's lowest-wage countries. Within industries, activity is reallocated towards capital-intensive plants. Plants are also more likely to alter their product mix (i.e. switch industries) in response to trade with low-wage countries. Plants altering their product mix switch to industries that are more capital-and skill-intensive.
- Topic:
- Economics, Government, and International Trade and Finance
- Political Geography:
- United States
392. Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics
- Author:
- J. Bradford Jensen, Andrew B. Bernard, and Peter K. Schott
- Publication Date:
- 05-2003
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper examines the response of industries and firms to changes in trade costs. Several new firm-level models of international trade with heterogeneous firms predict that industry productivity will rise as trade costs fall due to the reallocation of activity across plants within an industry. Using disaggregated U.S. import data, we create a new measure of trade costs over time and industries. As the models predict, productivity growth is faster in industries with falling trade costs. We also find evidence supporting the major hypotheses of the heterogenous- firm models. Plants in industries with falling trade costs are more likely to die or become exporters. Existing exporters increase their shipments abroad. The results do not apply equally across all sectors but are strongest for industries most likely to be producing horizontally-differentiated tradeable goods.
- Topic:
- Economics, Government, and International Trade and Finance
- Political Geography:
- United States
393. Improving The Sovereign Debt Restructuring Process
- Author:
- Brad Setser and Nouriel Roubini
- Publication Date:
- 03-2003
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The recent debate on reforming the international financial system has focused on the need to improve the sovereign debt restructuring process, and in particular on steps that could limit the risk that litigation could disrupt or delay a sovereign debt restructuring. This debate increasingly has focused on the debt restructuring process in those cases where debt reduction is needed to produce a sustainable debt profile. Less attention has been given to those cases where a sovereign lacks the reserves needed to cover its near-term obligations and, absent international support, has a clear need for debt rescheduling to push out near-term maturities.
- Topic:
- Economics, Government, and International Trade and Finance
394. Global Economic Prospects
- Author:
- Michael Mussa
- Publication Date:
- 09-2002
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The global economic recovery is continuing but at a somewhat slower pace than was anticipated six months ago. Specifically, using the country weights from the IMF's World Economic Outlook, the forecast for real GDP growth in the world economy during 2002 (i.e., on a fourth-quarter-to-fourth-quarter basis) is cut by about half a percentage point to 3 percent—a pace that is slightly below my estimate of the potential growth rate for world GDP. This downward revision reflects primarily slower growth than earlier expected during the first half of 2002 in most industrial countries and the expectation that growth will remain somewhat more sluggish than earlier expected at least through year-end. For 2003, the forecast for global economic growth is also cut by about half a percentage point—to 4 percent—reflecting both general factors suggesting slightly weaker performance in many industrial and developing countries and the particular economic risks arising from possible military action against Iraq and from potential credit events affecting key developing countries. Despite these downward revisions, however, there is little doubt that the world economy will see significant improvement this year from the 1 percent growth recorded in 2001, and it is still reasonable to expect further improvement to a growth rate modestly above global potential during 2003.
- Topic:
- Economics
- Political Geography:
- United States, Iraq, Europe, Israel, Asia, South America, Latin America, and North America
395. The Foreign Sales Corporation: Reaching the Last Act?
- Author:
- Gary Hufbauer
- Publication Date:
- 11-2002
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Some trade disputes—like long Russian novels—never seem to end. The United States, Europe, and other trading nations have disputed the taxation of export earnings since the 1970s. To understand why the Foreign Sales Corporation (FSC) dispute is so hard to resolve, we must start with a historical tour.
- Topic:
- Economics and Political Economy
- Political Geography:
- Russia, United States, and Europe
396. Further Financial Services Liberalization in the Doha Round?
- Author:
- Wendy Dobson
- Publication Date:
- 08-2002
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Recent evidence demonstrates strong links between developing countries' long-term growth and financial reform. Deputy Treasury Secretary Kenneth Dam has suggested that developing countries can transform their domestic financial sectors into "engines of growth."
- Topic:
- Economics, Emerging Markets, International Organization, and International Trade and Finance
397. Is Brazil Next?
- Author:
- John Williamson
- Publication Date:
- 08-2002
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This policy brief examines whether the pessimism that recently gripped the financial markets about Brazil's economic prospects is justified, and whether the big IMF program in support of Brazil announced on August 8, 2002, is likely to succeed in turning the tide. It concludes that present policies would be adequate to secure a gradual reduction in the debt/GDP ratio given return of the exchange rate to a less undervalued level and a level of interest rates that is normal by past Brazilian standards though still high by world standards, though not under the recent conditions of a severely undervalued real and astronomical interest rates. It also concludes that the strongly improving trend recently evident in Brazilian trade promises a progressive reduction in external vulnerability, though this again could be jeopardized by the maintenance of sky-high interest rates. It then argues that, despite the mixed records of the two principal opposition candidates for the presidency, neither would be likely to choose a policy of deliberately reneging on Brazil's debts. That being so, the recent market turbulence has to be interpreted as a panic in which even those convinced that Brazil's fundamentals are sound did not dare to speculate in favor of restoration of normality. Such situations are exactly those where the IMF can play a useful role in breaking a panic, and hence the new loan much improves the chances of Brazil avoiding the implosion that would be likely to follow a debt restructuring.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- Brazil and South America
398. The Looming Japanese Crisis
- Author:
- Adam S. Posen
- Publication Date:
- 05-2002
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- After more than a decade of economic stagnation and minimal structural change, Japan stands on the brink of outright financial crisis—the only debate is whether the Japanese government can dodge its imminent economic threats for another six months at most, or ride the wave of global expansion to throw still more money at these problems with decreasing effectiveness until the public debt becomes unsustainable (which should be no later than 2005). Either way, volatility in Japanese asset markets will be extremely high for the next 36 months, with significant declines on average in asset prices and the yen.
- Topic:
- Economics, Government, and International Trade and Finance
- Political Geography:
- Japan, Israel, and East Asia
399. Support the Ex-Im Bank: It Has Work to Do!
- Author:
- Gary Clyde Hufbauer and Ben Goodrich
- Publication Date:
- 05-2002
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The US Export-Import (Ex-Im) Bank is again at the center of controversy, as Congress debates the terms for its charter renewal. This policy brief critiques provisions of the House and Senate versions of the reauthorization bill and summarizes three justifications for Congress giving adequate support to the Ex-Im Bank. Box 1 provides a capsule description of the Ex-Im Bank's operations.
- Topic:
- Economics, Government, and International Trade and Finance
- Political Geography:
- United States
400. Sovereign Debt Restructuring: New Articles, New Contracts – or No Change?
- Author:
- Marcus Miller
- Publication Date:
- 04-2002
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- It was at the National Economists' Club in November 2001 that Anne Krueger, first deputy managing director of the International Monetary Fund, threw down the gauntlet. “There is,” she said, “a gaping hole [in the international financial architecture] – we lack incentives to help countries with unsustainable debts resolve them promptly and in an orderly way. At present the only available mechanism requires the international community to bail out the private creditors. It is high time this hole was filled.”
- Topic:
- Economics, Government, and International Trade and Finance