Financial Crisis in Focus
Preparing for the G-20: PIIE senior fellows offer suggestions on the summit agenda for dealing with the global financial crisis. Morris Goldstein offers a 10 point plan for economic recovery. Jeff Schott explains why trade needs to be an important part of the discussions. Simon Johnson gives a primer on the summit and looks at the summit's "shadow agenda."
RealTime Economic Issues Watch:
The Global Financial Crisis
Views updated daily on the current crisis in global financial markets, its impact on the real economy, and the public policy choices confronting the United States and other countries.
Peterson Perspectives: Interviews on Current Issues
John Williamson suggests that the leaders of Brazil, Mexico, and Argentina will bring lessons from their own financial crises of a decade ago to the G-20 summit in mid-November. Listen to the interview.
Simon Johnson testifies before Congress with recommendations for a stimulus package to protect the economy from a severe, prolonged recession.
Gary Clyde Hufbauer, Howard F. Rosen, and Jisun Kim augment Okun's original misery index, a combination of the inflation rate and the unemployment rate, by adding a housing price index.
Arvind Subramanian sees an increasing role for emerging-market countries in shaping the global response to the financial crisis at the G-20 meeting November 14–15. Listen to the interview.
See also "The West versus the Rest?"
Simon Johnson sees more rough weather, a recession that could last years, and more need for urgent action by the United States and its global partners in a website audio interview.
>> Transcript
The first priority of international cooperation must be saving the eurozone, writes Simon Johnson.
Anders Åslund argues that while policymakers may not repeat the mistakes of the Great Depression, they must avoid making new errors that exacerbate the global financial crisis.
Anders Åslund says that following its loan agreement with the International Monetary Fund, Ukraine faces political turbulence, a painful retrenchment, and a slow recovery in a website audio interview.
>> Transcript
Simon Johnson and Peter Boone outline six steps governments can take to avoid financial war.
Globalization of the financial crisis requires a globalized response, write C. Fred Bergsten and Arvind Subramanian.
Morris Goldstein presents his 10-point financial regulatory reform plan at an Institute event.
Incomprehensibility was at the root of the current financial crisis, and it is at the root of our difficulty getting out of it, writes Steven R. Weisman.
Adam S. Posen last year warned of the financial risks in Europe now being realized, and of the limits on Germany's long-term sustainable growth. See also "The Four Horsemen of Subprime Stupidity."
Arvind Subramanian discusses how Indian policymakers should respond to the Indian credit crunch and notes that cutting interest rates does not have an entirely positive effect.
>> See also Hot Topic: Global Financial Crisis
Jacob Funk Kirkegaard analyzes recent developments in US and regional NAFTA trade in computer and information services, with particular emphasis on their modes of supply. Working Paper 08-10.
New Book: China's Rise: Challenges and Opportunities
C. Fred Bergsten, Charles Freeman, Nicholas R. Lardy, and Derek J. Mitchell
>> Event: Book Release | Interview with Lardy
Indian policymakers need to take immediate action to shore up the Indian financial sector, argues Arvind Subramanian.
Anders Åslund argues that the Russian economy is facing a period of stagnation or outright decline that can only be resolved by market liberalization.
A fundamental shift is taking place in the world economy to which the multilateral trading system has failed to adapt. Working Paper 08-8 by Aaditya Mattoo and Arvind Subramanian.
New Book: Banking on Basel: The Future of International Financial Regulation by Daniel K. Tarullo
Global Economic Prospects
The world economy is and will remain in a period of slower growth and moderating but still high inflation—a situation of mild global stagflation, forecasts Michael Mussa. Arvind Subramanian presents the economic outlook for emerging markets.
New Book: Challenges of Globalization: Imbalances and Growth
Anders Åslund and Marek Dabrowski
North Korea's grain balance has gone into deficit for the first time since the 1990s famine, and prices have also risen sharply, observe Stephan Haggard and Marcus Noland. Working Paper 08-9.
Gary Clyde Hufbauer testifies that the United States might better address climate change goals through international negotiations at the climate conference in Copenhagen next year and in the WTO rather than through unilateral trade measures. See also Leveling the Carbon Playing Field.
Edwin M. Truman tells Congress that some progress has been made on establishing international best practice standards for sovereign wealth funds, but that countries receiving investments need to strengthen the openness of their financial systems. Truman dispels four myths about these funds and presents a blueprint for sovereign wealth fund best practices.
Peterson Perspectives: Interviews on Current Issues
Anders Åslund argues that the Russian economy has been jolted by problems following its invasion of Georgia in August and that the West can exploit these difficulties as it tries to modify Russian behavior. See also: "10 Reasons Why the Russian Economy Will Falter"
>> Transcript
Peterson Perspectives: Interviews on Current Issues
Edwin M. Truman analyzes both the key concerns raised by sovereign wealth funds and the essential measures required to alleviate those concerns in a
website audio interview.
>> Transcript
Anders Åslund considers the Russian economy's prospects following recent developments in the US financial crisis and in Georgia. The West should use economic engagement, not sanctions, to control Russia and its leaders.
Adam S. Posen and Arvind Subramanian call for a joint public commitment by the world’s monetary policymakers to the common goal of reducing inflation. Posen compares today's economic situation to that of the early 1980s under Reagan.
Financial repression—low and now negative real return on deposits—in China costs households $36 billion and is posing substantial risks to China's economy, writes Nicholas R. Lardy. Policy Brief 08-8.
Gary Clyde Hufbauer and Jeffrey J. Schott dismiss anecdotal criticisms of NAFTA and offer proposals for improvement.
America's Gains from Globalization
Gary Clyde Hufbauer answers critics who question US gains from globalization.
Paper | Summary
Liberalization of policies related to foreign direct investment accounted for 30 percent of US inward FDI stock growth and 18 percent of US outward FDI stock growth between 1982 and 2006, find Matthew Adler and Gary Clyde Hufbauer. Working Paper 08-7.
William R. Cline and John Williamson present new estimates of fundamental equilibrium exchange rates for leading advanced and emerging-market economies in Policy Brief 08-7 using a model Cline has developed in Working Paper 08-6.
Most viewed pages for the past 7 days.
Forum RealTime Economic Issues Watch
Forum RealTime: The Financial Crisis and Emerging Markets
Arvind Subramanian
Op-ed The Next World War? It Could Be Financial
Peter Boone and Simon Johnson
Op-ed
Start by Saving the Eurozone
Peter Boone, Simon Johnson, and James Kwak
Forum Making the G-20 Summit Work: The "Ten-Plus-Ten" Plan
Morris Goldstein
Event The Future of International Financial Regulation
Daniel K. Tarullo
Event The Euro at 10: The Next Global Currency?
Joaquín Almunia, Lorenzo Bini Smaghi, Dominique Strauss-Kahn, and Christian Noyer
Op-ed
How to Manage the Banks
Peter Boone, Simon Johnson, and James Kwak
Op-ed Globalizing the Crisis Response
C. Fred Bergsten and Arvind Subramanian
Speech Globalization: The Concept, Causes, and Consequences
John Williamson
Most recently posted material.
Peterson Perspectives: Interviews on Current Issues
Latin American Memories at the G-20
John Williamson—November 7, 2008
John Williamson suggests that the leaders of Brazil, Mexico, and Argentina will bring lessons from their own financial crises of a decade ago to the G-20 summit in mid-November.
Op-ed
The Credit Crunch Conundrum
Arvind Subramanian—November 5, 2008
Cutting interest rates is not obviously positive for credit expansion. This newspaper posed the question well: how can there be a credit crunch if credit continues to grow at a torrid 30 percent? Yet, it is undeniable that call rates have risen sharply to double-digit levels. What is going on? And how should monetary policy respond?
Peterson Perspectives: Interviews on Current Issues
A Seat at the Table for Emerging Markets
Arvind Subramanian—November 4, 2008
Arvind Subramanian sees an increasing role for emerging-market countries in shaping the global response to the financial crisis at the G-20 meeting November 14–15.
Op-ed
The West versus the Rest?
Arvind Subramanian—November 3, 2008
Writing in the Financial Times last week, Kishore Mahbubani rightly drew attention to the contrast between the handling by the US and European countries of their own financial crises and their stance as advisers, lenders, and conditionality-setters when emerging markets faced their crises back in the late 1990s.
Testimony
Faltering Economic Growth and the Need for Economic Stimulus
Simon Johnson—October 30, 2008
The United States is facing a serious recession and subsequent slow growth, due to the effects of a crisis of confidence in and around the global credit system. Some sensible countercyclical policies are now being implemented in the United States, but problems in other parts of the world are still emerging and most economic forecasts continue to be marked down. In this environment, a total fiscal stimulus of around $450 billion (or roughly 3 percent of GDP) would be appropriate, with about half front-loaded in the first three quarters of 2009, when there will likely be recession, and the rest following over the next 8 to 12 quarters, during which otherwise growth will be slow.
Event
China's Rise: World Bank Event
October 29, 2008
Authors C. Fred Bergsten, Charles Freeman, Nicholas R. Lardy, and Derek J. Mitchell discussed the conclusions of their latest book, China's Rise: Challenges and Opportunities, at a book-signing event at the World bank organized by the Peterson Institute for International Economics, Center for Strategic and International Studies, and the World Bank InfoShop.
Video available online.
Working Paper 08-10
Distance Isn't Quite Dead: Recent Trade Patterns and Modes of Supply in Computer and Information Services in the United States and NAFTA Partners [pdf]
Jacob Funk Kirkegaard—October 31, 2008
This paper evaluates the statistical strengths and weaknesses of available data on US trade in computer and information services and estimates the scope of delivery through General Agreement on Trade in Services (GATS) modes 1 (cross-border supply), 3 (commercial presence), and 4 (presence of foreign nationals). Trade values are estimated using a new methodology that adheres, to the greatest extent possible, to the definitions of modes of supply in the 2002 Manual on Statistics of International Trade in Services.
Kirkegaard finds that US trade (particularly exports) in computer and information services is overwhelmingly and increasingly delivered through mode 3. He finds that the United States experienced declining overall revealed comparative advantage (RCA) in traditional mode-1 computer and information services trade from 1986 to 2006, while having a stable, positive RCA in mode-3 trade. A new methodology for tentatively estimating US imports of computer and information services in GATS mode 4 suggests that the information technology services sector dominates US mode-4 imports and that these imports are several times larger than US traditional mode-1 imports of computer and information services.
Peterson Perspectives: Interviews on Current Issues
Ukraine's Financial Ordeal
Anders Åslund—October 30, 2008
Anders Åslund says that following its loan agreement with the International Monetary Fund, Ukraine faces political turbulence, a painful retrenchment, and a slow recovery.
Op-ed
It Can Be Worse than the Great Depression
Anders Åslund—October 28, 2008
This is the worst global asset bubble and financial panic since the Great Depression of 1929–33. Still, almost all argue that it cannot become equally bad, because we have learned those lessons. Analytically, that statement does not hold. True, our policymakers are not likely to repeat the same mistakes of the Great Depression, but they may commit other mistakes. Bank deposit insurance has come to stay for good, but not all advances represent progress, and many create new vulnerabilities.
Paper
The Augmented Misery Index [pdf]
Gary Clyde Hufbauer, Howard Rosen, and Jisun Kim—October 24, 2008
The original misery index, a combination of the inflation rate and the unemployment rate, was created by Arthur Okun just after the first oil crisis of the 1970s and was popularized by Jimmy Carter during his presidential campaign in 1976. As Okun's label suggests, when the misery index is larger, people feel worse off. In this short note, we augment Okun’s original index by adding asset price measures to the mix. Current circumstances amply demonstrate that falling housing and stock prices contribute to a widespread feeling of misery.
