An effective US export strategy must focus on four variables: the exchange rate of the dollar, trade agreements, our own export controls, and tax policy, writes C. Fred Bergsten. Jeffrey J. Schott and Bergsten hail USTR ambitions in negotiating a Trans-Pacific Partnership Agreement as an important move in securing US trade and security interests in Asia. See also The Future of APEC and Its Core Agenda.
Morris Goldstein prescribes policy measures to confront asset bubbles, too big to fail financial institutions, and beggar-thy-neighbor exchange rate policies. Policy Brief 10-3. Adam S. Posen rejects the notion that monetary policy should be used to tackle asset prices [pdf] and argues other tools are needed and better suited for the task.
News Release: Nicholas Lardy Appointed to New Chair in Honor of Anthony M. Solomon
Healthcare reform is good fiscal stimulus because it is timely, temporary, and targeted but Adam S. Posen warns it must be paid for before the temporary deficit it creates turns permanent.
Fundamental Equilibrium Exchange Rates 
The overvaluation of the dollar has been sharply reduced from March to the end of 2009, and the remaining overvaluation would be completely eliminated if the five East Asian economies with seriously undervalued exchange rates—China, Hong Kong, Malaysia, Taiwan, and Singapore—were to appreciate to equilibrium levels. Policy Brief 10-2 by William R. Cline and John Williamson. Listen to related interview.
Peterson Perspectives: Interviews on Current Issues
Arvind Subramanian argues that exporting countries in Asia, Africa, and Latin America have more reason than the United States to oppose China’s artificially undervalued currency.
Audio
In order to see real change in China’s exchange rate policy, Arvind Subramanian advises that more countries, including the silent victims of the policy, put pressure on China to reject its beggar-thy-neighborism.
Financial markets do care who chairs the central bank. Working Paper 07-3 by Kenneth N. Kuttner and Adam S. Posen.
Peterson Perspectives: Interviews on Current Issues
Michael Mussa traces the history of US bank deregulation since the 1930s and assesses the prospects for reviving the Glass-Steagall Act and other curbs on the banking sector.
Audio
The augmented misery index for the second half of 2009 fell to less than half the stratospheric level recorded in the first half, calculate Gary Clyde Hufbauer and Woan Foong Wong.
Peterson Perspectives: Interviews on Current Issues
Simon Johnson argues that President Obama's proposed bank tax is a step forward but that the financial system is still distorted by flawed incentives.
Audio | Transcript [pdf]
Economists may have failed to see the financial crisis coming, but they have made atonement through policies that have averted another Great Depression, writes Arvind Subramanian.
Peterson Perspectives: Interviews on Current Issues
Howard F. Rosen argues that exports are a key to US economic recovery but that export-led growth will require public and private investment. See also The Export Imperative.
Audio | Transcript [pdf]
With current forecasts showing extended economic stagnation in the developed world, policymakers need to focus on additional stimulus, not on an exit strategy, argues Joseph E. Gagnon. Policy Brief 09-22. Listen to related interview: The Fed Must Do More To Help the Economy
New Book: Reengaging Egypt: Options for US-Egypt Economic Relations by Barbara Kotschwar and Jeffrey J. Schott
North Korea's confiscatory currency reform and ban on the use of foreign currencies are economically misguided policies and will result in the reduction of North Korean citizens' welfare. Policy Brief 10-1 by Stephan Haggard and Marcus Noland. See also related interview and op-ed.
Peterson Perspectives: Interviews on Current Issues
Nicholas R. Lardy says relations with China are deteriorating over climate change, Iran, and the possible return of global current account imbalances. See also China's Rise: Challenges and Opportunities and The Future of China's Exchange Rate Policy.
Audio | Transcript [pdf]
Jeffrey A. Frankel and Daniel Xie test a synthesis technique to estimate countries' de facto exchange rate regimes and find that real world data require a flexible technique that allows parameters and regimes to shift frequently. Working Paper 10-1
Today's international monetary system is not uniquely prone to global current account imbalances [pdf]; it should continue to evolve with the international financial system, but the case for radical reform has not been made, argues Edwin M. Truman.
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
- Ukraine's Recovery, Ukraine's Election
- with Anders Åslund | Transcript [pdf]
- See also: How Ukraine Became a Market Economy and Democracy
- Reviving the US-Egypt Relationship
- with Barbara Kotschwar
- See also: Reengaging Egypt: Options for US-Egypt Economic Relations
- Europe's Struggle to Recover and Reform
- with Nicolas Véron
Russia is too "mature" an economy to be classified with the BRICs, writes Anders Åslund. In addition, it is lagging economically behind the other BRICs and needs to change quickly in order to avoid being ousted from BRIC.
Climate Change
William R. Cline notes that recent changes in approach by the United States, China, and India have improved the prospects for a climate change agreement in principle at Copenhagen. See also Global Warming and Agriculture: Impact Estimates by Country.
Audio | Transcript [pdf]
There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade. Working Paper 09-15 by Aaditya Mattoo, Arvind Subramanian, Dominique van der Mensbrugghe, and Jianwu He.
Wind energy can make a strong positive contribution to the fight against climate change through green technology cost reductions and innovation while creating predominantly local jobs, argue Jacob Funk Kirkegaard, Thilo Hanemann, and Lutz Weischer. Working Paper 09-14. Trevor Houser studies the economics of reducing greenhouse gas emissions through improvements in buildings' energy efficiency. Policy Brief 09-17. See also a guide to climate-change laws and the book Global Warming and the World Trading System.
Arvind Subramanian suggests Indian policymakers become more activist in relation to capital account policymaking. India should implement a goods and services tax in order to strengthen state capacity and bridge the gap between the economies of India and China.
Edwin M. Truman explains the broadly defined regulatory challenges facing the International Monetary Fund and offers insight into three types of challenges facing the IMF. Working Paper 09-16.
The global economic crisis has revealed the folly of large US budget and trade deficits, as well as the overvalued dollar that makes them possible. If it is serious about restoring long-term stable growth, the United States must balance the budget, stimulate private saving, and accept a declining international role for the dollar, writes C. Fred Bergsten. See also The Long-Term International Economic Position of the United States.
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Most recently posted material.
Op-ed
North Korea's Failed Currency Reform
Marcus Noland — February 5, 2010
On November 30, 2009, North Korea launched a surprise confiscatory currency reform aimed at cracking down on burgeoning private markets and reviving socialism. The move predictably set off chaos, and now it appears that the government is in retreat, acquiescing in the reopening of markets. The open question is what impact this episode may have for North Korea's looming leadership transition.
Peterson Perspectives Interview
China vs. the Rest of the World?
Arvind Subramanian — February 4, 2010
Arvind Subramanian argues that exporting countries in Asia, Africa, and Latin America have more reason than the United States to oppose China’s artificially undervalued currency.
RealTime Economic Issues Watch
Evaluating Copenhagen: Does the Accord Meet the Challenge?
Trevor Houser — February 4, 2010
Now that the dust has settled from the climate change conference in Copenhagen last December, it's a good time to step back and take stock. Policymakers and the public had high expectations for the summit and its conclusion left many confused and disappointed. But while the meeting did not reach con ...
Policy Brief 10-3
Confronting Asset Bubbles, Too Big to Fail, and Beggar-thy-Neighbor Exchange Rate Policies [pdf]
Morris Goldstein — February 4, 2010
The global financial crisis presents an opportunity—for the first time in many years—for wholesale reform of the international financial and monetary system. The root causes of the crisis, says Goldstein, can be found in both the financial and monetary spheres and so reforms must be prescribed for both. On the financial side, he emphasizes two problems: pricking asset price bubbles before they get too large and confronting "too big to fail" financial institutions. On the monetary side, he concentrates on what can be done to induce large, surplus economies to abandon now—and avoid in the future—beggar-thy-neighbor exchange rate policies.
Peterson Perspectives Interview
Did Obama 'Snub' the European Union?
Jacob Funk Kirkegaard — February 4, 2010
Jacob Funk Kirkegaard explains how the Lisbon Treaty reconstituting the European Union made it less essential for President Obama to attend a US-EU summit in May.
Op-ed
It Is the Poor Who Pay for the Weak Renminbi
Arvind Subramanian — February 4, 2010
China's exchange rate policy has largely been viewed through the prism of global imbalances. That has had three unfortunate consequences. It has allowed China to deflect attention away from its policy. It has obscured the real victims of this policy. And it has made political resolution of this policy more difficult.
Event
Better Together: The Costs and Benefits of an Integrated North American Cap-and-Trade Policy
Gary Doer —February 3, 2010
The Peterson Institute for International Economics and the C.D. Howe Institute of Canada held a half-day conference on February 3, 2010, to examine US and Canadian climate change policies and prospects going forward in light of the outcome of the Copenhagen summit in December 2009. The conference organizers had two objectives: to examine each country's efforts to reduce greenhouse gas emissions and to assess the potential costs and benefits of coordinating those efforts more closely, including through an integrated North American carbon trading regime. Canadian Ambassador to the United States Gary Doer delivered the keynote address on current climate change efforts in Canada and provided a Canadian perspective on evolving US policies.
Paper
Submission to the USTR in Support of a Trans-Pacific Partnership Agreement
C. Fred Bergsten and Jeffrey J. Schott — February 3, 2010
We strongly support the US government decision to participate in negotiations for a Trans-Pacific Partnership (TPP). Deepening US engagement with countries in the Asia-Pacific region is crucial for the advancement of both US economic and foreign policy interests, and the TPP is the best way to pursue both goals. The US objective should be to reach agreement on a TPP including at least a dozen Asia Pacific countries, including Japan and Korea and at least one major ASEAN country as well as the eight that are currently committed to the initiative, by the time of the APEC Summit to be hosted by the United States in President Obama's home town of Honolulu in late 2011. In this brief submission, we summarize why the TPP is important for the United States, assess the key US objectives in advancing the TPP talks, and address the major challenges for US policy. We conclude with recommendations regarding the participation in and substantive coverage of the prospective pact.
Op-ed
How Best to Boost US Exports
C. Fred Bergsten — February 3, 2010
President Obama has smartly suggested that a new export strategy could support 2 million very good American jobs, more than created by his stimulus initiative. The United States already sells about $1.5 trillion worth of goods and services annually to the rest of the world, which creates about 10 million high-paying jobs. Every $1 billion of additional exports will produce about 7,000 very good jobs. Robust export expansion would also reduce our large trade deficits and resultant need to borrow abroad to finance them.
RealTime Economic Issues Watch
The European Union Must Say "No" to the California-ization of Europe
Jacob Funk Kirkegaard — February 2, 2010
How much European democracy is too much?
In a move to bring the European Union closer to its citizens, the Lisbon Treaty established the "European Citizens' Initiative" (ECI) two years ago. This innovation would let one million EU citizens—or about 0.25 percent of the European Union's adult ...
News Release
Nicholas Lardy Appointed to New Chair in Honor of Anthony M. Solomon
February 1, 2010
The Peterson Institute for International Economics is pleased to announce the creation of an endowed chair in honor of the late Anthony M. Solomon and the appointment of Nicholas Lardy as the first scholar to hold the position. Dr. Lardy, who has ...
RealTime Economic Issues Watch
Move Your Politician's Money
Simon Johnson — February 1, 2010
I talked Sunday about Move Your Money with Guy Raz of NPR's Weekend All Things Considered (summary; ...
Peterson Perspectives Interview
FEERs Update: China's Persistently Undervalued Currency
John Williamson — January 29, 2010
In the light of PIIE's latest update of estimates of fundamental equilibrium exchange rates (FEERs), John Williamson discusses China's currency practices, its undervalued renminbi, and the impact on US-China trade.
Peterson Perspectives Interview
Too Big to Fail: Too Big to Solve?
Michael Mussa — January 27, 2010
Michael Mussa traces the history of US bank deregulation since the 1930s and assesses the prospects for reviving the Glass-Steagall Act and other curbs on the banking sector.
Op-ed
What Globalization Strategy for India?
Arvind Subramanian — January 27, 2010
India escaped the worst effects of the global financial crisis by following what Arvind Subramanian calls the "Goldilocks" globalization model—relying neither too much on foreign capital, like Eastern Europe, nor on exports, like China. While it may be tempting to policymakers to simply continue to follow the middle path, Arvind Subramanian cautions that the natural forces of economic convergence and the domestic political economy will carry India into reliance on foreign capital. Policy activism, particularly in relation to the capital account, is paramount to maintaining the Goldilocks globalization model.
