Peterson Institute Update

The IMF Revisits Sovereign Debt Restructuring, Not the SDRM

A long-awaited overview paper [pdf] on sovereign debt restructuring from the International Monetary Fund (IMF) is here, the first since 2005. And it does not revive the Sovereign Debt Restructuring Mechanism (SDRM) proposal, which died in 2003 at the hands of the United States and the big emerging markets. As the new paper explains politely, SDRM "failed to command the majority needed ... due to the members' reluctance to surrender ... sovereignty" a decade ago. It then takes great pains to establish that the core political reality has not changed, even though SDRM would have solved many of the problems with sovereign debt restructuring that have arisen in the interim.

RealTime post by Anna Gelpern.

Peterson Perspectives Interview: Are Tax Avoidance 'Havens' a Bad Thing? Part II

Nicolas Véron says Europe has taken a step forward in requiring European banks to exchange information to crack down on tax evasion.

Self-Defeating Austerity and the Improved US Fiscal Outlook

Last week, Tyler Cowen of the blog Marginal Revolution asked "Have we seen self-defeating austerity in the United States?" Cowen declines to take a clear stand on the question, but his main point is that the well-known fiscal cuts of 2012 and 2013 have, in fact, reduced the US budget deficit. Ergo, goes the implication, austerity was not self-defeating.

RealTime post by Joseph E. Gagnon.

Peterson Perspectives Interview: Are Tax Avoidance 'Havens' a Bad Thing? Part I

Nicolas Véron explains why low-tax havens in Europe like Ireland and Luxembourg are a legitimate business model and will be hard to suppress. In Part II: A Step Forward on Disclosure

Will the Pacific Alliance Succeed in Latin America After Other Trade Pacts Have Failed?

Pacific Alliance fever has set in. This trade grouping—which joins together the economies of Chile, Colombia, Mexico, and Peru—is holding its seventh summit on Thursday in the western Colombian city of Cali with more and more attention being paid throughout the region. The alliance has been lauded as "the most exciting thing going on today in Latin America" by Chile's Finance Minister, characterized by the Economist magazine as a "hard-nosed business deal," and crowned as "a new Latin American superpower" by MoneyWeek.

RealTime post by Barbara Kotschwar.

Congressional Testimony: European Union Economic Relations: Crisis and Opportunity

While the purpose of today's hearing is not to rehash what led to the economic challenges currently facing the European Union, I would like to start my testimony with a reminder that the European Union is fundamentally a political project. Although the euro, as a common currency, is obviously an economic instrument, its introduction within the European Union remains principally an outgrowth of political motivations. Somewhat paradoxically, to understand European economic issues, one needs to always look primarily through a political prism.

Congressional Testimony by Douglas A. Rediker.

The ECB Should Act to Avert the Risk of Deflation in the Euro Area

For years, observers of the European Central Bank (ECB) have been hearing the same line from its former President, Jean Claude Trichet: "We have one needle in our compass, and that is price stability." This precept should contribute to understanding the central bank's policy stance: When price stability is assured, there is no need to change policy. When price stability is at risk, policy should be changed to fulfill the mandate.

RealTime post by Angel Ubide.

Event: Monetary Policy in the Context of Balance Sheet Adjustments

Peter Praet, member of the Executive Board of the European Central Bank (ECB), addressed the topic of "Monetary Policy in the Context of Balance Sheet Adjustments."

Praet's prepared remarks and powerpoint are available online.

Underperforming Even in Good Times

The late Professor Raj Krishna's term "Hindu growth rate" was an aptly pejorative description of India's economic performance. But he was referring to the pre-take-off period, the first three decades after Independence.

Op-ed by Arvind Subramanian.

Interview: A Misguided Fix on Solar Panels?

Gary Clyde Hufbauer says that a reported US-EU-China accord to raise prices of solar panels will harm consumers and the solar energy industry.

Quit Biting on Apple: Congress's Misplaced Outrage over Corporate Taxes

Senators are chomping down hard on Apple's tax returns, trying to paint the company as Peck's Bad Boy of corporate taxation. The lawmakers' appetite has been whetted by a congressional investigation showing that the company avoided billions in taxes by setting up a complex web of global subsidiaries, some of them with no employees but run out of its headquarters in California. Senate hearings should thus be a learning exercise, both for the Congress and for the American public.

RealTime post by Gary Clyde Hufbauer.

From Here to Eternity: The Outlook for Fiscal Adjustment in Advanced Economies

Carlo Cottarelli, director of the International Monetary Fund's (IMF) Fiscal Affairs Department, addressed the topic "From Here to Eternity: The Outlook for Fiscal Adjustment in Advanced Economies," on May 20, 2013. His remarks built on the work behind the April 2013 issue of the IMF Fiscal Monitor, which surveys and analyzes the latest public finance developments and assesses policies to put public finances on a sustainable footing.

Event materials are available online.

Currency Wars, the Economy of the United States, and Reform of the International Monetary System

C. Fred Bergsten, the founding director of the Institute, delivered the twelfth annual Stavros Niarchos Foundation Lecture, on May 16, 2013. Drawing on his 45 years at the center of international economic policy debates, he argued in his lecture that currency manipulation is the single biggest challenge facing the world economic system and costs millions of US jobs. Bergsten offered bold proposals for countervailing intervention and ties between the International Monetary Fund and the World Trade Organization in evaluating currency misalignments.

Event materials are available online.

Be Warned George Osborne: More Home Owners Just Really Means Higher Unemployment

Unemployment is a major source of unhappiness and mental ill-health.

Yet after a century of economic research, the determinants of unemployment are still imperfectly understood, and unemployment levels in the industrialized nations are around 10 percent, with some over 20 percent.

Op-ed by David G. Blanchflower.

Effects of the Euro Crisis on Reserve Currency Holdings

The International Monetary Fund (IMF) released the latest update of its data on the Currency Composition of Official Foreign Exchange Reserves (COFER) at the end of March, with data through the end of 2012.

RealTime post by Allie E. Bagnall.

The Rise of Emerging Asia: Regional Peace and Global Security [pdf]

The rapid economic rise of China, India, and the Association of Southeast Asian Nations (ASEAN) could have several effects on regional peace and global security. The power transition perspective overstates the risk of conflict that results from convergence between dominant and challenger states. Rapid changes in economic and military capabilities can, however, have negative consequences for regional peace. Three features of the international environment—democratization, economic interdependence, and international institutions—provide weak insurance, at best, against conflict in Asia. Emerging Asian powers may also challenge existing global security regimes, a more indirect threat to global peace. The continuing contribution of Asia to global peace and security will require measures that will be difficult for newly empowered actors competing for status and influence.

Working Paper by Miles Kahler.

Is France a 'Peripheral' Country?

A few weeks ago Reuters reported that the French finance Minister, Pierre Moscovici, fell asleep during the final late night negotiations over the Cypriot bank bailout on March 24. It apparently fell to the International Monetary Fund (IMF) managing director, Christine Lagarde--a former French finance minister herself--to wake him up. No doubt the grueling round-the-clock schedule of the Cyprus negotiations would have taxed the most vigorous participant, but that should not stop speculation about the meaning of what happened.

RealTime post by Jacob Funk Kirkegaard.