Financial Crisis in Focus
Globalization of the financial crisis requires a globalized response; this week's IMF conclave offers a unique opportunity to do so, write C. Fred Bergsten and Arvind Subramanian.
Central banks need to act decisively to stem the panic and restore more normal functioning to financial markets, urges Michael Mussa.
Arvind Subramanian proposes a master plan for China to bail out America. Nicholas R. Lardy discusses what policies China needs to respond to the current global economic slowdown.
Morris Goldstein presents his 10-point financial regulatory reform plan at an Institute event.
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.
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: Banking on Basel: The Future of International Financial Regulation by Daniel K. Tarullo
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 his "The Four Horsemen of Subprime Stupidity" on the broader sources of the crisis.
Simon Johnson and James Kwak argue that Treasury's purchase of mortgage-backed securities from banks should occur in two steps: purchasing the securities at fair market value and then providing capital injections as needed in exchange for newly issued preferred shares in the banks.
Peterson Perspectives InterviewsCrisis Management and Global Markets
with Morris Goldstein
with Adam S. Posen
>> See also Hot Topic: Global Financial Crisis
Peterson Perspectives: Interviews on Current Issues
Nicholas R. Lardy, coauthor of China's Rise, assesses China's economy slowdown, what China can do about it, and its impact on the global economy and financial crisis in a website audio interview.
>> Transcript
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: China's Rise: Challenges and Opportunities
C. Fred Bergsten, Charles Freeman, Nicholas R. Lardy, and Derek J. Mitchell
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. Policy Brief 08-8. Morris Goldstein and Nicholas Lardy find the undervaluation of the renminbi has increased in the three years since China adopted its new currency regime.
What would Korea look like after Kim Jong-il? Marcus Noland offers a look at the potential future for the two countries. See also the article "Markets and Famine in North Korea."
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.
News Release: Former IMF Economic Counsellor Simon Johnson Joins Peterson Institute as Senior Fellow
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.
News Release: Key Asian Currencies Still Substantially Undervalued with Respect to Dollar
New Book: Challenges of Globalization: Imbalances and Growth
Anders Åslund and Marek Dabrowski
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Event
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Most recently posted material.
Event
The Euro at 10: The Next Global Currency?
October 10, 2008
Speakers and panelists at the joint Peterson Institute–Bruegel conference explored questions centered on how the current global financial crisis will affect the relative positions of the euro and the dollar as global currencies. Audio of panelists and keynote speakers Dominique Strauss-Kahn, Joaquín Almunia, Lorenzo Bini Smaghi, and Christian Noyer is available online.
Op-ed
The Policy Priority Is to Act Decisively
Michael Mussa—October 9, 2008
Panic has gripped world financial markets since mid-September and threatens to transform global economic prospects from mild stagnation into the worst world recession in more than 30 years.
The panic began three weeks ago, when short-term credit markets in both Europe and the United States froze in the aftermath of the failure of Lehman Brothers and the rescue of AIG on punitive terms.
Peterson Perspectives: Interviews on Current Issues
China's Rise and the Global Financial Crisis
Nicholas R. Lardy—October 7, 2008
Nicholas R. Lardy, coauthor of China's Rise, assesses China's economy slowdown, what China can do about it, and its impact on the global economy and financial crisis.
Event
China's Rise: Challenges and Opportunities
October 8, 2008
The Peterson Institute and the Center for Strategic and International Studies (CSIS) hosted a joint conference to release their new book China's Rise: Challenges and Opportunities on October 8, 2008. Audio and video are available online.
Op-ed
Globalizing the Crisis Response
C. Fred Bergsten and Arvind Subramanian—October 8, 2008
Globalization of the financial crisis requires a globalized response. An internationally coordinated strategy, ranging far beyond the heroic efforts of the world's leading central banks, is essential. When finance ministers convene in Washington this week for the annual International Monetary Fund meeting, they should adopt several initial components of such a strategy. Not doing so would be almost as serious as if Congress had adjourned without passing the rescue legislation.
Op-ed
A Master Plan for China to Bail Out America
Arvind Subramanian—October 7, 2008
The financial rescue plan passed by the US Congress is viewed as flawed but necessary to head off panic in financial markets and loss of confidence in the economy. It seems a holding operation, a Plan C or D that might need augmentation via a Plan A.
A vital component of a Plan A is likely to be additional money. For one thing, there is suspicion that the amount of toxic assets is considerably greater than the rescue plan provides for. For another, more money may be required to address the problem in the housing market by providing relief to subprime and marginal borrowers. And finally, further fiscal stimulus could become necessary if recessionary forces take hold.
Event
Addressing the Current Financial Crisis
Morris Goldstein—October 7, 2008
Senior Fellow Morris Goldstein presented his diagnosis of the global financial crisis and his 10-point program for regulatory reform for responding to it at a Peterson Institute event held October 7, 2008. C. Fred Bergsten, William R. Cline, Simon Johnson, Michael Mussa, and Adam S. Posen joined Goldstein in a panel discussion. Audio and video will be available for this event.
Op-ed
Can Russia's Economy Afford Putin for Much Longer?
Ander Åslund—Posted October 7, 2008
Today the whole world is being hit by a tremendous financial crisis, but Russia is facing a perfect storm. The Russian stock market is in free fall, plummeting by 60 percent since May 19, a loss of $900 billion. And the plunge is accelerating. As a result, Russia's economic growth is likely to fall sharply and suddenly.
Event
Zoellick on Fighting Poverty in a Global Economic Crisis
Robert B. Zoellick—October 6, 2008
Robert B. Zoellick, president of the World Bank Group, spoke at the Peterson Institute October 6, 2008, on the development and implications of the global financial crisis, previewing the agenda he will present at the annual meetings of the World Bank and International Monetary Fund in Washington.
Working Paper
Multilateralism beyond Doha [pdf]
Aaditya Mattoo and Arvind Subramanian—October 2008
A fundamental shift is taking place in the world economy to which the multilateral trading system has failed
to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were
not even on the negotiating agenda. This paper advances five propositions: (1) the traditional negotiating
dynamic, driven by private-sector interests largely in the rich countries, is running out of steam; (2) the world
economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic
security has become a paramount concern for consumers, workers, and ordinary citizens; (3) international
economic integration can contribute to enhanced security; (4) addressing these new concerns—relating to
food, energy, and economic security—requires a wider agenda of multilateral cooperation, involving not just
the World Trade Organization but other multilateral institutions as well; and (5) despite shifts in economic
power across countries, the commonality of interests and scope for give-and-take on these new issues make
multilateral cooperation worth attempting.
