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Blog Post - Views on the Economy and the World

How China Compares Internationally in New GDP Figures

| May 31, 2020

The World Bank on May 19, as it does every six years, released the results of the most recent International Comparison Program (ICP), which measures price levels and GDPs across 176 countries.  The new results are striking.  It is surprising that they have received almost no attention so far, perhaps overshadowed by all things coronavirus.

For the first time, the ICP shows China’s total real income as slightly larger than the US.  It reports that China’s GDP was $19,617 billion in 2017, in Purchasing Power Parity (PPP) terms, while the United States’ GDP stood at $19,519 billion.

Blog Post - Views on the Economy and the World

Let’s Go Back to Good Old Tariff-Cutting

| Dec. 02, 2019

The “bicycle theory” used to be a metaphor for international trade policy.  Just as standing still on a bicycle is not an option — one has to keep moving forward or else the bike will fall over – so it was said that international trade negotiators must continue to engage in successive rounds of liberalization, or else the open global trading system would be pulled down by protectionist interests.  I don’t know if the theory was ever right.  (And, to be honest, I don’t entirely understand why forward movement keeps a bicycle from falling over.)  But if we had stood still on trade policy over the last three years we would be a lot better off than where we are now.

Blog Post - Views on the Economy and the World

Fiscal Education for the G-7

| May 26, 2016
As the G-7 Leaders gather in Ise-Shima, Japan, on May 26-27, the still fragile global economy is on their minds.  They would like a road map to address stagnant growth. Their approach should be to talk less about currency wars and more about fiscal policy.Fiscal policy vs. monetary policyUnder the conditions that have prevailed in most major countries over the last ten years, we have reason to think that fiscal policy is a more powerful tool for affecting the level of economic activity, as compared to monetary policy.

Blog Post - Views on the Economy and the World

The Fed, China and Oil

| Jan. 01, 2016
My answers to three questions at the start of 2016 (from Chosun Ilbo, leading Korean newspaper):1. How do you analyze the recent US interest hike, and how will it influence the global economy in the coming year?The Fed had telegraphed its decision to raise the interest rate so far in advance and (by December) so clearly, that the policy change was already fully reflected in markets.  For example most of the substantial appreciation of the dollar since 2014 can be attributed to anticipation of the Fed tightening.

Blog Post - Views on the Economy and the World

The World Economy in 2015

| Dec. 28, 2014
I am posting in three parts the results of an interview on the year-end outlook.  (The questions come from Chosun Daily, leading Korean newspaper. The interview is to be published there January 1.)Part 1. The Global Economy in 2015Q: Around this time next year, which countries do you predict will be the winners, and which will be the losers of the year?A: The big gainers will be oil-importing economies, particularly China, India and other Asian countries.Russia will be the big loser. It has now become clear to all how fragile and vulnerable the Russian economy was, especially with respect to world oil prices.

Blog Post - Views on the Economy and the World

IMF Reform and Isolationism in Congress

| Jan. 29, 2014
A long-awaited reform of the International Monetary Fund has now been carelessly blocked by the US Congress.   This decision is just the latest in a series of self-inflicted blows since the turn of the century that have needlessly undermined the claim of the United States to global leadership.The IMF reform would have been an important step in updating the allocations of quotas among member countries.  From the negative congressional reaction, one might infer that the US was being asked either to contribute more money or to give up some voting power.

Blog Post - Views on the Economy and the World

Economists Polled On Pre-Election Economy

| Oct. 15, 2012
A survey of economists is published in the November 2012 issue of Foreign Policy.  One question was whether we thought that the US unemployment rate would dip below 8.0% before the election.   When the FPconducted the poll at the end of the summer, unemployment was 8.1-8.2%.  Now it’s 7.8%.  Only 8% of the respondents said “yes.”   (I was one.  I basically just extrapolated the trend of the last two years.)My fellow economists choose defense and agricultural subsidies as the two categories of US federal spending that they think the best to cut.

Blog Post - Views on the Economy and the World

Will Emerging Markets Fall In 2012

| Jan. 23, 2012
Emerging markets have performed amazingly well over the last seven years. They have outperformed the advanced industrialized countries in terms of economic growth, debt-to-GDP ratios, and countercyclical fiscal policy.  Many now receive better assessments by rating agencies and financial markets than some of the advanced economies.As 2012 begins, however, emerging markets may be due for a correction, triggered by a new wave of “risk off” behavior among investors. Will China experience a hard landing? Will a decline in commodity prices hit Latin America? Will the sovereign-debt woes of the European periphery spread to neighbors such as Turkey in a new “Aegean crisis”?Engorged by large capital inflows, some emerging market countries were in an overheated state a year ago.

Blog Post - Views on the Economy and the World

The Phylloxera Analogy: Lessons from Emerging Markets

| Dec. 24, 2010
In 2008, the global financial system was grievously infected by so-called toxic assets originating in the United States. As a result of the crisis, many have asked what fundamental rethinking will be necessary to save macroeconomic theory. Some answers may lie with models that have in the past been applied to fit the realities of emerging markets — models that are at home with the financial market imperfections that have now unexpectedly turned up in industrialized countries. The imperfections include default risk, asymmetric information, incentive incompatibility, procyclicality of capital flows, procyclicality of fiscal policy, imperfect property rights, and other flawed institutions.

Blog Post - Views on the Economy and the World

Leadership Need Not Come Only from the G7: The G20 Meeting in Korea

| Nov. 03, 2010
Korea may have an opportunity to exercise historic leadership, when it chairs the G-20 meeting in Seoul, November 11-12.    This will be the first time that a non-G-7 country has hosted the G-20 since the larger, more inclusive, group supplanted the smaller rich-country group in April of last year as the premier steering committee for the world economy.  With large emerging market and developing countries playing such expanded economic roles, the G-7 had lost legitimacy.  It was high time to make the membership more representative.