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Op-ed
Greek Deal Lets Banks Profit from "Immoral Hazard"
Arvind Subramanian
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The economic adjustment program agreed last weekend between Europe, the International Monetary Fund, and Greece will be considered and approved by the IMF's executive board soon. Early satisfaction with the program has given way to serious market doubts about it. These doubts are rational because the fiscal arithmetic simply does not work. For the IMF, this program represents a squandered opportunity because it could have gotten ahead of events and designed a much better program, specifically by facilitating orderly debt restructuring. Instead, we could end up with a program that is inequitable, perverse, and unsuccessful with much greater costs all around.
>> Read full op-ed
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Working Paper 10-4
The Margins of US Trade
[pdf]
Andrew B. Bernard, J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott
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Recent research in international trade emphasizes the importance of firms' extensive margins for understanding overall patterns of trade as well as how firms respond to specific events such as trade liberalization. In this paper, Jensen et al. use detailed US trade statistics to provide a broad overview of how the margins of trade contribute to variation in US imports and exports across trading partners, types of trade (i.e., arm's length versus related party) and both short and long time horizons. Among other results, the authors highlight the differential behavior of related-party and arm's-length trade in response to the 1997 Asian financial crisis.
>> Read full working paper [pdf]
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Working Paper 10-3
Intra-Firm Trade and Product Contractibility
[pdf]
Andrew B. Bernard, J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott
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This paper examines the determinants of intra-firm trade in US imports using detailed country-product data. Jensen et al. create a new measure of product contractibility based on the degree of intermediation in international trade for the product. The authors find important roles for the interaction of country and product characteristics in determining intra-firm trade shares. Intra-firm trade is high for products with low levels of contractibility sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.
>> Read full working paper [pdf]
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Working Paper 10-5
Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach
[pdf]
Olivier Jeanne
and Anton Korinek |
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This paper analyzes prudential controls on capital flows to emerging markets from the perspective of a Pigouvian tax that addresses externalities associated with the deleveraging cycle. It presents a model in which restricting capital inflows during boom times reduces the potential outflows during busts. This mitigates the feedback effects of deleveraging episodes, when tightening financial constraints on borrowers and collapsing prices for collateral assets have mutually reinforcing effects. In the authors' model, capital controls reduce macroeconomic volatility and increase standard measures of consumer welfare.
>> Read full working paper [pdf]
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Peterson Perspectives Interviews
US Job Growth and the Turmoil in Markets and in Europe
Michael Mussa assesses the latest US employment numbers and the potential effects of the chaos surrounding Europe and Greece.
PIIE Noted in the News and on the Web
PBS NewsHour
Bailout for Greece Raises Stability Concerns Across Europe, United States
Margaret Warner interviews C. Fred Bergsten on market turmoil following the rescue package for Greece and what the bailout means for the United States.
Preview of Our Next Issue
Updated
US and Canadian Climate Legislation by State and Province
The data table on US state and Canadian province climate change initiatives has been updated.
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Peterson Institute for International Economics