Economics, Politics and Public Policy in East Asia and the Pacific
Author: Geethanjali Nataraj, NCAER
As developed countries struggle to recover after the global recession and try to confront the looming sovereign debt crisis in Europe, big emerging markets are now driving global growth.
Given the slow down in developed countries, emerging economies are trying to boost domestic demand to sustain growth — and this is particularly the case in China. Read more…
Author: Arief Ramayandi, ADB
The slow resolution of the European debt crisis has evolved into a liquidity problem which threatens the global financial system.
And these long-drawn-out efforts to address the sovereign debt problems have heightened uncertainties about resolving the crisis and induced speculative activities, threatening the survival of many European banks. Read more…
Author: Pravakar Sahoo, IEG
A falling currency may be normal and acceptable when the economy is slowing, but the rupee’s apparent free fall over the last few months — more than 15 per cent since August — is a serious blow to the Indian economy.
Though a depreciating rupee is not surprising given India’s international investment position, with its higher rate of liabilities than assets, such a sudden fall is worrisome. Read more…
Author: Stephen Grenville, Lowy Institute
Only a few years ago, the European common-currency arrangements were held up as a possible model for Asia.
With the euro under serious threat, we do not hear much about this now, but the current mess in Europe could well contain a number of lessons for Asia. Read more…
Authors: Yin-Wong Cheung, Guonan Ma and Robert N. McCauley
The global financial crisis and second round of quantitative easing served to highlight the international financial system’s dependence on the US dollar, a currency subject to national management.
Against this backdrop, a number of recent policy initiatives suggest the Chinese authorities have adopted a proactive strategy to promote the international use of the renminbi — referring to the use of a currency by non-residents to invoice trade, make payments and denominate assets and liabilities. Read more…
Author: Jacob Kierkegaard, PIIE
The G20 Summit in Cannes probably made its most important contribution to global financial stability and economic growth before it even commenced.
The summit, held 3–4 November, became a deadline for European leaders to deal decisively with the economic and financial crises in the euro zone. Read more…
Author: Gunter Dufey, Nanyang Technological University
There is a great deal of speculation around the rise of China’s economy and the eventual changes this will supposedly bring to the international monetary system.
The potential for such change undoubtedly exists as the Chinese economy continues to grow and catches up with more-developed countries. Read more…
Author: Sourabh Gupta, Samuels International
On 2 November, on the sidelines of the G20 leaders meeting in Cannes, Zhang Tao, director general of the international department of the People’s Bank of China (PBoC), averred that China’s foreign exchange management strategy was based on ‘the principle of safety, liquidity and adding value’.
Given the US$271 billion in reserve losses presumed to have accrued during the 2003-2010 period as a result of the US dollar’s depreciation, this notion of ‘safety’ appears to be a rather elastic one. Read more…
Author: Christopher Findlay, University of Adelaide
The way ahead in the European debt crisis appears to lie in refinancing the debt held by those countries whose sovereign bond spreads are widening and who are at risk of default: but who will pay?
Author: Huw McKay, Westpac and ANU
The Australian economy presents a conundrum for both policymakers and outside observers.
Despite a spectacular effort in evading the worst of the 2008/09 downturn and an impressive recovery trajectory in the labour market through 2010, a striking undercurrent of pessimism has emerged. Read more…
Author: Shankaran Nambiar, Manipal International University
The recent downgrade of the United States’ credit worthiness by Standard & Poor (S&P) rocked financial markets around the world, Malaysia’s included.
Yet a strange sense of confidence pervades Malaysia’s market observers. The impact of the downgrade by S&P from a rating of AAA to AA-plus is thought to have limited impact on the Malaysian economy.
Author: Ronald McKinnon, Stanford University
In reforming the international monetary system, exchange rates usually get primary attention front and center — such as in numerous meetings of the Group of 20. Indeed, at the G20 meeting in November 2010, President Obama attacked China for not appreciating its currency.
But China’s monetary policy has been oriented toward keeping the renminbi-dollar rate stable since 1994, which served China well as a nominal anchor for its domestic price level and to smooth exchange relationships with its smaller neighbours. Read more…
Author: Lex Rieffel, Brookings Institution
In a primer on sovereign debt restructuring published eight years ago, I noted that ‘None of the mature democracies in the world have come close to a sovereign default in the Bretton Woods era’.
What was true then is not true now, and the world is worse off because of it. Read more…
Author: Pravakar Sahoo, IEG
In its latest monetary policy review, the Reserve Bank of India (RBI), continuing with its tight monetary policy, revised policy rates upwards for the eleventh consecutive time.
Both the repo rate and the reverse repo rates went up by 50 basis points to 8 per cent (from 7.5 per cent) and 7 per cent (from 6.5 per cent) respectively. Read more…
Author: Nurhisham Hussein, Economics Malaysia
An interesting experiment is going on in Malaysia. The administration of Prime Minister Najib Razak has embarked on an economic transformation plan that marks a clear departure from the development plans of Malaysia’s past.
In years past Malaysia’s development plans, while ostensibly focusing on economic growth and structural changes, had been in actuality little more than budget priorities for the federal government. Read more…