Peterson Institute for International Economics Update Newsletter
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PIIE Update Newsletter
October 10, 2012

"Washington's premier think tank on the global economy"
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  Peterson Perspectives Interview
Presidential Debate: A Missed Opportunity

C. Fred Bergsten
  C. Fred Bergsten C. Fred Bergsten says that neither President Obama nor Governor Romney offered much illumination on macroeconomic policy, the Federal Reserve, or the world economy. Bergsten also says that the presidential candidates need to address what they intend to do about Europe, trade, and the role of the International Monetary Fund.

>> Listen to the interview

  Working Paper 12-18
Developing the Services Sector as Engine of Growth for Asia: An Overview

Marcus Noland, Donghyun Park, and Gemma B. Estrada
  Marcus Noland The maturing of the manufacturing sector in many Asian countries, combined with the relative backwardness of its services sector, has made services sector development a top priority for developing Asia. The authors' central objective is to broadly survey and analyze the current landscape of the region's services sector so as to assess its potential to serve as an engine for inclusive economic growth. Their analysis indicates that services are already an important source of output, growth, and jobs in the region. However, its productivity greatly lags that of the advanced economies, which implies ample room for further growth. The impact of the services sector on poverty reduction is less clear but the authors do find some limited evidence of a poverty reduction effect. One key challenge for all Asian countries is to improve the quality of services sector data. Overall, while services sector development is a long and challenging process, creating more competitive services markets by removing a wide range of internal and external policy distortions is vital for improving services sector productivity. As important as such policy reforms are, complementary investments in physical infrastructure and human capital will also be necessary to achieve a strong services sector.

>> Read full working paper [pdf]

The New Indian Politics: No Slowdown, No Panic

Arvind Subramanian
  Arvind Subramanian The Indian government's recent reforms to reduce government subsidies and embrace greater foreign direct investment were unexpected and bold. Markets have rewarded them with surging stock prices and a rebound in the value of the rupee. The reforms may yet be reversed or diluted because of the political backlash. Their impact may be more symbolic than substantive. Nevertheless, they are significant in that they reflect changes in the operating assumptions of Indian politics. It is striking that India's economy has experienced close to double-digit inflation for more than three years, among the highest in the world. Remarkably, there has been no domestic uproar. This growing indifference to high inflation seems to be the result of the rise in real incomes that has accompanied high growth. But as growth has begun to head south, high government expenditure has become a problem, feeding investors' negative perceptions about the Indian economy, hence the recent actions to reduce government subsidies. But their modesty, the opposition they are generating, and the likelihood that any further reforms will not touch subsidies, all suggest that it will not be easy to break the hold of fiscal populism. This indifference to high inflation and the opportunistic, rather than serious, effort to roll back high government spending may yet come back to haunt the Indian economy in the future. For the moment the government's response is all about maintaining the pace of economic growth.

>> Read full op-ed
>> See also: Where Is the Bharatiya Janata Party?

Peterson Perspectives Interviews

audio  Turmoil at Gazprom: Is Its Demise Imminent? Part I
Anders Åslund explains how the surge in shale gas exploration has undercut the Russian energy giant Gazprom, reducing its profits and capacity for corruption.

audio  Turmoil at Gazprom: Is Its Demise Imminent? Part II
Anders Åslund says the collapse of profit potential at Gazprom appears to be shaking the administration of Russian President Putin, forcing him to deal with charges of corruption.

audio  Presidential Debate: A Missed Opportunity
C. Fred Bergsten says that neither President Obama nor Governor Romney offered much illumination on macroeconomic policy, the Federal Reserve, or the world economy. Bergsten also says that the presidential candidates need to address what they intend to do about Europe, trade, and the role of the International Monetary Fund.

Recent Blog Posts

RealTime Economic Issues Watch   China Economic Watch    North Korea:  Witness to Transformation
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Youth Unemployment in Europe: More Complicated Than It Looks

Protests, Riots, Rightists Rage in Europe—But No Ill Effect

Britain's Contractionary Fiscal Stimulus

Major SPR Oil Sales Are in the Offing

The US Case Against Chinese Autos and Auto Parts Is Not Likely to Curb Imports Dramatically
  Leading Indicators of Economic Rebalancing in China

China's Infrastructure Funding Suffers from Credibility Gap

The Change in Renminbi Expectations

Christmas Time for Local Infrastructure in China

Urbanization and Economic Growth in China

  Sources: European Views of China-DPRK Relations

Sources: Faisal Z. Ahmed on the Perils of Unearned Income

Moon Jae-in's initiative for 'South-North Economic Union'

Event: North Korea's Political Prisoner Camp System and the Plight of North Korean Refugees: A Call for Action

North Korea discovers an NGO. And is highly confused.

PIIE Noted in the News and on the Web

Financial Times
Intellectual Property: A New World of Royalties
Keith E. Maskus is quoted reaffirming the view that the United States actively tries to export its intellectual property laws through trade agreements. Maskus is author of Private Rights and Public Problems: The Global Economics of Intellectual Property in the 21st Century.

Financial Times
American Patent Law is Nonsense
In his Financial Times op-ed Sebastian Mallaby cites Keith E. Maskus's new book, Private Rights and Public Problems, while discussing examples of frivolous patent applications that are swamping the US Patent and Trademark Office.

China's Currency Foray Augurs Geopolitical Strains
The article introduces John Williamson as "one of the foremost academics on exchange rates" and notes he argues that US exchange-rate flexibility is actually limited because the dollar is the anchor of the system. Surjit Bhalla's new book, Devaluing to Prosperity: Misaligned Currencies and Their Growth Consequences, is also mentioned in the article along with Bhalla's view that China is shedding its mercantilist skin and switching its development model from exports to consumption-led growth.

India's Economy: As Economic Growth Slows, Is India Losing Its Way?
Arvind Subramanian and Shashi Tharoor, an elected member of the Indian Parliament, debate online on the Economist's website whether India is losing its way. The debate runs through October 15, 2012.

CCTV's Biz Asia
Subramanian on US-India Strategic Dialogue
Arvind Subramanian tells CCTV what to expect from the US-India Strategic Dialogue, noting the US-India trade relationship has been on autopilot while the China-India trade relationship has grown.

Voice of America:
2012 Ukrainian Elections Through the Eyes of US Experts
Anders Åslund joins a Voice of America discussion to preview the upcoming parliamentary elections in Ukraine and to discuss future cooperation between Kyiv, Brussels, and Washington.

Preview of Our Next Issue

Comments on "Methods of Policy Accommodation at the Interest-Rate Lower Bound" by Michael Woodford [pdf]
Adam S. Posen

Ukraine's Outdated Educational System Translates into Lagging Economy
Anders Åslund

In This Issue

Matías Rodríguez Inciarte Strength in a Time of Crisis: The Experience of Banco Santander

Matías Rodríguez Inciarte of Spain's largest bank, Banco Santander, discusses the European crisis and the progress toward achieving a banking union in the euro area.

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