RealTime Economic Issues Watch

A Foreign Exchange Reserve Mystery: Which Major Advanced Economy Is Not Reporting the Currency Composition of Its Reserves?

Allie E. Bagnall — Thu, 24 May 2012 14:09:59 +0000

The International Monetary Fund (IMF) collects and publishes quarterly data on the currency composition of official foreign exchange reserves, known as COFER. The data are published for three groups: the world, the advanced economies, and the emerging and developing economies. For each group, allocated reserves are broken down into the traditional reserve currencies (US dollar, [...]

Latvia Shows the Way, Proving Some Famous Merchants of Doom Wrong

Anders Aslund — Wed, 23 May 2012 16:59:24 +0000

Today, the Latvian government can claim victory. In the first quarter of this year, Latvia’s annualized GDP grew by 6.8 percent, the highest growth rate in Europe, and last year Latvia recorded a growth rate of 5.5 percent, the third highest in Europe. Four years ago, GDP plummeted by a total of 24 percent because [...]

Implementing Basel III in the European Union: A Deeply Flawed Compromise

Morris Goldstein — Tue, 22 May 2012 14:22:18 +0000

By all accounts, EU member countries have for months been debating how to implement the minimum bank capital standards agreed under Basel III. Their arguments have unfolded as the EU works to complete its fourth Capital Requirements Directive (CRD4) and its Capital Requirements Regulation (CRR); (see Véron 2012). Three issues have been contentious: (i) whether [...]

Endgame in Greece: Don’t Look for an Imminent “Grexit”

Jacob Funk Kirkegaard — Mon, 21 May 2012 16:04:21 +0000

As the countdown toward a new Greek election heads toward June 17, most analysts predict an imminent Greek exit from the euro area. Almost anything can happen, but a few possibilities are worth considering. Any newly elected Greek government will have trouble implementing the current austerity program called for by euro leaders and the International [...]

Is Europe Ready for Banking Union?

Nicolas Véron — Fri, 18 May 2012 13:00:41 +0000

Systemic fragility in the European banking sector predates the Greek fiscal crisis. It was revealed by the subprime/Lehman shock of 2007–08, and has never been properly addressed since then in spite of successive stress tests. In recent weeks, several senior policymakers have become more explicit on the need for a banking union—in other words, a [...]

The Endgame in Greece—How a Bank Run Can Be Part of the Solution

Jacob Funk Kirkegaard — Wed, 16 May 2012 18:22:44 +0000

Greek politicians have once again let their country down and we are now headed for new Greek elections by mid-June. A highly volatile couple of weeks are in store, since the elections are sure to serve as a referendum on Greek membership of the euro. On one side will be the euro area and the [...]

US Power Sector Meets 2020 Climate Change Target—for a Month

Trevor Houser — Fri, 11 May 2012 18:21:23 +0000

At the United Nations climate change conference in Copenhagen in 2009, the United States committed to cut greenhouse gas emissions 17 percent below 2005 levels by 2020—a target included in cap-and-trade legislation that had passed the House of Representatives earlier that year. With the death of cap-and-trade in the Senate and the Republican takeover of [...]

Move the Financial Stability Board’s Secretariat to Asia

Nicolas Véron — Thu, 10 May 2012 16:01:05 +0000

On the face of it, the financial crisis of 2007-08 has helped rebalance the governance of global financial authorities, partially correcting the prior underrepresentation of emerging economies and of Asia in particular. From November 2008 to April 2009, when the G-7/G-8 was superseded by the G-20, the Financial Stability Board (FSB) was empowered and enlarged [...]

Greece’s Election: Tough Choices and a Sense of Déjà vu

Jacob Funk Kirkegaard — Thu, 10 May 2012 13:54:30 +0000

The Greek election on May 6 delivered a result that was only marginally surprising, defeating both “establishment parties,” the center-right New Democracy and the Socialists, or PASOK. Together they fell short of a majority, with only 108 seats for New Democracy and 41 for the Socialists, out of 300 parliamentary seats. 1 Because it is [...]

How to Save Corporate Tax Reform: Stop Exaggerating the Revenue Cost

Gary Clyde Hufbauer — Mon, 07 May 2012 14:27:16 +0000

Until recently, corporate tax reform was a bipartisan priority. Commissions with a Democratic slant and a Republican slant both argued for a cut in the statutory US corporate tax rate – the highest among advanced countries – from 35 percent to the neighborhood of 25 percent.1 Congressional Republicans and President Obama’s Treasury Department agreed. But [...]