Capital controls are back in vogue. This column argues that we should distinguish between episodic controls (gates) and long-standing controls (walls). Research shows that the apparent success of 'walls' in China and India tells us little about the consequences of capital controls imposed or removed in countries like Brazil and South Korea, as circumstances change. Walls and gates are fundamentally distinct, and policy debate needs to take into account these differences.
Michael Klein, 17 January 2013
Amit Khandelwal, Shang-Jin Wei, Peter Schott, 02 December 2012
If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. This paper examines Chinese textile and clothing exports before and after the removal of externally imposed quotas. Both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalisation quota allocation is not based on firm productivity. Removing this misallocation accounts for a substantial share of the overall productivity gains associated with the quota removal.
Barry Eichengreen, Donghyun Park, Kwanho Shin, 11 January 2013
The rapid economic growth of emerging markets is the leading headline of our age. But growth is slowing. Using new research, this column asks why this might be, and how policymakers might remedy flagging economies. The answer seems to be education. Recent research suggests, for instance, that the rapid expansion of secondary and tertiary education helped Korea’s successful transition from middle- to high-income status, very much unlike Malaysia and Thailand. Whether China can avoid the middle-income trap will depend in part upon developing an education system producing graduates with skills that Chinese employers require.
Philippe Bacchetta, Kenza Benhima, Yannick Kalantzis, 09 January 2013
China is perennially accused of currency manipulation. Yet, this column argues that a weak currency value doesn’t necessarily reflect currency manipulation. China is a fast growing economy with strong financial frictions and a high saving rate, and such countries naturally have weak currencies. Instead of focussing on accusations of currency manipulation, it might be more helpful for economists to encourage policies that foster Chinese consumption, gradually leading the renminbi to an appreciating path.
Amit Khandelwal, Peter Schott , Shang-Jin Wei, 15 January 2013
The institutions that manage trade barriers are subject to corruption, imposing additional distortions. This column shows that in China, the government misallocated quota licenses permitting firms to export. When the US and EU abolished quotas governing textile exports in 2005, China experienced productivity gains not only from the actual elimination of the quota but also from the termination of the misallocation due to inefficient licensing.
Fabrice Defever, Alejandro Riaño, 04 January 2013
The West perennially complains about China subsidising industry geared towards its domestic market. But what will happen when China enacts its latest Five Year Plan’s emphasis on domestic growth? This column argues that ending ‘pure-exporter subsidies’ – subsidies that boost Chinese exports while simultaneously protecting the least efficient, domestically oriented firms – will benefit Chinese consumers, but will cost the rest of the world.
Rudolfs Bems, Robert Johnson, 06 December 2012
With the rise of complex, globalised supply chains is the real effective exchange rate (REER), the most commonly used measure of competitiveness, now outdated? If it is, what should replace it? This column presents a ‘Value-Added REER’ and shows that it differs substantially from the conventional REER. Because it is possible to construct a new Value-Added REER from existing data, policymakers interested in improving their understanding of competitiveness might well consider including it in their toolbox.
Arvind Subramanian, Martin Kessler, 27 October 2012
As China becomes ever more important in the global economy, will its currency take on an international role? This column argues that in some sense, this is already happening – an increasing number of emerging-market currencies seem to track (co-move with) the renminbi – and the trend is set to continue.
Linda Lim, Ronald Mendoza, 24 September 2012
There has been much talk among economists of ‘global rebalancing’, with the focus on China and the US rebalancing their current accounts. But this column argues that the type of rebalancing that will bring real gains to the global economy is one that will be shaped by many countries, both industrial and developing.
Raman Ahmed, Heleen Mees, 28 August 2012
China’s huge savings are met with both awe and suspicion. This column asks what explains the high savings rate. It uses data from 1960 to 2009 – including the periods with the most significant economic reforms.
John Gibson, Chao Li, 09 August 2012
Many an economist will tell you they base their decisions on evidence. But what if the evidence is based on incorrect or irrelevant data? This column asks what this might mean for our view on regional inequality in China.
Françoise Lemoine, Deniz Ünal, 19 July 2012
Since 2008 China’s trade surplus has fallen sharply. This column argues that China has since become a major source of international demand, thanks to its strong economic growth. China’s import demand has been aimed at resource-rich countries and at its Asian neighbours, but also at European exporters, especially in high-end consumer goods.
Ganeshan Wignaraja, 04 July 2012
With little end in sight for the Doha Round of trade talks, this column argues that China and India are only going to pursue more free trade agreements. It asks what can be done to make sure these agreements lead to deeper integration between these countries and the rest of the world.
Pradumna Rana, 25 June 2012
China, Japan, and South Korea are currently negotiating a free trade agreement (FTA) lending support to the possibility of an agreement for the South-East Asian region as a whole. This column calls for more of the same – and quickly.
John Williamson, Olivier Jeanne, Arvind Subramanian, 11 June 2012
Do we need international rules for capital controls? This column looks at the different regimes in countries such as Brazil and China and argues that we do.
Yasuyuki Todo, 07 June 2012
How do firms go international? This column reviews evidence from industrialised and emerging economies, including Japan and China, with some surprising findings.
Kamil Yilmaz, 19 May 2012
Germany’s fiscal response to the crisis was timid compared with those of China and the US. This column uses business-cycle connectedness indices to show that Germany should follow in the footsteps of China and increase its domestic spending so that it will generate net positive connectedness to others. Germany was able to increase its exports thanks to the fact that countries like the US, China and Japan stimulated domestic spending significantly.
Carlo Carraro, Emanuele Massetti, 25 April 2012
In 2006 China became the world’s largest carbon dioxide polluter. This column argues that China is not rich enough to start reducing emissions immediately, but it is far too big not to do anything. The question is when and at what rate it is reasonable to call on China to start cutting back.
Marco Annunziata, 21 April 2012
According to its latest projections, the IMF no longer sees China as the main source of imbalances in the global economy. This column argues that fears of a stalling Chinese economy are exaggerated, and that sustained and more balanced Chinese growth will actually be a rare nugget of good news for the global economy.
Julian di Giovanni, Andrei Levchenko, Jing Zhang, 02 April 2012
The late Nobel Laureate Paul Samuelson argued that if China’s productivity growth accelerates in areas where it does not currently have a comparative advantage – notably the service sector – developed countries may suffer. This column presents a multi-country, multi-sector model, and reaches the opposite conclusion: the world, including developed countries, is far better off when China’s growth favours its current comparative disadvantage sectors.