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Global income inequality will decline further in 2035, largely owing to rapid economic growth in the emerging-market economies, with India, China, and Sub-Saharan Africa reaping the most gains. Working Paper 15-7 by Tomas Hellebrandt and Paolo Mauro.

William R. Cline examines the empirical evidence on the Modigliani-Miller capital structure irrelevance proposition as applied to the banking sector. The central question he addresses is whether more highly capitalized banks do indeed enjoy lower costs of equity capital. Working Paper 15-8.

Avinash D. Persaud assesses the risks and dangers of Solvency II, the new EU directive for regulating insurance companies, and recommends an alternative approach. Policy Brief 15-5.


Fears of losing market share and "selling the country to foreigners" still dominate Brazil's national debate. Protectionist arguments, however, reflect concern over specific groups that would lose from increased openness and fail to take stock of the countless others who would benefit from liberalization, writes Monica de Bolle. Angel Ubide assesses Brazil's stabilization plan as like an IMF program but self-financed. See also: Brazil’s Adjustment: It’s (not) Mostly Fiscal

As many countries in Asia shift from a development model based on technology absorption to one that promotes innovation, specialized finance and investors can play a critical role in allowing innovative firms to conduct research, adopt technologies necessary for inventions, and ultimately commercialize innovations. Working Paper 15-6 by Ajai Chopra.

William R. Cline finds that the financial sectors in Asian emerging-market economies are now relatively unlikely to provoke new financial crises, either because of reforms after the East Asian financial crisis in the later 1990s or because of the dominance of state-owned banks not subject to bank runs. Working Paper 15-5.

Nicholas Borst and Nicholas R. Lardy trace the evolution of China's financial system away from a traditional bank-dominated and state-directed financial system toward a more complex, market-based system and analyze the optimal sequence of financial reforms needed to manage the new risks accompanying this evolution. Working Paper 15-4.

The vital role of innovation and knowledge in Asia's productivity growth and hence economic growth makes it critical that its financial system be able to channel more funds at lower cost to entrepreneurs and new firms in the future. Working Paper 15-3 by Gemma B. Estrada, Marcus Noland, Donghyun Park, and Arief Ramayandi.

Jacob Funk Kirkegaard empirically investigates US-India labor migration and finds it to dominate permanent and temporary employment-based migration to the United States. He concludes that the 2013 Senate Bill S-744 would ease access for Indian workers to the US labor market, while making it harder for some Indian high-tech firms to operate in the US market. Working Paper 15-1.

US concerns about Chinese leadership of the Asian Infrastructure Investment Bank are justified, but the way to address them is to join the institution and work from within, writes C. Fred Bergsten.

Germany has the obligation to reduce its external imbalances and contribute to global economic growth. Fortunately for Germany, a program of reforms and public investment would meet both objectives, writes Angel Ubide.

Ukraine: What Went Wrong and How to Fix ItNew Book: Ukraine: What Went Wrong and How to Fix It

by Anders Åslund

Release Event | News Release

Cullen S. Hendrix and Marcus Noland assess the state of governance reform in Myanmar and discuss outstanding challenges facing the country, particularly in the legal system, business regulatory framework, and bureaucratic capacity, as well as the potential use of external policy anchors, particularly the Extractive Industries Transparency Initiative, to strengthen Myanmar's ongoing reform effort. Working Paper 15-2.

Theodore H. Moran and Lindsay Oldenski analyze the recent reemergence of Japan as the most important source of foreign direct investment in the United States and recommend that US policy should focus on reinforcing and expanding the factors that attract high-performing firms and high-value production stages to the United States. Policy Brief 15-3.

Approval of the Trans-Pacific Partnership faces a major hurdle in the form of bipartisan demand in Congress that it address the manipulation of exchange rates; there is a way to resolve this dilemma, but it will require new initiatives by the Obama administration, Congress, and TPP partner countries, writes C. Fred Bergsten.

Korea should seek to join the Trans-Pacific Partnership (TPP) as soon as possible if it can manage its bilateral trade issues with Japan in a pragmatic way, write Jeffrey J. Schott and Cathleen Cimino. Simon Johnson urges the inclusion of a currency clause in the TPP agreement.

Chinese leaders have outlined an ambitious agenda for service sector reform, but myriad vested interests could slow or block their plans. Failure to reform and open up the service sector could seriously impair China’s growth prospects. Policy Brief 15-2 by Ryan Rutkowski.

Although the US unemployment rate has fallen, there is much unfinished business in restoring the health of the labor market, says Justin Wolfers in testimony before the US Senate Committee on Finance.

audio A Dramatic Opening with Cuba
Barbara Kotschwar, who was in Havana when normalization with Cuba was announced, assesses the impact and the prospects for renewed economic ties.
See also:
Speeding the Winds of Change in Cuba-US Economic Relations

Economic Normalization with Cuba: A Roadmap for US PolicymakersThe United States and Cuba are ending decades of hostility and heading toward normalizing their relations. Gary Clyde Hufbauer and Barbara Kotschwar provide recommendations on how to proceed in their recent book Economic Normalization with Cuba: A Roadmap for US Policymakers.

Seven years after the start of the global financial crisis in 2007, the prospect of secular stagnation threatens to fracture the political and social fabric of the euro area. A PIIE Briefing of six essays by economists at the Peterson Institute for International Economics offers a roadmap for policymakers to guide Europe out of its current self-defeated policy mix. Book: The Great Rebirth: Lessons from the Victory of Capitalism over Communism

Anders Åslund
Simeon Djankov, eds.

Release Event | News Release

A new PIIE Briefing, released on the heels of Prime Minister Abe’s election victory in December, calls on Japan to be flexible in the negotiations for a Trans-Pacific Partnership trade deal and to take steps to achieve fiscal sustainability over the medium and long term.

Kevin Stahler and Arvind Subramanian find that there has been a deterioration, not improvement, in competitiveness in the eurozone periphery countries, and the pattern of adjustment within the eurozone between 2007 and 2013 has been dramatically perverse, with Germany's competitiveness having improved by 9 percent and Greece's having deteriorated by 9 percent. Working Paper 14-10.

William R. Cline finds that all four of the major economies—China, the euro area, the United States, Japan—remain close to their fundamental equilibrium exchange rates (FEERs); however, a continued decline in the euro and the yen could push the US economy to an excessive deficit. Policy Brief 14-25.

Theodore H. Moran identifies the most important market failures and impediments that hinder the spread of supply chains in developing economies and examines how some host governments have been successful in overcoming these obstacles. Working Paper 14-12.

Avinash D. Persaud explains why bail-in securities are fool’s gold and do not make sense in the more common and intractable case where many banks get into trouble at roughly the same time as the assets they own go bad. Policy Brief 14-23.

In NAFTA 20 Years Later, part of a new series of publications called PIIE Briefings, Institute scholars and experts assess the record two decades after the approval of the North American Free Trade Agreement.

Roberto Alvarez and José De Gregorio analyze the resilience of Latin American countries to the global financial crisis and find that effective macroeconomic policies were key to good economic performance. Working Paper 14-11.

Bridging the Pacific: Toward Free Trade and Investment between China and the United StatesNew Book: Bridging the Pacific: Toward Free Trade and Investment between China and the United States

by C. Fred Bergsten, Gary Clyde Hufbauer, and Sean Miner, assisted by Tyler Moran

Release Event | News Release



Vitor Gaspar

Gains from Harmonizing US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership

Caroline Freund and Sarah Oliver discuss the potential gains from harmonizing automobile regulations under the TTIP.

Vitor Gaspar

IMF Presentation on Fiscal Policy and Growth

Vitor Gaspar presents the IMF's new assessment of the relationship between fiscal policy and economic growth.

Ratna Sahay

Rethinking Financial Deepening: Stability and Growth in Emerging Markets

Ratna Sahay, IMF, presents the IMF's recent groundbreaking report on where emerging markets are on the stability-growth tradeoff that financial development entails.


The Future of Worldwide Income Distribution

Worldwide income distribution is becoming more equal. This video presents new evidence that global income inequality will decline further in 2035, largely owing to rapid economic growth in the emerging-market economies, with India, China, and Sub-Saharan Africa reaping the most gains.


Turbulent Outlook for Greece

The escalating confrontation between Greece and its international creditors has further devastated Greece's economic outlook. The damage will be severe even if Greek voters defy their prime minister and go along with the creditors' demands, according to Jacob Funk Kirkegaard, Simeon Djankov, and Angel Ubide.

An Economic Tragedy in Six Charts

Greece's descent into its difficulties is narrated and visualized through six charts. They focus on the severity of the economic downturn, reduced government spending, the increase in public debt and how Greek debt has changed hands from the private sector to European taxpayers.


  1. A Political and Intellectual Proxy War over Greece
    Angel Ubide
  2. Can the Grexit Lemon Be Made into Lemonade?
    Joseph E. Gagnon
  3. Greece Turns from Drama to Tragedy
    Jacob Funk Kirkegaard
  4. Turbulent Outlook for Greece
    Jacob Funk Kirkegaard, Simeon Djankov, and Angel Ubide
  5. Greece's Future Is in Greek Hands
    Jacob Funk Kirkegaard


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