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Home / Tag Archives: International Macroeconomics: Exchange Rates, International Debt, etc.

Tag Archives: International Macroeconomics: Exchange Rates, International Debt, etc.

Currency Manipulation, Saving Manipulation, and the Current Account Balance

That’s the title of my new Mercatus working paper. Here’s the abstract: Concern over currency manipulation plays a major role in international economic diplomacy. Unfortunately, the concept is not well defined, and the most coherent explanations apply to a concept more accurately termed “saving manipulation,” as it has little to do with market exchange rates. I argue that the costs of currency manipulation are far lower than they are widely assumed to be and that the...

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Bill Gates and Ohio auto parts factory workers

China recently announced that it will beef up its intellectual property rights enforcement: China said on Sunday it would seek to improve protections for intellectual property rights, including raising the upper limits for compensation for rights infringements. . . . The document said that by 2022, China should be making progress in issues that have affected intellectual property rights enforcement, such as low compensation, high costs, and the difficulty of proof. By...

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The China (manipulation) shock and the (mostly) Trump fiscal shock

During the 2000s, China was accused of currency manipulation. Many observers claimed that this policy hurt America’s tradable goods sector, boosting our current account deficit. Some argue that this led to a net loss of jobs, and/or de-industrialization. Here I’d like to point out that the same models that suggest China’s currency manipulation hurt our tradable goods sector also imply that America’s recent fiscal policy hurts this sector even more, indeed by much,...

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Can tariffs have a deflationary impact?

Before I read Deirdre McCloskey, I had a rather primitive view of methodology. Economists should develop hypotheses and then test these theories using real world data. Models were mathematical and empirical tests used regression analysis. Today, I have a more eclectic view.  A macroeconomist uses basic economic concepts, stylized facts and financial market reactions to news in order to develop a framework for understanding important macro phenomena.  Influential...

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The curse of size

Small countries have numerous advantages. For instance, they are less likely to get drawn into a trade war. The Netherlands and Germany have roughly the same size current account surplus (as a share of GDP), and yet it’s Germany that attracts all the criticism. Singapore’s current account surplus is far larger than China’s (as a share of GDP), but the US goes after China. Yes, there are now other issues with China beside trade, but at the beginning it was the Chinese...

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So you don’t believe in using PPP data?

Is the Chinese economy larger than the US economy? In nominal terms (measured at current exchange rates), the Chinese economy is only about two-thirds the size of the US economy. In purchasing power parity terms (adjusting for differences in prices), the Chinese economy is actually larger than the US economy.  That’s because China has much lower prices. Over the years, I’ve seen numerous commenters make the following two claims: 1. Economies should be compared using...

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Language trumps money

The euro is used throughout most of Europe. Thus you’d naturally expect Europe’s financial center to be located in a country that uses the euro. But that’s not the case; the “Wall Street” of Europe is in “the City”, the term for London’s financial district. That’s as weird as if North America’s major financial center were located in Toronto. It seems like having a universally accepted language to do business deals (English) is more important than having a common...

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The laws of economics cannot be wished away

In areas such as rent control and minimum wage laws there’s an increasing tendency to ignore the basic laws of economics, and hope they somehow don’t apply to the policy being considered. President Trump provided another example in this recent tweet: There are multiple errors here.  The first sentence is incorrect; the yuan was much lower when I first visited Beijing in 1994.  The second sentence is also incorrect, for two different reasons.  Currency manipulation is...

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Peter Thiel’s pivot

Tyler Cowen linked to some discussion of a recent speech by Peter Thiel, a highly successful Silicon Valley entrepreneur. Thiel is known for holding somewhat libertarian views, but recently seems to be pivoting towards national conservatism.  The talk ranged over a wide variety of issues.  An attendee named Bonnie Kavoussi took notes: I took notes on my phone, so any mistakes are mine. These notes should be treated as paraphrases and not as direct quotes, since I was...

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The Trump administration’s advice to Malaysia

In a recent post I discussed John Cochrane’s reaction to the Treasury department’s criteria for “currency manipulation”. John’s post included a link to the report, which contains some quite odd recommendations that raise additional question marks. Consider the following: Malaysia’s external rebalancing in recent years is welcome, and the authorities should pursue appropriate policies to support a continuation of this trend, including by encouraging high-quality and...

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