Category Archives: international

Guest Contribution: “Europe’s Lehman Moment”

Today, we’re fortunate to have a guest contribution by Jeffry Frieden, Stanfield Professor of International Peace at Harvard University, and coauthor of Lost Decades: The Making of America’s Debt Crisis and the Long Recovery. This article first appeared on Reuter’s Opinion.


Europe’s Lehman Moment

 

By Jeffry Frieden

 

Europe is in the midst of its variant of the great debt crisis that hit the United States in 2008. Fears abound that if things go wrong, the continent will face its own “Lehman moment” — a recurrence of the sheer panic that hit American and world markets after the collapse of Lehman Brothers in October 2008. How did Europe arrive at this dire strait? What are its options? What is likely to happen?

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Rebalancing Update

Some groups have overstated the need for immediate fiscal retrenchment in order to push an agenda spending cuts, when in fact we face more serious problems of medium and long term spending growth and lagging tax revenues, and overall increasing indebtedness to the rest-of-the world. That second point (which I first made in 2005 [0] ) has been somewhat neglected in the (misplaced) focus on reining in spending at the short horizon.

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Will a Tax Repatration Holiday Spur Investment?

If you ask a person prefers to ignore data, the answer might be yes. If you ask a person who looks at the data, the answer is likely no. There are apparently a lot of the former [0]. Anyway, to some analysis. From the abstract of a paper by Dharmapala, Foley and Forbes entitled Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act:

This paper analyzes the impact on firm behavior of the Homeland Investment Act of 2004, which provided
a one-time tax holiday for the repatriation of foreign earnings by U.S. multinationals. …

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Consumption, Imports and the Prospects for US External Balances

Most forecasts incorporate a resurgence in the US trade and current account deficits. This projection makes sense to the extent that the US is expected to grow faster than Europe and Japan, and the estimated income elasticity of US imports exceeds that of US exports (the Houthakker-Magee finding [0]). Here’s a summary of forecasts for the current account.

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