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A website forum in which senior fellows of the Peterson Institute for International Economics discuss and debate their responses to global economic and financial developments as they occur each day and offer insights that others might overlook.
What hand wringing there has been recently on both sides of the Atlantic as the major European economies pursue austerity in their budgets and social programs! But is it not overdone? Europeans and Americans need only look east—to the European Union’s new eastern members—to see that austerity can deliver growth and [...]
On February 19, 2010, the International Monetary Fund released a “Staff Position Note” on capital controls as a policy instrument.1 The paper concluded that, subject to four conditions, controls on capital inflows can be justified. The four conditions are: the economy is operating near potential, there is an adequate level of reserves, the exchange rate [...]
The International Monetary Fund (IMF) has had a good year in Eastern Europe. It has been called to help numerous countries and it has acted fast and generously. It has learned several lessons from the East Asia financial crisis of 1997–98, which was very similar. The East European crisis is primarily [...]
For nearly a year, prominent American economists, such as Paul Krugman, Nouriel Roubini, and Kenneth Rogoff, have maintained that Latvia is just another Argentina (as Krugman has put it) and that it was only a matter of when, not whether, Latvia would be forced to devalue its currency. Well, despite these [...]
Latvia has a severe financial crisis, the preconditions for which have long been evident. A fixed exchange rate to the euro led to an excessive speculative influx of capital, boosting Latvia’s private foreign debt to 100 percent of GDP. Inflation soared to 16 percent, and the current account this year to 15 percent of GDP. [...]