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The International Economy Program

The International Economy program aims to explain developments in the international economy, and influence policy. It does so by undertaking independent analytical research.

The International Economy program contributes to the Lowy Institute’s core publications: policy briefs and policy analyses. For example, the program contributed the Lowy Institute Paper, John Edwards’ Beyond the Boom, which argued that Australia’s transition away from the commodities boom will be quite smooth.



Latest Publications

A more expensive Chinese lunch for Australia?

Last week, the IMF made its contribution to the ongoing debate over Chinese economic performance. The growth forecasts included in the Fund's latest Article IV Staff Report on China – which see growth this year at around 7.75% and at 7.7% in 2014 – are right up at the optimistic end of current

Indonesia's development formula

I share Sam Roggeveen's enthusiasm for the iconoclastic approach of Joe Studwell's How Asia Works (his previous book on Asian Godfathers was a great read too). I also share Studwell's scepticism about the 'magic of the market', his views on the IMF, and his admiration for the achievements of the

G20 on tax avoidance: Talk or action?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. There were reports prior to the G20 finance ministers' meeting in Moscow on 19-20 July that, while G20 gatherings do not always set the pulse racing, this gathering had a better chance than most of grabbing the attention of

Are robots killing jobs?

We've been through this debate before, says Wall Street Journal writer Daniel Akst. The last such period of disruptive automation was in the mid-20th century: Reading through the literature of the period, one is struck—and humbled—by how wrong so many smart people could be. Yet some got

G20: Rudd should go because it's important

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The G20 Leaders' summit in St Petersburg on 5-6 September 2013 continues to be a factor influencing the timing of the Australian federal election. But it says something about the status of the G20 when commentators argue that

Interview: 'How Asia Works' part II

Below is the second part of my exchange with Joe Studwell, whose book, as I said in the intro to part 1, has tested some assumptions about economic development I've been carrying around with me for a long time. SR: Asia is home to some of the great cautionary tales of industry policy: Malaysia’s

Interview: Author of 'How Asia Works'

Last month Marginal Revolution blogger Tyler Cowen described Joe Studwell's How Asia Works: Success and Failure in the World's Most Dynamic Region as 'perhaps my favourite economics book of the year'. I decided to see for myself what the fuss was about, and I must say I have rarely had my economic

China's incomplete financial evolution

The spike in China's short-term interest rates over the past month sent a shiver through world financial markets, in the same way that Fed Chairman Bernanke's statements on quantitative easing startled financial markets a month earlier. In both cases the market over-reacted, reflecting a

Financial reform: A job half-done

Nearly five years after the onset of the financial crisis, we might expect widespread agreement on what went wrong and how to fix it. But there is still a lot to be done, with some new thinking required. In the UK, the two biggest banks are still in government administration, the prudential

Monetary policy: BIS sounds the alarm

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The Bank of International Settlements (BIS) sounds like a dull place. It is the central banks' central bank. But its latest Annual report provides a loud wake-up call for governments everywhere. The summary chapter, 'Making the

G8 Summit: Lessons for the G20

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. Lough Erne, Northern Ireland, the site of the recent G8 summit, was chosen to inspire leaders, with Northern Ireland demonstrating that even the most intractable problems can be resolved. Were leaders inspired? David Cameron

Reader riposte: Costs of EU-US free trade deal

Reader Peter Frank recommends this Spiegel analysis of the proposed US-EU free trade agreement, which contains estimates that such a deal would cost Australia 52,000 jobs and result in 7.4% decline in Australia's per capita income. Peter writes: Interesting analysis of impacts of EU/US free trade

US-Europe FTA + TPP = Super FTA?

Geoff Miller is a former Director-General of the Office of National Assessments. Reading this morning's news from the G8 Summit and thinking back to recent discussions of the Trans Pacific Partnership (TPP), I was struck by the announcement of the likely opening of negotiations for a US-Europe

Do financial markets understand QE?

Fed Chairman Ben Bernanke sent a shiver through financial markets worldwide late last month when he said that if the Fed saw 'real and sustainable improvement in the labour market' it could 'take a step down' in the volume of its quantitative easing (QE), possibly 'in the next few meetings'. Bond

China's agenda in Switzerland (and Europe)

Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. For his first trip abroad as Chinese premier last month, Li Keqiang went to India and Pakistan and then continued to Switzerland and Germany before heading back home. Germany

Global economy: Experimental fallout

The global economy is in the midst of an unprecedented macroeconomic policy experiment based on unconventional monetary policy marked by a combination of high public debt, near-zero interest rates and aggressive quantitative easing. As a recent IMF policy assessment pointed out, the initial

Is China already a responsible economic stakeholder?

The meeting between Presidents Obama and Xi in Palm Springs over the weekend presented another opportunity to berate China for its international economic imbalances, but the two presidents sensibly found more fruitful things to talk about. It's getting harder to find fault in China's interaction

IMF's Greece mea culpa does not go far enough

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The IMF recently released a self-assessment of its 2010 Greek bailout program. The media commentary is summed up in the Forbes headline, IMF on Greece: We Screwed Up, But it's Really the Eurozone's Fault. Is this an example

Structural reform: Are we slow learners?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The global financial crisis has resulted in the IMF saying that there is a need to rethink macro policy. Samuel Brittan from the Financial Times has reflected on how central banks were lured into thinking that stability had been

Insolvency: When countries go broke

The debt mess in the European periphery (Ireland, Greece, Spain, Cyprus and Italy) has been a reminder of how hard it is to sort out sovereign insolvency. Much damage is done to the international economy when there are no clear rules for sovereign bankruptcy, analogous to domestic bankruptcy

Asia Pacific trade: Choosing sides

Hugh White makes a compelling case that we may have to choose between America and China one day, with that moment of choice decided by the two great powers. Here is one small example where we could do something which might – just might – make it less likely that this moment of choice will

Debt paranoia

Global bond markets seem determined to fight the last war. Having ignored the debt build-up that brought down the US financial system in 2008 and crippled the European periphery in 2010, debt phobia is now imposing excessive austerity on key advanced countries which should be growing faster.

Lifting Asia's economic voice

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. One of Australia's objectives when it chairs the G20 in 2014 should be to lift the voice of Asia in global economic forums. A step in this direction would be for Australia to coordinate a joint statement by the six Asian

Martin Wolf's climate change column

Further to the thread I started on Monday about Martin Wolf's pessimistic column, I've had an email from economist John Quiggin which goes directly to the source of Wolf's (and my) pessimism. For Wolf, the problem is that the case for acting against climate change is always based around privation

Bankers humbled in St Gallen

Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. The St Gallen Symposium, held annually at the University of St Gallen, Switzerland (my report on the 2012 edition) is smaller, more intimate and, thanks to its large student

Reader riposte: Countering Krugman

James Bloomfield writes: If you are going to link to yet more Krugman on austerity, you should also link to the contra argument, namely Tyler Cowen, Steven Pearlstein, Larry Summers, Betsey Stevenson and Justin Wolfers, and finally N Gregory Mankiw. And I didn't even get near the Chicago Boys (

The global macro policy experiment

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The world is going through a macroeconomic policy experiment, with many countries having very high levels of public debt, short-term interest rates close to zero, and central banks with balance sheets bloated with public debt

China doomsayers run out of arguments

Ever since China slowed from unsustainable 10%-plus growth figures in the pre-2008 decade, there has been a barrage of voices foreseeing a painful slump. Some even doubt that China will overtake American GDP.  Meanwhile, official figures show China growing at more than 7%, which is enough to

The deadly politics of fuel subsidies

When G20 leaders met in Pittsburgh in 2009, they committed to 'rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption'. Subsequent meetings have repeated this commitment. It's a big issue. One estimate puts the worldwide subsidies at 2

Is the G7 back?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. Finance Ministers from G7 countries (US, UK, Germany, Japan, Italy, France and Germany) met in London on 10-11 May 2013. This was described as a rarity, because in recent years G7 ministers have usually met on the sidelines of a

A new WTO boss: Brazil 1-0 Mexico

So Brazil has triumphed over Mexico in the contest to provide the next Director-General of the WTO. Roberto Azevedo (pictured) beat Herminio Blanco to take over from Pascal Lamy, who will step down on 31 August after serving two terms as DG. Brazil's President Dilma Rousseff declared that

Is there a middle-income trap?

With Europe stagnating, America in a limp recovery and Japan still mired in its lost decades, world growth has been sustained over the past two years by the performance of the emerging countries, which accounted for half of world growth. This has occurred despite confident predictions that these

Bending to China's wishes: Tibet and Glencore

Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. Due to China's size and importance, relations with Beijing are of a particular nature. Rather than a genuine give and take, it's often a case of 'you take and I give'. Countries

Can a new DG save the WTO?

And then there were two. The process of selecting a new Director-General for the WTO is heading to a conclusion, with the third and final round of consultations with members scheduled to start today. After the previous two rounds, the original nine-person shortlist has been whittled down to just

What can the world learn from Abenomics?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. As the debate over 'growth versus fiscal austerity' continues, with the latest battleground set to be the IMF's forthcoming annual review of the UK economy, attention continues to focus on what is happening in Japan. Simon

Fiscal policy: A rock and a hard place

With Spanish unemployment topping 27%, it's hard to argue that the recovery is on track. It's not just Spain: the IMF estimates, in its latest World Economic Outlook, that euro-area GDP declined nearly 1% during 2012 and this loss will not be recovered this year. The Fund forecasts growth of

The Twitterisation of economic debate

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The controversy over mistakes in a research paper by Harvard Professors Carmen Reinhart and Kenneth Rogoff is a sad indictment on the state of the public debate on economic policy. Reinhart & Rogoff's work was never

Why economists' errors matter

Economics blogs are all atwitter with discussion of Reinhart and Rogoff's (R&R) Excel error: it turns out that a 90% debt-to-GDP ratio is not a critical threshold for dramatically slower growth after all. All this excitement may be a storm in a teacup but there are wider lessons which go

What the G20 finance ministers did not say

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.  What was not included in the communiqué was the most interesting thing coming from the meeting of G20 finance ministers and central bank governors in Washington, DC on 18-19 April. Some of the omissions were positive,

How not to Excel in economics

Hugh Jorgensen is a Research Associate in the Lowy Institute's G20 Studies Centre. Drama, tension and controversy are not usually phenomena associated with high-level econometric analysis, but arguments over a paper written three years ago by two Harvard Professors, Carmen Reinhart and Kenneth

Commodity trade: Where's the scrutiny?

The Interpreter has commented on the relaxed attitude of Australian authorities to the possibility that world commodity prices might be manipulated to our disadvantage.  The Chinese seem more interested in the issue. The Glencore-Xstrata merger has finally been agreed by Chinese authorities