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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.

 

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Latest Publications

Monetary policy: All in the mind (nearly)

The initial response to Japan's new monetary policy has been dramatic. Even before any action has been taken, the exchange rate has depreciated by 20% and equity prices are up 30%. People are talking as if the lost decades are over. Others, however, are arguing that Quantitative Easing (QE) shouldn

Ten tips for better G20 communiqués

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.  G20 Finance Ministers and Central Bank Governors will meet in Washington, DC on 18 April. They will issue a communiqué. But who will read it? These communiqués will never win a prize for literature. They are drafted by

Growth and jobs: A new focus for the IMF

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. His op-ed on Australia's agenda for the 2014 G20 meeting appears in today's Financial Review. Things are changing in the IMF. And it's positive change. For example, the IMF has admitted that it was wrong in underestimating the

Thatcherism and economic leadership

In the years of economic turbulence that have followed the onset of the global financial crisis, a common lament has been the absence of effective economic leadership and an unwillingness to take tough decisions. The early obituaries and assessments of Margaret Thatcher offer a potent reminder

BRICS shows G20 the way

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. Was the fifth summit of BRICS leaders (Brazil, Russia, India, China and South Africa) held in South Africa on 27 March a success? At least all the leaders attended. In fact, the BRICS summits have a perfect attendance record

What's wrong with the NZ economy?

New Zealand pioneered economic reform. Now, nearly three decades later, some Kiwis are wondering why there has not been a bigger pay-off. New Zealand real income was above the OECD average in the 1960s, fell to less than 60% of the OECD average by 1990 and since then, despite sustained vigorous

Australian model or Australian bubble?

In a blog post earlier this year I asked whether emerging economies had been lucky or smart. I also suggested that one way to start answering this question was to look at their performance during the major stress test provided by the global financial crisis. Of course, it's possible to ask

Cyprus and the euro: The first domino?

We now have a new deal for Cyprus, one that looks a fair bit closer to what the first deal should have been and what the IMF originally proposed. In particular, it backs away from the attempt to impose a levy on depositors covered by the EU-wide €100,000 deposit insurance and instead puts the

When countries go broke

Every country has detailed procedures to govern private sector bankruptcy. These allow the residual assets of the insolvent company to be divided equitably between creditors. The insolvent party can begin again, reputation damaged but at least able to move forward with the slate wiped clean. But

Who is to blame for austerity?

The concerted global fiscal stimulus of 2009 is an example of excellent policy-making, the more outstanding because subsequent policies have been ineffectual in addressing the weak recovery in advanced economies. Why did success morph so quickly into the fiscal policy lethargy of the past three

Is the US holding back IMF reform?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.   Is US leadership in the IMF and on global financial issues under threat? Over 100 former US senior policy advisors and academics think so. They wrote to Speaker of the US House of Representatives John Boehner on 11

Why is hosting the G20 important to Australia?

Hugh Jorgensen is a Research Associate in the Lowy Institute's G20 Studies Centre. This is going to become a politically vexing question for the Prime Minister ahead of the September federal election, as this year's G20 summit in St Petersburg is being held one week before Australians head to the

Emerging countries go with capital flow

It goes without saying that the 2008 financial crisis altered the way capital flows between countries. Cross-border capital flows fell by 60% between 2007 and 2012. We now have enough perspective to evaluate how this might affect future flows to emerging economies. Risk perceptions altered

The dangers of policy complacency

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The markets are taking in their stride the uncertain outcome from the Italian election and the continuing fiscal impasse in the US. If held last year, an Italian election with the same uncertain result would have likely

Conservative governments divorcing big business?

Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. Tax may be a dry subject but Mike Callaghan's 25 February piece was anything but. Mike highlighted a recent OECD report to the G20 Finance Ministers' meeting in Moscow on '

Free markets: Purity is impotence

Australia has a pretty consistent record of playing by the 'free market' rules in its international economic relations, with low tariffs, restrained use of anti-dumping restrictions, acceptance of international intellectual property norms and openness to international capital flows. By and large,

The power of decisive policy action

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.   Comparisons between the Japanese Prime Minister Shinzo Abe and the President of the European Central Bank (ECB) Mario Draghi may be rare. But the two men do have something in common. They have both demonstrated the power

Never easier to see the world

This piece about falling US airline ticket prices in The Atlantic (short version: they've fallen 50% in the last 30 years) reminds me of one of my favourite personal stories about globalisation. In early 1990 I had just finished high school and was embarking on the rite of passage that so many 

World economy: Keep optimism cautious

Earlier this month I noted that, after several years dominated by bad economic news, the start of the current year had brought hopes that we might finally see a degree of stability return to what has been a demonstrably unstable global economy. While some of this shift in sentiment could be put

Southern Europe wounded, not defeated

Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. All is not well in southern Europe. Six months ago I wrote in this space about southern Italy's crumbling infrastructure and rotting structures. Italy's voters just presented the

Busting some myths about the G20

Hugh Jorgensen is a Research Associate in the Lowy Institute's G20 Studies Centre. While much of the G20 commentary in early 2013 has tended towards a diagnosis of doom for the forum, to borrow from Mark Twain, the reports of the G20's death 'are greatly exaggerated'. The latest G20 Monitor

The unavoidable global tax problem

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.   Tax is a dry subject. It may be one of the certainties in life, but it is extremely complex, few fully understand it, and most individuals feel they pay too much of it. But therein lies a problem. Some large corporations

On 'minilateralism': Why we need the G20

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.  On the eve of the G20 Finance Ministers' meeting in Moscow on 15-16 February, Moises Nain commented in the Financial Times that he had given up on the G20. The problem, as he sees it, is the diversity of interests: 'when

Mike Callaghan on 'relaunching' the G20

With a G20 leaders' meeting happening in Russia this weekend, it's an opportune time to catch up with the Lowy Institute's G20 Studies Centre Director, Mike Callaghan.   At the end of January, Mike authored a new Lowy Institute Analysis, Relaunching the G20, which was quickly picked up in

Finance sector ills dormant, not cured

In America, the momentum for reform resulting from the 2008 financial crisis has dissipated, with Wall Street's continuing resistance weakening the initial political vigour. Some progress has been made. In due course, banks will have to hold more capital and meet liquidity requirements. US

No shortage of work for G20

Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. In two insightful posts on the G20 and global economic leadership, the Lowy Institute's Mike Callaghan wonders whether the G20 has run out of puff, and asks for a 'circuit

Debt vs deficit: A quick primer

Stephen Grenville's latest post talks about debt and deficits, two distinctly different concepts which often get confused or conflated. British PM David Cameron has been a bit naughty in this regard, and in a letter from the head of the UK's statistics authority, he's been sharply rebuked for

US budget woes: It's all politics

US fiscal policy slid over the fiscal cliff last month without serious damage and the next debt ceiling hurdle has been pushed back a few months. But the longer-term issues remain unaddressed. This failure to articulate a credible and sustainable budget strategy saps confidence and holds back a

Who will provide global economic leadership?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. The world is going through a dramatic transformation with the rapid growth of the emerging economies, particularly in Asia. What does this mean for global economic leadership? Fen Osler Hampson and Paul Heinbecker from the

Is central bank independence at risk?

Two decades ago, monetary policy seemed to have reached the 'end of history': it had evolved an optimal format from which no further refinement seemed necessary. The two key elements were a focus on low inflation and central bank independence as the means of separating monetary policy from political

Has the G20 run out of puff?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. Having attended the G20 sessions at the Davos World Economic Forum (WEF), Howard Davies writes in the Financial Times that 'the G20 seems condemned to drift along, unloved and unremarked, until the next crisis, when world

Emerging economies: Lucky or smart?

Last December, in a post on the future of global growth, I posed a set of questions related to the future performance of emerging markets. Will catch-up growth be sustained at pre-GFC rates or will it continue but at a slower pace, reflecting a tougher external environment? Or will the '

China's demographic turning point

Back in mid-2010, I wrote a lengthy post looking at the possible link between labour unrest in China and the so-called 'Lewisian turning point'. Last week, we got another critical data point on China's demographic profile when the country's National Bureau of Statistics announced that China's

World economy: 13 for 2013 (part 3)

This is part 3 of Mark's thirteen suggestions (in no particular order) of things to look out for in the global economy this year. Part 1 is here, part 2 is here.    9. Keep an eye on oil prices Despite some signs that the world is less sensitive to oil price hikes than it used to be, the

World economy: 13 for 2013 (part 2)

This is part 2 of Mark's thirteen suggestions (in no particular order) of things to look out for in the global economy this year. Part 1 is here. 5. China's growth prospects We spent quite a lot of 2012 on The Interpreter debating China's growth outlook, wondering whether last year's

World economy: 13 for 2013

It feels like a long time since we had a boring year in the world economy. Financial crises, debt crises, food crises, natural disasters, geo-economic power shifts, social upheaval and revolution have all shaped and reshaped the economic environment in recent years.  So will 2013 change the

Putting the heat on credit rating agencies

Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. Following a path-breaking Australian court judgment against Standard & Poors (S&P), Stephen Grenville, in a blog post on 14 November, notes how credit rating agencies (CRAs), 'by

Indonesia's WTO candidate

Peter McCawley is a Visiting Fellow at the Indonesia Project, ANU, and former Dean of the Asia Development Bank Institute, Tokyo. During the first decade of this century we heard a lot about the economic role of China and India but very little about Indonesia. For close to ten years following

Is the G20 agenda too big?

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre. Mark Thirlwell is Director of the Lowy Institute's International Economy Program and a G20 Studies Centre Fellow. Is the G20 agenda expanding too widely at a time when its top priority should be on reinvigorating global

More on why economic policy fails

  Unemployment in Ireland, Greece, Spain, Italy and Portugal. The above graph (h/t RCW and Early Warning) reminds us that the policy failures Stephen Grenville described in his piece earlier today are, above all, an enormous human tragedy. But there's slightly Brechtian subtext to Stephen's

Why economic policy fails

It was not pre-ordained that the economies of Europe, the US, and the UK would perform as poorly as it they have over the past two years. There were better policy options available which would have lowered unemployment (currently close to 8% in the US and the UK, and nearly 12% in Europe),

In defence of the IMF: At least it's consistent

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.  IMF Chief economist Olivier Blanchard recently confirmed that he was 'right about being wrong' in underestimating the effect of fiscal tightening on European economic growth. When he first suggested, in the IMF's October

Economic forecasting: Broken models

Economists are the butt of much mirth about their forecasting ability, but the recent performance may be getting beyond a joke. Failing to predict the precise outcome is one thing: being consistently wrong in the same direction is harder to explain, and very unhelpful for the policy-making

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