Sunday 05 Jul 2020 | 15:11 | SYDNEY
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Stephen Grenville's picture
People | experts Stephen Grenville
Nonresident Fellow
Lowy Institute
Stephen Grenville's picture
Areas of ExpertiseRegional economic integration; Australia's economic relations with East Asia; international financial flows and the global financial architecture; financial sector development in East Asia

A mug's game: Forecasting China's economic future

Forecasting is a mug's game, but we can't resist. Economists usually take a stab at the central growth forecast and then add a shopping-list of things that might go wrong. If you enumerate enough risks, there are built-in excuses when the central forecast doesn't happen. Inscrutable China provides a

International economy: What's in store for 2014?

Let's start with the global economic outlook. A common view is that advanced economies are at last on the mend and will take over the running from the emerging economies, which have provided much of world growth since 2008. The US and the UK seem likely to do better this year, because both are

Spying on Kristiani Herawati: A loss of judgement

The Weekend Australian carried a ‘well-sourced’ article defending our listening in on Kristiani Herawati, Indonesian President Susilo Bambang Yudhoyono's wife. Quoting the usual ‘well-connected insider who asked not to be named’, it argues that she was a legitimate target because she was

Does monetary policy need to be reinvented?

There is a widespread view that monetary policy has been fundamentally changed by the 2008 financial crisis. The IMF’s Chief Economist Olivier Blanchard says that ‘Monetary policy will never be the same’. Policy certainly explored new areas in response to unusual circumstances, but when the

The Trans-Pacific Partnership: Where have we got to?

The latest round of negotiations in Singapore for the Trans-Pacific Partnership (TPP)  wound up last week, still a long way short of agreement. Negotiators will meet again in January.  Thanks to WikiLeaks and other seepages from the confidential negotiations, the public discussion is starting to

GrainCorp and the complexity of foreign investment

The Australian Treasurer's rejection of the $3.4 billion take-over bid for grain handler GrainCorp by American firm Archer Daniels Midlands (ADM) has set a number of confusing and conflicting arguments running. It looks like a narrow issue dominated by domestic politics, but raises wider national

Infrastructure: Overcoming sovereign-debt phobia

Infrastructure is high on the agenda for G20, yet most aspects of infrastructure are essentially domestic policy matters, with little need — or room — for international cooperation. So what exactly might the G20 do?  There is a disconnect between the many viable infrastructure projects in

Spying on Indonesia: Apologise and learn

We have blundered. The Wise Heads are saying that we should tough this out, simply asserting that everyone does it. In fact we've gone a bit further. We've confirmed that we think if you can do it, then you should: 'The Australian government uses all the resources at its disposal'. They say the

Will Asia's rapid growth continue?

Convergence – the catch-up process whereby poor economies grow substantially faster than the mature economies – may be the most important economic story in the past fifty years. It is transforming the world, shifting hundreds of millions out of abject poverty while simultaneously shifting the

Secrecy, intellectual property and the TPP

WikiLeaks has turned its attention to the Trans Pacific Partnership. The press, in Australia and overseas, has noticed.  The Interpreter has previously drawn attention to the complex issues (some would say the downside concerns) of the Trans Pacific Partnership. The negotiations can be seen as

QE has global effects, needs global coordination

The unwinding of quantitative easing (QE) has been postponed for the moment. Financial markets have regained their composure and their panicky flight from emerging economies (notably India and Indonesia) has reversed. But the ‘taper’ of QE must inevitably occur: the emerging economies have a

Indonesia 2014: Jokowi or bust

You can't read a paper or watch TV in Indonesia without coming to the conclusion that Joko Widodo ('Jokowi'), the mayor of Jakarta, is a shoe-in for the 2014 Indonesian presidential election. Not only is he the front runner in most polls, he is ubiquitous, getting footpaths fixed, sorting out

Asian crisis and GFC compared: All the wrong lessons

  Do we learn from economic crises? The 2008-10 crises in America and Europe and the Asian crisis a decade earlier present a rich source of contrasting experience to examine. What a divergence there is between the 2008-10 policy responses and 1997-8! In 1997 IMF funding, even supplemented by

Who are the real laggards in global growth?

For the past three months there has been a steady chant of pessimism about growth prospects in the emerging economies, with the IMF’s voice prominent in the wailing. As IMF Managing Director Christine Lagarde told the G20 meeting in September: ‘Just as some advanced economies have begun to

Hey growth pessimists, why the long faces?

Economics has long been seen as the dismal science. Current commentary provides evidence. Whether discussing the cyclical conjuncture or the prospects for longer-term sustainable growth, gloom prevails. Certainly, the mature economies have had a pathetically limp recovery from the 2008 financial

Blame China for the global financial crisis?

In the five years since Lehman Brothers declared bankruptcy, the scale of the financial sector debacle has become clear. The global financial crisis (GFC) can now be seen as the product of multiple policy and institutional failures embedded within misguided doctrine. Amazingly, with the full

How much slowing in emerging economies?

Financial markets are the gate-keepers on capital flows to emerging economies, but their views can be disruptively fickle. Earlier this year the 'search for yield' brought a flood of foreign capital to these countries, supported by effusive commentary from the international press and market

Trade priorities in the 2013 election

Shadow Foreign Minister Julie Bishop's outline of the Coalition's international policies emphasised the importance of trade in general and free trade agreements (FTAs) in particular. She singled out for special mention those countries which have gained advantage by signing bilateral treaties ahead

The dark art of economic forecasting

Since so much international economic discussion revolves around GDP forecasting, it's worth looking at the quirks and pitfalls of this black art. Yogi Berra famously said 'It's tough to make predictions, especially about the future'. This view has been confirmed by more rigorous analysis, both at

Who will lead the Fed?

Ben Bernanke's term as Chairman of the US Federal Reserve finishes in January next year, and President Obama has indicated that he will be replaced rather than reappointed. The past few years demonstrate that running a central bank has plenty of pitfalls, with the 2008 crisis identifying mistakes

Emerging economies: Why so gloomy?

Ever since the 2008 financial crisis left many advanced economies in disarray, global growth has been sustained only through the continued spectacular performance of the emerging countries, especially China. But a wave of gloom has now spread concerning their prospects and the knock-on implications

Indonesia's development formula II

Part 1 of this post here. The debate Joe Studwell has advanced in How Asia Works (see Sam Roggeveen's three-part interview here) is, in fact, not that novel. Studwell is not alone in advocating industrial policy: Justin Lin, former World Bank chief economist, makes the same argument in his recent

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

China: What about the workers?

While the worrywart commentators are focused on the slowing of China's growth (even though most forecasts still start with a '7', which doubles income in a single decade), they reinforce the drama by implying that China has run out of policy options to maintain growth. Sure, China may not be able

Global growth gloom: Let's calm down

The IMF has updated its forecasts for global growth. The Financial Times reports that the IMF has 'slashed its forecasts' and that 'the downgrades highlight the gathering clouds around the world economy'. The Wall Street Journal opens its reporting on the update like this: 'investor fears that the

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

Infrastructure: The limits of PPPs

Infrastructure is a sturdy perennial on the G8 and G20 agendas. Invariably there is a plea for more public-private partnerships (PPPs). With the prospect of budget austerity as far ahead as the eye can see, the case for getting the private sector to pay for infrastructure seems compelling. If

Warming up to Indonesia

Most of us Indonesia groupies have long been nonplussed at how Australians are so luke-warm (and so ill-informed) about Indonesia, as confirmed by the latest Lowy poll. I agree with Dave McRae that we need more person-to-person links. But there are already quite a few. What about all those

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

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

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

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.

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 2.5

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

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 just

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 beyond

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