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  • The Cost of Economic Espionage

    The Brookings Institution hosted a discussion with John Carlin , Assistant Attorney General for National Security. The topic was not terrorism, but another threat to national security: economic espionage. Carlin addressed the massive cost of economic espionage, and the efforts underway at the Justice Department to track and prevent intellectual property theft. Here is an excerpt: Watch the full talk here .
  • Ben Bernanke on Innovative Responses to Financial Crisis

    Ben Bernanke closed out a daylong discussion at the Brookings Institution titled Liquidity and the Role of the Lender of Last Resort. In his address, Bernanke talked about how the Fed--with him at the helm--responded to "unforeseen challenges" during the global financial crisis. Bernanke notes that the Fed had to be innovative because of limited legal powers.
  • Raghuram Rajan on Global Impact Uncoventional Monetary Policies

    The monetary policies of central banks in the world's largest economies have a significant impact not only on the residents of those nations, but on people and businesses around the world. This is especially true of the Federal Reserve's monetary policy moves. With the Fed looking to scale back its quantitative easing program, the Brookings Institution invited India's top central banker, Raghuram Rajan , to speak about the impact of the Fed's unconventional monetary policies on emerging economies. Here are two excerpts from that speech, in which Rajan discusses his concern that central bankers in emerging and developed economies are not adapting quickly enough to a changing global economy: Read more about Rajan's visit to Brookings here .
  • Brookings Paper on Long Term Unemployed

    Princeton economists Alan B. Krueger , Judd Cramer , and David Cho have released a new paper for the Brookings Institution in which they look at "plausibility of a unified explanation for the recent shifts in the price and real wage Phillips Curves and Beveridge Curve in the U.S." In other words, they study the long term unemployment problem. Their findings lead them to calling long term unemployed workers "unlucky." From the conclusion: Although the long-term unemployed have about a one in ten chance of moving into employment in any given month, when they do return to work their new jobs are often transitory. After 15 months, the long-term unemployed are more than twice as likely to have withdrawn from the labor force than to have settled into steady, full-time employment. And when they exit the labor force, the long-term unemployed tend to say that they no longer want a job, suggesting that many labor force exits could be enduring. The subset of the long-term unemployed who do regain employment tend to return to jobs in the same occupations and industries from which they were displaced, suggesting that significant challenges exist for helping the long-term unemployed to transition to growing sectors of the economy. A stronger macroeconomy helps the long-term unemployed in part because it raises demand in their previous sectors. But even in good times, the long-term unemployed are often on the margins of the labor market, with diminished employment prospects and relatively high labor force withdrawal rates. The portrait of the long-term unemployed in the U.S. that emerges here suggests that, to a considerable extent, they are an unlucky subset of the unemployed. Their diverse and varied set of characteristics implies that a broad array of policies will be needed to substantially lower the long-term unemployment rate and stem labor force withdrawal, as concentrating on any single occupation, industry, demographic group or region is unlikely to have a substantial impact reducing long-term unemployment by itself. Understanding the labor market and personal hurdles faced by the long-term unemployed should be a priority for future research in order to craft solutions to reduce long-term unemployment. Read the paper here . And watch Justin Wolfers discuss the paper in this video:
  • Kemal Derviş Sees 'Vulnerability' in Emerging Market Private Sector Balance Sheets

    There has been a fair bit of pessimism about the fate of emerging market economies this year. At Project Syndicate , Kermal Derviş writes that, with the Federal Reserve expected to begin tapering off its quantitative easing programs, "the emergent market bears are ascendant once again." In gauging whether countries like Brazil, India, Indonesia, South Africa, and Turkey are in trouble, Davis urges us to pay a little less attention to public deficits and look more at private sector balance sheets. To be sure, the weakest-looking emerging countries have large current-account deficits and low net central-bank reserves after deducting short-term debt from gross reserves. But one could argue that if there is a capital-flow reversal, the exchange rate would depreciate, causing exports of goods and services to increase and imports to decline; the resulting current-account adjustment would quickly reduce the need for capital inflows. Given fiscal space and solid banks, a new equilibrium would quickly be established. Unfortunately, the real vulnerability of some countries is rooted in private-sector balance sheets, with high leverage accumulating in both the household sector and among non-financial firms. Moreover, in many cases, the corporate sector, having grown accustomed to taking advantage of cheap funds from abroad to finance domestic activities, has significant foreign-currency exposure. Where that is the case, steep currency depreciation would bring with it serious balance-sheet problems, which, if large enough, would undermine the banking sector, despite strong capital cushions. Banking-sector problems would, in turn, require state intervention, causing the public-debt burden to rise. In an extreme case, a “Spanish” scenario could unfold (though without the constraint of a fixed exchange rate, as in the eurozone). It is this danger that sets a practical and political limit to flexible exchange rates. Some depreciation can be managed by most of the deficit countries; but a vicious circle could be triggered if the domestic currency loses too much value too quickly. Private-sector balance-sheet problems would weaken the financial sector, and the resulting pressure on public finances would compel austerity, thereby constraining consumer demand – and causing further damage to firms’ balance sheets. To prevent such a crisis, therefore, the exchange rate has to be managed – and in a manner that depends on a country’s specific circumstances. Large net central-bank reserves can help ease the process. Otherwise, a significant rise in interest rates must be used to retain short-term capital and allow more gradual real-sector adjustment. Higher interest rates will of course lead to slower growth and lower employment, but such costs are likely to be smaller than those of a full-blown crisis. Read Tailspin or Turbulence? here .
  • Bernanke Helps Open New Brookings Center for Fiscal and Monetary Policy Studies

    On Thursday the Brookings Institution opened the new Hutchins Center on Fiscal and Monetary Policy , and Ben Bernanke was one of the featured guests for the event. Bernanke spoke about the past, present, and future of monetary policy in the U.S. and the Federal Reserve in particular. With the Fed now in the early days of its centenary year, Bernanke is about to step down after being in charge for 8 challenging years. In this excerpt from his talk, Bernanke takes a moment from discussing the long view to address monetary policy during the global economic crisis, saying "we did the right thing": Here is the full talk: You can watch other sessions from the Hutchins Center launch here .
  • Brookings Institute: Foresight Africa 2014

    The Brookings Institution 's Africa Growth Initiative has asked experts to put forward what they think should be priorities for policy makers across the continent in the coming year. The responses offer a range of interesting ideas and arguments: from pushing more biotechnology in agriculture, to focusing on employment for urban and rural youth. Vera Songwe argues that any growth in Africa is dependent first on opening up channels for more capital: See all the responses in the Foresight Africa report, here .
  • Brookings Global Cities Initiative: Boosting North American Competitiveness

    Before there was an Italy, there were a collection of powerful city-states that were integral to a burgeoning global trade. Venice, Genoa, Florence, even little Siena all took turns being big global players in spite of their small geographic footprints. Today's economy isn't exactly turning back half a millenium, but we may need to once again recognize the role of cities as trading economies in and of themselves--even if they are not autonomous political entities. The Brookings Institution 's Global Cities Initiative gathered urban leaders from across North America last week, and Bruce Katz launched an interesting discussion about how cities are boosting global trade in the region.
  • Brookings' Metro Freight Series

    The Brookings Institution 's Metropolitan Policy Program has a strong new series out called Metro Freight. The series takes an in-depth look at trade "at the metropolitan scale." As the report notes, "The rise of global value chains forces metropolitan areas to assess their relationship to the global economy." The animated video below sets up the series nicely. Take a look, and then view the report here .
  • Fall 2013 Brookings Panel on Economic Activity

    The Brookings Panel on Economic Activity is under way in Washington today. You can take a look at the agenda here . Justin Wolfers and his colleagues have managed to put together a tempting mix of topics. Wolfers introduces two of today's discussions in these short videos. First, declining U.S. labor share: Second, seasonal data: Read more about the conference, and download the conference papers, here . And follow the conference via Twitter by using #BPEA .
  • Don't Call it a Comeback...or a Black Swan: Lagarde on the EU Recovery

    IMF Director Christine Lagarde visited the Brookings Institution yesterday and spoke about the outlook for the global economy. She was, as she tends to be, deliberate and clear, and while she was anything but glowing in her assessment of the state of the global economy, she was not in any way pessimistic. Here is a brief excerpt in which she discusses the "slow and deliberate" recovery of the EU: Watch the full conversation here .
  • The Rise of Suburban Poverty

    The suburban poor population has been growing at an alarming rate, according to Elizabeth Kneebone and Alan Berube of the Brookings Institution's Metropolitan Policy Program . While suburban poverty has increased over 60% since 2000, we still have trouble picturing poverty outside of urban or deep rural areas. Kneebone and Berube have authored a book, Confronting Suburban Poverty in America . They also have a lot of helpful supplements, community profiles, and stories online, here . This video highlights the central challenge of tackling the rising poverty rate in the suburbs.
  • American Families' Heavy Student Debt Burden and the Value of Subsidizing Higher Education

    When it comes to household debt, mortgages still dominate. But you might be surprised to learn, as Brookings 's Isabel Sawhill notes, that student loan debt is now the second biggest source of debt for U.S. households--ahead of credit card debt and car loans. Taking on that debt still is not a terrible idea ... as long as you graduate. Sawhill and Ron Haskins , her co-director at the Brookings Center on Children and Families recently discussed the economic advantages of a college education. And they raise an interesting question: is the U.S. government's approach to subsidizing higher education paying off?
  • A Call to Promote Saving Through the Tax System

    If Karen Dynan were in charge of fixing the federal budget, she would put in place measures to encourage more savings for Americans at all income levels. Dynan, Co-director of Economic Studies at the Brookings Institution , has written a policy proposal on savings for The Hamilton Project . In it, she point to the figure below as revealing a major problem: Dynan writes: Increasing personal saving in the United States is a desirable policy goal. To be sure, over the near future there would be a downside to households saving more because that means they would be spending less, and, in turn, the economic recovery would not be as strong as it otherwise would be. But, over the longer run, higher personal saving would lead to stronger economic growth. The correlation between a country’s saving rate and its investment rate remains large and significant despite the globalization of international capital markets (Obstfeld and Rogoff, 2000). Hence, higher personal saving in the United States should increase investment in this country, which, in turn, should raise our capital stock and our productive capacity. In addition to promoting higher personal saving in the aggregate, policy also should encourage higher saving among individual households. Households need savings in order to cope with unforeseen disruptions to their income and unanticipated consumption needs. Having such reserves is even more important now than it was in the past because household income volatility has trended upward amid ever-more-competitive and dynamic labor markets: recent research has found that the share of households experiencing a 50 percent plunge in income over a two-year period climbed from about 7 percent in 1971 to 10 percent in 2008 (Dynan, Elmendorf, and Sichel 2012). Moreover, as policymakers look for ways to reduce growing budget deficits, they may cut social programs so that the need for households to have precautionary reserves may be even higher in the future. Saving also provides households with opportunities. Funds accumulated through saving can be used to pay for college tuition and to purchase big-ticket items such as cars and homes. Saving is likely even more important to attaining homeownership than it was in the past, given the greatly reduced availability of low-down-payment mortgages in the wake of the recent mortgage crisis. In addition, saving puts some households in a better position to establish businesses. Read the policy proposal here . And watch Dynan summarize the report below:
  • Brookings Paper Calls on Regional Firms to Increase Exports

    Researchers in the Brooking Institution 's Metropolitan Policy Program have put out a new paper calling on the federal government to "initiate a short-term competitive Regional Export Accelerator Challenge (REACH) grant program." They argue that too many U.S. cities are too slow to engage in the global marketplace. From the paper: Despite the size and growth of foreign consumer demand, too many firms and too many parts of the United States remain domestically-oriented, thereby missing out on opportunities to innovate and expand. In addition, the national export service delivery system is too Washington-centric and does not embrace federalism’s opportunities to work directly with leaders in regions, and their state partners, to globalize traditional economic development strategies. The key problem is that both individual firms and entire regions under-export. -Too few firms are exporting and exporting regularly. As of 2010, less than 1 percent of U.S. firms sell a product abroad, a much lower share than in other countries, including major trading partners such as Canada, Germany, and Korea. While the number of new exporting firms continues to grow (with 16,500 firms beginning to export between 2009 and 2010), that pace is slower than the creation of all new firms, keeping the overall percentage of exporting firms low. As of 2010, the United States has 293,000 exporters. However, only 188,000 firms exported in both 2009 and 2010, suggesting that approximately one-third of exporters may be “accidental exporters” that react to one-time demand from international buyers rather than integrating exports into their long-term sales and marketing strategy. -The nation itself remains a patchwork of exporting activity. The share of the U.S. economy that is driven by exports is relatively small, at 14 percent. But even at that level, 74 percent of metro areas—and 86 of the 100 largest metro economies—underperform the national rate. Metro areas as large and diverse as Atlanta, Baltimore, Denver, Miami, New York, and San Antonio all generate less than 8 percent of their economic output through exports, placing them in the bottom quarter of performers among the largest 100 metro economies. Read the paper here . Amy Liu , co-director of the Metropolitan Policy Program, discusses the need for domestic firms to expand exports in this interview: