output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

trade policy review for china the world s top exporter with new normal economic growth this paper has evaluated the wto trade policy review and added more information and recent data to examine more closely china s economy and trade major trade policies during 2014 16 were summarised as the belt and road initiative policies facilitating trade and new adjustments to support and promote cross border e commence after evaluating data on china s trade and economic performance it discussed three challenges the chinese government needs to deal with in the near future

populism and income redistribution abstract populist governments might attempt to favor workers in the short run by encouraging nominal wage increases but if the real wage can only be affected by productivity in the long run these redistributive attempts would lead to inflation and no real improvement based on this widely accepted argument this paper proposes a simple method to disentangle productivity from what is here called populist shocks in particular a bivariate structural vector autoregressive analysis with nominal and real wages and where long run restrictions are imposed can be used to identify these two structural innovations the methodology is applied to argentina using data from 1865 to 1974 to identify populist regimes

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

reform and opening up in the new era china trade policy review this paper reviews the major changes in china s trade policies in the last few years during this period the adjustment of trade policies has developed in the following ways first the establishment of free trade zones which emphasises the importance of advanced systems rather than preferential policies second putting forward the belt road initiative which indicates china s new stage of development from bringing in to going out third holding import expos which marks an era when china s foreign trade development has shifted from focusing on exports only to focusing on both exports and imports fourth reducing entry barriers of foreign capital which demonstrates that the policy framework for fdi has gradually changed from a positive list to a negative list fifth promoting trade negotiations which reflects that china has actively participated in bilateral regional and multilateral trade talks and finally building up new experimental fields of reform and opening up which shows evidence that a new generation of special economic zones is emerging

a volatility based theory of fiscal union desirability abstract heterogeneous countries may rationally choose to form a currency union first and a fiscal union later we find and illustrate empirically for the emu countries reasonable volatility conditions under which this sequencing in the deepening process is indeed rationalizable changes in the distribution of expected income shocks require a reassignment of political weights to restore unanimous support for an added fiscal dimension the bargaining space depends on countries relative income size and cross correlation of shocks

can aggregation explain the persistence of inflation abstract an aggregation exercise is proposed that aims at investigating whether the fast average adjustments of the disaggregate inflation series of the euro area cpi is coherent with the slow adjustment of euro area aggregate inflation estimating a dynamic factor model for 404 inflation sub indices of the euro area cpi allows to decompose the dynamics of inflation sub indices into a part due to a common macroeconomic shock and to sector specific idiosyncratic shocks although idiosyncratic shocks dominate the variance of sectoral prices one common factor appears to be the main driver of aggregate dynamics in addition the heterogenous propagation of this common shock across sectoral inflation rates and in particular its slow propagation to inflation rates of services generates the persistence of aggregate inflation we conclude that the aggregation mechanism explains a significant amount of aggregate inflation persistence

the political geography of the eurocrisis the european union provided a mixed response to the 2008 financial crisis on the one hand it refused to pursue fiscal integration through a common budget on the other it introduced significant transfers between countries that were designed to produce financial stabilization the authors analyze this response as the outcome of democratic constraints on eu leaders given the eu s current institutional structure citizens preferences pose a binding constraint on what leaders can do as these preferences limit the scope of risk pooling among members and the degree of political tolerance for different courses of action the authors show that citizens preferences reflect differences in the geography of income production regimes and institutional organization the heterogeneity of constituencies redistribution preferences combined with a diverse economic geography helps to explain why political constraints on national governments prevent them from engaging in further fiscal integration by contrast externalities among member states shift the preferences of citizens who may experience negative effects and make international redistribution politically feasible the authors analyze these two mechanisms and present novel empirical results on the determinants of preferences for fiscal integration and international redistribution in the aftermath of the eurocrisis

understanding china s urban pollution dynamics china s ongoing urban economic growth has sharply increased the population s per capita income lowered the count of people living below the poverty line and caused major environmental problems we survey the growing literature investigating the causes and consequences of china s urban pollution challenges we begin by studying how urban population and industrial growth impacts local pollution levels and greenhouse gas production as the urban population grows richer its demand for private transportation and electricity sharply increases such privately beneficial activity exacerbates urban pollution externalities facing these severe environmental challenges china s urbanites increasingly demand quality of life progress we survey the emerging literature investigating the demand for environmental progress in china progress in mitigating externalities hinges on whether the powerful central and local governments choose to address these issues we analyze the political economy of whether government officials have strong incentives to tackle lingering urban externalities we conclude by discussing future research opportunities at the intersection of environmental and urban economics jel o18 p25 p28 q53 r23 r41 r58

aggregation persistence and volatility in a macro model we introduce firm heterogeneity into the standard monopolistically competitive real business cycle rbc model the fundamental equilibrium path is derived and the time series properties of aggregate gdp are studied analytically although firms productivities are subject to temporary shocks the aggregate process displays a surprising novel form of nonlinearity and long memory which had not been built into the model at the outset this aggregate gdp turns out to have very different properties from log linear time series models such as auto regressive ar models and their extensions it displays very strong persistence which ends abruptly with a sudden change of tendency giving its autocorrelation function acf an s shape although persistent it is mean reverting unlike the everlasting memory of unit root processes its volatility is of a greater order of magnitude than that of any of its components so small micro shocks can generate large macro fluctuations it is also characterized by long asymmetric cycles of random lengths increased monopoly power tends to reduce the amplitude and increase the

trade policy review for china continuing globalisation amidst the world financial crisis the 2008 world financial crisis had led many industrialised countries to endure a significant decline in their gdps though the chinese government arranged a 4 trillion rmb stimulus package coupled with 30 trillion rmb of new bank credits in 2008 2010 to mitigate the impact of the world financial crisis the growth of china s international trade declined to a single digit level after 10 years of rapid growth at more than 20 per annum since its wto accession the latest wto trade policy review for china is a timely piece of literature which provides excellent information on china s current economic situation its trade and investment policies and government s priorities of policy support in this article we intend to reveal the latest development in the chinese economy from the second half of 2011 and to predict what it may happen in the next a couple of years china s determination to go global has not faded and china can only become more open in the future

on the dynamics of international inflation abstract we investigate the dynamic properties of inflation in 20 oecd countries with a novel approach based on the autocorrelation function we find evidence in favor of long memory and nonlinearity linear autoregressive models are shown to be misspecified

no razor s edge reexamining alwyn young s evidence for increasing inter provincial trade barriers in china abstract alwyn young 2000 argues that barriers to interprovincial trade in china have increased during the reform period this paper critically examines each of his five arguments and the evidence he presents in all five instances the argument is problematic and the evidence not robust a comparison with the united states shows the chinese evidence to be well within the range of that of a normal relatively integrated large economy

china and its dollar exchange rate a worldwide stabilising influence 1 we argue that criticism concerning the chinese dollar peg is misplaced as no predictable link exists between the exchange rate and the trade balance of an international creditor economy the stable nominal yuan dollar rate is argued to have stabilized chinese east asian and global growth however linked to us low interest rates chinese sterilization policies and potentially subsidized capital allocation in china the real yuan dollar rate is undervalued this has caused both in china and the united states structural distortions and threatens to undermine global growth and stability we propose sino american policy coordination to escape from the policy dilemma which continues to drive global imbalances jel code f150 f310 f330

reviewing trade policy in china during the transition to balanced economic growth the paper reviews the world trade organization s analysis of developments in china s trade policy during 2012 14 the review overlaps with the continuing great recession and with china s determination to foster a sustainable rate of economic growth developments in the country s trade policy include the launching of the shanghai pilot free trade zone china faces a series of trade policy related challenges including the complex process necessary to internationalise the renminbi

monnet s error in entering a currency union without any political union european countries have taken a gamble will the needs of the currency unions force a political integration as anticipated by monnet or will the tensions create a backlash as suggested by kaldor friedman and many others we try to answer this question by analyzing the cross sectional and time series variation in pro european sentiments in the eu 15 countries the 1992 maastricht treaty seems to have reduced the pro europe sentiment as does the 2010 eurozone crisis yet in spite of the worst recession in recent history the europeans still support the common currency europe seems trapped there is no desire to go backward no interest in going forward but it is economically unsustainable to stay still

aggregate savings and external imbalances in china over the last decade the internal and external macroeconomic imbalances in china have risen to unprecedented levels in 2008 china s national savings rate soared to over 53 percent of its gdp whereas its current account surplus exceeded 9 percent of gdp this paper presents a unified framework for understanding the structural causes of these imbalances i argue that the imbalances are attributable to a set of policies and institutions embedded in the economy i propose a unified framework for understanding the joint causes of the high savings rate and external imbalances in china my explanations first focus on an array of factors that encouraged saving across the corporate government and household sectors such as policies that affected sectoral income distribution along with factors like incomplete social welfare reforms and population control policies i then turn to policies that limited investment in china thus preventing the high savings from being used domestically finally i will examine how trade policies such as export tax rebates special economic zones and exchange rate policies strongly promote exports moreover the accession of china to the world trade organization has dramatically amplified the effects of these structural distortions in conclusion i recommend some policy reforms for rebalancing the chinese economy

policy barriers to international trade in services evidence from a new database surprisingly little is known about policies that affect international trade in services previous analyses have focused on policy commitments made by countries in international agreements but in many cases these commitments do not reflect actual policy this paper describes a new initiative to collect comparable information on trade policies for services from 103 countries across a range of service sectors and relevant modes of service delivery the resulting database reveals interesting policy patterns although public monopolies are now rare and few services markets are completely closed the authors observe numerous second generation restrictions on entry ownership and operations even in instances in which there is little explicit discrimination against foreign providers market access is often unpredictable because the allocation of new licenses remains opaque and highly discretionary in many countries across regions some of the fastest growing countries in asia and the oil rich gulf states have restrictive policies in services whereas some of the poorest countries are remarkably open across sectors professional and transportation services are among the most protected industries in both industrial and developing countries whereas retail telecommunications and even finance tend to be more open

on economic theory and recovery of the financial crisis this paper presents a new economic theory to explain the evolution of a financial crisis and why a major crisis may take a long time to recover it suggests that asymmetric psychological reactions of market players to gains and losses are the principal cause of a crisis and responsible for prolonging recovery three different shapes of recovery v u and l are defined and explained during the current financial crisis some countries such as china and india may have a v shaped recovery others such as the uk and the us may have a u shaped recovery an important policy implication is that effective macroeconomic policies should be designed to smooth market movements and implementation of such policies has to be countercyclical rather than pro cyclical

the potential of land rental markets in the process of economic development evidence from china abstract we develop a model of land leasing with agents characterized by unobserved heterogeneity in ability and presence of an off farm labor market in this case decentralized land rental may contribute to equity and efficiency goals and may have several advantages over administrative reallocation the extent to which this is true empirically is explored using data from three of china s poorest provinces land rental markets and administrative reallocation reallocate land to those with lower endowments but the former are more effective in doing so and have a bigger productivity enhancing effect information on hypothetical market participation suggests that reducing transaction costs in land rental markets could help to realize significant additional productivity gains

global crises and populism the role of eurozone institutions populist parties are likely to gain consensus when mainstream parties and status quo institutions fail to manage the shocks faced by their economies institutional constraints which limit the possible actions in the face of shocks result in poorer performance and frustration among voters who turn to populist movements we rely on this logic to explain the different support of populist parties among european countries in response to the globalization shock and to the 2008 2011 financial and sovereign debt crisis we predict a greater success of populist parties in response to these shocks in euro zone countries and our empirical analysis confirms this prediction this is consistent with voters frustration for the greater inability of the euro zone governments to react to difficult to manage globalization shocks and financial crises our evidence has implications for the speed of construction of political unions a slow staged process of political unification can expose the eu to a risk of political backlash if hard to manage shocks hit the economies during the integration process

china trade policy review a political economy approach chinese trade policy has experienced great reversal in the year of 2008 a series of constraining measures taken previously have been loosened eventually we investigate this situation using a political economy approach unlike in democratic countries where interest groups play a crucial role in trade policy change in china given the political reality leaders will and trade partners pressure are the determinant factors we call this top down and outside in trade policy actually the idea of harmonious society and scientific development emphasised by top leaders in october 2006 paved the road for the following trade policy adjustment i e reducing tax rebate limiting processing trade compressing the catalogue for foreign investment etc however with the shock of a global financial tsunami these measures get coastal areas relying on foreign trade heavily into trouble the economic downturn in pearl river delta even astonished the decision making body calling on a quick reversal in foreign trade policy if interest groups had been allowed to express their demand formally and adequately from the very start the cycle of taking up first but giving up last in policy design would have not taken place in other words the bottom up and inside out trade policy should be more stable although flexibility is necessary in the face of uncertainty frequent and discretionary trade policy change usually produces effects of pro government not pro market this is unfavourable for the transformation in china the constraining trade policy in mid 2007 to mid 2008 has been a part of the government s desire to seek healthier development however with the inside and outside surroundings getting worse the structural adjustment long run objective has had to concede to the economic growth short run objective

welfare impacts of china s accession to the world trade organization data from china s national rural and urban household surveys are used to measure and explain the welfare impacts of changes in goods and factor prices attributable to accession to the world trade organization wto the price changes are estimated separately using a general equilibrium model to capture both direct and indirect effects of the initial tariff changes the welfare impacts are first order approximations based on a household model incorporating own production activities calibrated to household level data and imposing minimum aggregation the results show negligible impacts on inequality and poverty in the aggregate however diverse impacts emerge across household types and regions associated with heterogeneity in consumption behavior and income sources with possible implications for compensatory policy responses