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1 – 10 of over 2000Trade relations between China and the USA have been marked by conflict, especially since China’s membership in the World Trade Organization (WTO). These conflicts have been…
Abstract
Purpose
Trade relations between China and the USA have been marked by conflict, especially since China’s membership in the World Trade Organization (WTO). These conflicts have been analyzed from a variety of perspectives, including the loss of jobs in the USA due to Chinese imports, competition in high technology sectors and the balance of trade. Conceptual frameworks have employed models of domestic differences as well as models of international power distribution. Among domestic differences examined are the existence of state-owned enterprises in China compared to the domination of the USA economy by private firms, the large role of the Communist Party in China and the influence of labor and environmental and labor groups in the USA. Power distribution theories focus on the systemic effects of the distribution of power on trade openness and on the pattern of intra-bloc versus between-bloc trade. This paper aims to examine the role of macroeconomic policy factors in China and the USA, in particular, the role of national patterns of savings, investment and consumption (both private and government). The paper concludes that insofar as the balance of trade is an important component of the trade conflict, domestic macroeconomic factors continue to be important. The resolution of the conflict will have to take into account the respective macroeconomic policies of China and the USA.
Design/methodology/approach
The design is an analytic case study of US–China trade relations with a particular focus on the balance of trade. The conceptual framework employed involves an analysis of macroeconomic policy categories, especially the overall pattern of savings (household, firm and government), investment and consumption. Process tracing over time since China's membership in the WTO is carried out with an eye toward the relationship between the balance of trade and macroeconomic policy.
Findings
The main findings are that there is a strong relation between the respective macroeconomic policies of the USA and China and their trade relations. The domestic political economy of the USA encourages consumption and a low rate of savings. The opposite is true of China where household income is low by design and national savings are high. China depends on the USA to consume what is not consumed domestically. The USA depends on Chinese imports for additional consumption encouraged by its low rate of savings. The two economies are locked in a mutual dependence.
Research limitations/implications
Key research implications are that there should be more focus on domestic macroeconomic policies since these are the root causes of the trade imbalance. This is not to say that trade frictions centering on jobs, subsidies and competition in high technology are unimportant. However, without the resolution of differences in the management of macroeconomic policies, trade conflicts between the USA and China will continue.
Practical implications
Practical implications are huge, in some ways much more important than the academic implications. Macroeconomic policy differences in savings, investment, government spending, taxation and infrastructure are important. Furthermore, there are available tools in both China and the USA to manage the macroeconomy, particularly, monetary and fiscal policy.
Social implications
One implication of this paper is that satisfaction or dissatisfaction of workers is dependent on income distribution which in turn affects trade. Treatment of people in different socioeconomic categories, such as the elderly, the young, and those at working age are a function of macroeconomic policies.
Originality/value
Many people have written about macroeconomics. It is a conventional subfield of economics. The originality of this paper lies in its advocacy of a shift of focus and attention and in the argument that traditional macroeconomics is related to trade. Despite its importance, macroeconomics has not been the center of attention for most political scientists, though economists have made it more central.
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Lixin Tao, Yingfan Guo and Weiwei Du
The purpose of this paper is to propose and demonstrate criteria for omnibearing imbalance of macroeconomic system structure (regions, industries, urban and rural areas…
Abstract
Purpose
The purpose of this paper is to propose and demonstrate criteria for omnibearing imbalance of macroeconomic system structure (regions, industries, urban and rural areas, departments, ownership, etc.) and their strategic optimization, for structural optimization of the global regional macroeconomic system, providing universal application of the formula for calculating, and quantitative basis.
Design/methodology/approach
Relevant statistical data will compare receipts (GBC) model calculation to quantitatively determine structural imbalance and the formation of structural optimization and direction and intensity of the strategic program.
Findings
Contemporary system science believes that all things take the form of systems, and that the output function depends on the internal structure of systems. Therefore, the system structure must be judged by the output benefit. Although the output benefit of a society's macroeconomic system is enslaved to the system's external environment (the peripheral environment, international economy, or even global economy), the state of the system's internal structure directly determines its output benefit. In reverse, the output benefit of the macroeconomic system is also the reference to evaluate its internal structure.
Research limitations/implications
Research on the macroeconomic system structural imbalances and optimization with universal applicability.
Originality/value
The paper is of great significance with regard to the theory, methodology, and practice for structural optimization of the global regional macroeconomic system.
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Yaya Sissoko and Brian W. Sloboda
The objective of this chapter is to examine the recent experiences of capital flows and the associated fiscal imbalances since the inception of the Eurozone. We show that the…
Abstract
The objective of this chapter is to examine the recent experiences of capital flows and the associated fiscal imbalances since the inception of the Eurozone. We show that the standard explanation for understanding these fiscal imbalances and capital flows is viable, but is not complete given the unique circumstances surrounding these fiscal imbalances within the Eurozone. That is, the creation of the Eurozone provided some fiscal and monetary stability up until the shock of the 2008 Financial Crisis. After the 2008 Financial Crisis, the interaction between the current account and fiscal imbalances started to spread throughout the Eurozone members and many of these Eurozone members began to engage in policies in an attempt to restore stability and to stem capital outflows by implementing fiscal reforms. In fact, some of the Eurozone members attempted to restore their fiscal viability in response to the 2008 Financial Crisis, but not with much success. Thus, the Eurozone members, collectively, need to reexamine best practices to implement fiscal policies that are resistant to intense financial shocks. Empirically, we examined the following two hypotheses in this chapter via the Wald test statistic. The first hypothesis examined the effect of the own country fiscal imbalances within own country is uniform across all the Eurozone members. Then, the second hypothesis examined the fiscal imbalances of one Eurozone member do not have on other Eurozone members. The Wald test statistic rejected both hypotheses.
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This paper aims to develop a compound measure, which is fiscal vulnerability index, provides early warning signals of fiscal sustainability problems for Türkiye's economy.
Abstract
Purpose
This paper aims to develop a compound measure, which is fiscal vulnerability index, provides early warning signals of fiscal sustainability problems for Türkiye's economy.
Design/methodology/approach
The index is constructed using twelve distinct fiscal indicators and applying the portfolio method, which considers the time-varying cross-correlation structure between the subindices.
Findings
Dynamics of the fiscal vulnerability index indicate that it accurately predicts to the well-known fiscal crisis occurring in Türkiye's recent history. As a result, such a compound measure should be used in the early identification of fiscal vulnerability in Türkiye.
Originality/value
The main contribution of this paper, relative to existing papers, is that a fiscal vulnerability index was constructed by employing the most contemporaneous method and evaluating its performance in terms of capturing historical stress periods.
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Cosimo Magazzino, Francesco Felici and Vanja Bozic
The purpose of this paper is to investigate the information content of the variables that can help detecting external and internal imbalances in an early stage. The starting point…
Abstract
Purpose
The purpose of this paper is to investigate the information content of the variables that can help detecting external and internal imbalances in an early stage. The starting point is the Scoreboard, where nine indicators are chosen in order to increase macroeconomic surveillance of all member states.
Design/methodology/approach
This paper provides an overview of the variables that could be informative for imbalances by focusing on EU-27 countries over the period 1960-2010. The number of chosen variables is 28, and they are aggregated in six macro-areas. Therefore, once an imbalance is observed in any of those areas, it is possible to detect in a simple way which specific variable is determining such outcome.
Findings
In general, this approach provides reliable signal to the policy-makers about the indicators that can drive imbalances within the area, shedding light on the relationship among the variables included in the analysis, too.
Research limitations/implications
In fact, the empirical results underline some well-known critical issue for several countries, and is largely in line with results obtained in a variety of EC and OECD studies.
Originality/value
The main added value of the approach adopted in this paper is the introduction of more variables than those initially proposed by the European Commission in the construction of the Scoreboard. This provides more information about the macroeconomic situation in each country, preserving, however, the simplicity of the analysis as the variables are aggregated by homogeneous areas.
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Jean-Pierre Allegret and Aufrey Sallenave
We analyze the determinants of the cyclical position in some Baltics and South-Eastern European countries as well as peripheral European countries over the period 2000–2013…
Abstract
We analyze the determinants of the cyclical position in some Baltics and South-Eastern European countries as well as peripheral European countries over the period 2000–2013. Specifically, we consider a sample of eight economies: Croatia, Estonia, Latvia, and Lithuania for the sub-sample of Baltics and South-Eastern European economies; and Greece, Ireland, Portugal, and Spain for the sub-sample covering EMU peripheral countries. To this end, we proceed in two steps. In the first, we simulate Taylor rules for each studied countries in order to see to what extent the effective monetary policy has suffered from an expansionary bias. Such analysis is conducted for both peripheral and Central, Eastern, and South-Eastern Europe (CESE) countries. In a second step, we compare the simulated Taylor rules for our selected CESE countries with the Eurozone Taylor rule. Our contribution is threefold. First we show that the ineffectiveness of monetary policy to face imbalances – and especially financial imbalances – suggest that the EU should adopt macroprudential measures. Second, the experience of CESE and Peripheral countries suggests that fiscal policy has tended to be pro-cyclical or at least neutral. Third, we underline the importance of using the Macroeconomic Imbalance Procedure as a tool to implement automatic adjustment mechanisms.
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This chapter argues that the key Eurozone imbalances are not a failure of nation states. At the heart of the integration process is the convergence criteria – limits on government…
Abstract
This chapter argues that the key Eurozone imbalances are not a failure of nation states. At the heart of the integration process is the convergence criteria – limits on government deficit, debt, interest rate, inflation, etc. While these were intended to eliminate asymmetries across countries, the conception of convergence was too narrow since the euro designers completely ignored the elephant in the room – that countries were on different technological frontiers. I show that this difference is an important determinant of the key macroeconomic imbalances across the Eurozone. It follows that the primary convergence criterion should be limits on non-price competitive gaps across countries. The chapter overturns the simplistic view of price competitiveness and illustrate that the regulating forces of competition originate from productive structures.
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Khurram Ejaz Chandia, Muhammad Badar Iqbal and Waseem Bahadur
This study aims to analyze the imbalances in the public finance structure of Pakistan’s economy and highlight the need for comprehensive reforms. Specifically, it aims to…
Abstract
Purpose
This study aims to analyze the imbalances in the public finance structure of Pakistan’s economy and highlight the need for comprehensive reforms. Specifically, it aims to contribute to the empirical literature by analyzing the relationship between fiscal vulnerability, financial stress and macroeconomic policies in Pakistan’s economy between 1971 and 2020.
Design/methodology/approach
The study develops an index of fiscal vulnerability, an index of financial stress and an index of macroeconomic policies. The fiscal vulnerability index is based on the patterns of fiscal indicators resulting from past trends of the selected variables in Pakistan’s economy. The financial stress in Pakistan is caused from the financial disorders that are acknowledged in the composite index, which is based on variables with the potential to indicate periods of stress stemming from the foreign exchange market, the securities market and the monetary policy components. The macroeconomic policies index is developed to analyze the mechanism through which fiscal vulnerability and financial stress have influenced macroeconomic policies in Pakistan. The causal association between fiscal vulnerability, financial stress and macroeconomic policies is analyzed using the auto-regressive distributive lags approach.
Findings
There exists a long-run relationship between the three indices, and a bi-directional causality between fiscal vulnerability and macroeconomic policies.
Originality/value
This study contributes to the development of a fiscal monitoring mechanism, which has the basic purpose of analyzing the refinancing risk of public liabilities. Moreover, it focuses on fiscal vulnerability from a macroeconomic perspective. The study tries to develop a framework to assess fiscal vulnerability in light of “The Risk Octagon” theory, which focuses on three risk components: fiscal variables, macroeconomic-disruption-associated shocks and non-fiscal country-specific variables. The initial contribution of this work to the literature is to develop a framework (a fiscal vulnerability index, financial stress index and macroeconomic policies index) for effective and result-oriented macro-fiscal surveillance. Moreover, empirical literature emphasized and advised developing countries to develop their own capacity mechanisms to assess their fiscal vulnerability in light of the IMF guidelines regarding vulnerability assessments. This study thus attempts to fulfill the said gap identified in literature.
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