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IntroductionThe PEGGED Research ProgrammeThe PEGGED Research Programme has helped European policymakers to constructand project a vision for this new global system. Within the PEGGED Programme,political scientists and economists have worked together to develop workable, realworldpolicy solutions in four important areas of international cooperation. These fourareas are:• The governance of international macroeconomic relations• Globalisation, financial stability, and global financial regulation• The global trade regime• International migration and the mobility of labourThroughout its life, PEGGED has produced a number of working papers on each ofthese four topics. The Programme has also produced many policy publications on thesetopics, in the form of Policy Briefs, Papers, and Reports. These can all be found onhttp://pegged.cepr.org/. PEGGED has also held regular policy events in a number ofplaces, including Amsterdam, Barcelona, Brussels, Florence, Geneva, London, Lisbon,Madrid, Oxford, Paris, Pisa, Rome, Tilburg, Tokyo, and Villars. Details of all of thesemeetings can also be found at http://pegged.cepr.org/.In this introductory chapter we briefly describe the chapters included in this Report,grouping them by the four areas.The governance of international macroeconomic relationsGlobal governance made remarkable progress with the establishment of the G20Leaders’ Summit. The first cooperative steps – coordinated stimulus in reaction to theglobal crisis – were easy. Today, with monetary policy at its lower bound and fiscalpolicy at its upper bound in the advanced economies, global coordination is far moredifficult. The chapter by David Vines outlines the main economic imbalances thatrequire coordination: China must move towards a greater reliance on domestic demand;3
Rethinking Global Economic Governance in Light of the Crisisthe US must secure long-term fiscal consolidation; and Europe must embrace reformsthat will allow southern Europe to grow. The world now needs a group of policymakers,from a number of countries, who act together so as to carry out the necessary policyadjustments. The G20 Mutual Assessment Process is a new framework in which thesepolicymakers may well be able to do what is required.Initial responses to the crisis led to the accumulation of a vast stock of public liabilities.Since then, fiscal tightening has become the priority in advanced countries, andespecially across Europe. In his chapter Giancarlo Corsetti asks whether governmentsshould relent in their efforts to reduce deficits now, when the global economy is stillweak, and policy credibility is far from guaranteed. He draws on two channels ofrecent research, which point in opposite directions. Recent work on the effects of fiscalcontraction at the time of a liquidity trap suggests that multipliers may be large in thesecircumstances. Empirical evidence confirms this, especially at a times of recessionin the presence of a banking and financial crisis. As a result, if monetary policy isconstrained, there is little doubt that governments with strong credibility shouldabstain from immediate fiscal tightening, while committing to future deficit reduction.However there is a difficulty in following this advice when the government is chargeda sovereign-risk premium, since sovereign risk adversely affects borrowing conditionsin the broader economy. That will cause fiscal multipliers to be much lower. And, dueto the sovereign-risk channel, highly indebted economies can become vulnerable to aself-fulfilling economic downturn. This poses a dilemma for highly indebted countries:they may be well-advised to tighten fiscal policies early, even if the effect of this willbe to reduce activity. The presence of such a sovereign-risk channel provides a strongargument for focusing on ways to limit the transmission of sovereign risk into privatesectorborrowing conditions. Recent unconventional steps by the ECB suggest that thisis possible.The Eurozone crisis of 2011–12 would have been much easier to contain and resolvehad there been no global financial crisis, and no deep recession in the advancedcountries. As a consequence, Richard Portes argues in his chapter that it is too facile to4
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The Doha Round impasseSimon J Evene
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The Doha Round impasseAll too often
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