Papers

2022
Furman, Jason. 2022. “Bad News About the Good Inflation News .” Wall Street Journal, March 6, 2022.
bad_news_about_the_good_inflation_news_-_wsj.pdf
Clavin, Patricia, Giancarlo Corsetti, Maurice Obstfeld, and Adam Tooze. 2022. “Lessons of Keynes’s Economic Consequences in a Turbulent Century, CEPR Discussion Paper DP16610, CE”. Abstract

Just over a century old, John Maynard Keynes’s The Economic Consequences of the Peace (1919) remains a seminal document of the twentieth century. At the time, the book was a prescient analysis of political events to come. In the decades that followed, this still controversial text became an essential ingredient in the unfolding of history. In this essay, we review the arc of experience since 1919 from the perspective of Keynes’s influence and his changing understanding of economics, politics, and geopolitics. We identify how he, his ideas, and this text became key reference points during times of turbulence as actors sought to manage a range of shocks. Near the end of his life, Keynes would play a central role in planning the world economy’s reconstruction after World War II. We argue that the “global order” that evolved since then, marked by increasingly polarized societies, leaves the community of nations ill prepared to provide key global public goods or to counter critical collective threats.

cepr-dp16610_3.pdf
Furman, Jason. 2022. “Four Reasons to Keep Worrying About Inflation.” Wall Street Journal, Jan. 13, 2022.
four_reasons_to_keep_worrying_about_inflation_-_wsj.pdf
Furman, Jason. 2022. “Why Did (Almost) Nobody See it Coming and What Does That Mean for What's Next?” Macroeconomics Policy Seminar February 8, 2022.
furman.20220210_macro_policy_seminar_revised_5.pdf
Furman, Jason. 2022. “What the Federal Reserve Should Do Now: An Elaboration.” Peterson Institute for International Economics, November 18, 2021. Publisher's Version
furman-2021-11-17.pdf
Furman, Jason. 2022. “Four Reasons to Worry About Inflation.” Wall Street Journal. Publisher's Version
Mian, Atif, Ludwig Straub, and Amir Suf. 2022. “The Saving Glut of the Rich ∗”. Abstract
There has been a large rise in savings by Americans in the top 1% of the income or wealth distribution over the past 40 years, which we call the saving glut of the rich. Instead of financing investment, this saving glut has been associated with dissaving by the non-rich and dissaving by the government. An unveiling of the financial sector reveals that rich households have accumulated substantial financial assets that are direct claims on U.S. government and household debt. State-level analysis shows that the rise in top income shares has been important in generating the rise in savings by the rich.
the_saving_glut_of_the_rich.pdf
Mian, Atif, Ludwig Straub, and Amir Sufi. 2022. “ “Indebted Demand.” .” Quarterly Journal of Economics 11/2021: 2243–2307. Abstract
We propose a theory of indebted demand, capturing the idea that large debt burdens lower aggregate demand, and thus the natural rate of interest. At the core of the theory is the simple yet underappreciated observation that borrowers and savers differ in their marginal propensities to save out of permanent income. Embedding this insight in a two-agent perpetual-youth model, we find that recent trends in income inequality and financial deregulation lead to indebted household demand, pushing down the natural rate of interest. Moreover, popular expansionary policies—such as accommodative monetary policy—generate a debt-financed short-run boom at the expense of indebted demand in the future. When demand is sufficiently indebted, the economy gets stuck in a debt-driven liquidity trap, or debt trap. Escaping a debt trap requires consideration of less conventional macroeconomic policies, such as those focused on redistribution or those reducing the structural sources of high inequality.
indebted_demand.pdf
Wellhausen, Rachel L. 2022. “Chapter 5: Foreign Firms and their Diplomats in Ukraine.” The Shield of Nationality: When Governments Break Contracts with Foreign Firms. 2015, 44 pp. Cambridge: Cambridge University Press.
shieldofnationalityukraine_44pp_wellhausen2015.pdf
Wellhausen, Rachel L. 2022. “ Chapter 1: Introduction. In: The Shield of Nationality: When Governments Break Contracts with Foreign Firms.” The Shield of Nationality: When Governments Break Contracts with Foreign Firms., 14 pp. Cambridge: Cambridge University Press.
shieldofnationalityintroduction_14pp_wellhausen2015.pdf
Moehlecke, Carolina, and Rachel L. Wellhausen. 2022. “ "Political Risk and International Investment Law." .” Annual Review of Political Science , 1-23. Publisher's Version Abstract

International investment law provides a means for states to mitigate political risks that foreign investors face inside their borders. Its status quo includes thousands of international investment agreements (IIAs) and Investor–State Dispute Settlement (ISDS), a dispute resolution mechanism in which for- eign, private investors sue host states in ad hoc international tribunals in pursuit of monetary compensation for property rights violations. In this re- view, we survey the vast contemporary literature on this regime to evidence the ways in which scholars have challenged the purported original goals of international investment law and its distributional consequences. In light of this literature’s accomplishments, we highlight opportunities for a refocusing of international relations scholars’ research agenda on dynamics of continu- ity and change in the regime. The status quo in international investment law is fragile, and, in our view, the regime is on the brink of a major shift toward prioritizing state sovereignty well above political risk mitigation.

reviewpolrisk_23pp_moehleckewellhausen2022.pdf
This paper proposes a new framework for studying the interplay between culture and institutions. We follow the recent sociology literature and interpret culture as a \repertoire", which allows rich cultural responses to changes in the environment and shifts in political power. Specifically, we start with a culture set, which consists of attributes and the feasible connections between them. Combinations of attributes produce cultural configurations, which provide meaning, interpretation and justification for individual and group actions. Cultural figurations also legitimize and support different institutional arrangements. Culture matters as it shapes the set of feasible cultural figurations and via this channel institutions. Yet, changes in politics and institutions can cause a rewiring of existing attributes, generating very different cultural configurations. Cultural persistence may result from the dynamics of political and economic factors - rather than being a consequence of an unchanging culture. We distinguish cultures by how fluid they are - whereby more fluid cultures allow a richer set of cultural configurations. Fluidity in turn depends on how specific (vs. abstract) and entangled (vs. free-standing) attributes in a culture set are. We illustrate these ideas using examples from African, England, China, the Islamic world, the Indian caste system and the Crow. In all cases, our interpretation highlights that culture becomes more of a constraint when it is less fluid (more hardwired), for example because its attributes are more specific or entangled. We also emphasize that less fluid cultures are not necessarily "bad cultures", and may create a range of benefits, though they may reduce the responsiveness of culture to changing circumstances. In many instances, including in the African, Chinese and English cases, we show that there is a lot of fluidity and very different, almost diametrically-opposed, cultural configurations are feasible, often compete with each other for acceptance and can gain the upper hand depending on political factors.
culture_institutions_and_social_equilibria_a_framework.pdf
Obstfeld, Maurice. 2022. “The International Financial System after COVID-19, December 14, 2021; updated February 10, 2022.” Korea Institute of Finance, “Prospects of the Global Economy after COVID-19: Implications for Korea. Abstract

In March of 2020, international markets seized up with a violence unequaled since the Global Financial Crisis (GFC) nearly a dozen years before. As economies around the world locked down in the face of the potentially deadly but completely novel SARS-CoV-2 virus, stock markets fell, firms and governments scrambled for cash, liquidity strains emerged even in the market for U.S. Treasurys, and capital flows to emerging and developing economies (EMDEs) reversed violently. This paper reviews the evolution of global financial markets since the GFC, changes in academic thinking about these markets’ domestic impacts, the strains seen during the COVID-19 crisis, and perils that may lie ahead. A key theme is that stability will be enhanced if the global community embraces reforms that elevate market resilience, rather than depending on skillful policymakers wielding aggressive but ad hoc policy interventions to ride to the rescue again.

Keywords: COVID-19 crisis, emerging markets, capital flows, international finance, global financial cycle, U.S. dollar, Korean economy

JEL Codes: E58, F32, F33, F36, F42, F44

prospects_of_the_global_economy_after_covid_cepr_ch_2.pdf
Obstfeld, Maurice. 2022. “An Uneven Global Rebound Will Challenge Emerging-Market and Developing Economies.” PIIE Policy Brief 21-21. Washington: Peterson Institute for International Economics. October: 1-12.
obstfeld.an_uneven_global_rebound.pdf

Pages