Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

Addressing America’s Infrastructure Challenge

by Robert Kahn Tuesday, July 22, 2014

America’s woeful lack of infrastructure spending is well appreciated.  What is missing is action to address it.  My colleague Heidi Crebo-Rediker writes that the Administration has now launched a new Transportation Investment Center to share best practice, provide technical assistance, and give support for accessing credit programs for new infrastructure projects. This one-stop shop within the Department of Transportation has much in common with (and looks to draw heavily on) Heidi’s earlier proposal for an “Infrastructure USA” initiative.  While no silver bullet, it’s a valuable first step.

China Chooses Growth Over Reform

by Robert Kahn Friday, July 18, 2014

The Wall Street Journal piece on rapid credit growth in China yesterday describes the sharp tradeoff for the Chinese government: achieving growth targets in the near term comes at the expense of reform delays and further rapid debt accumulation. With growth likely to decelerate in 2015 without additional stimulus, the prospects for meaningful economic reform are receding. I’ve explored this tradeoff in my July Global Economics Monthly (here). Imposing hard budget constraints, tightening credit, recognizing losses, and addressing massive excess capacity in real estate, raw materials and other sectors is disruptive in the short term, and as long as growth is falling short of government targets the hard decisions are likely to be deferred. If it takes a crisis to force change, I argue in the GEM that the smooth rebalancing scenarios that China optimists predict will be at risk.

Russian Sanctions: The United States Takes the Lead

by Robert Kahn Wednesday, July 16, 2014

The United States has taken what, on first read, looks to be a significant step today, extending sanctions ( see also here) to block new debt and equity issuance by a number of energy, financial and military companies.  It is not quite full “sectoral” sanctions–both because it is limited in what it blocks (new debt and equity of maturity greater than 90 days) and because it excludes Sberbank, which holds the majority of Russian deposits. But I would argue that the reach of this new executive order in terms of institutions covered is sufficiently broad that the effects on the Russian financial system could be systemic.

Read more »

BRICS and Mortals

by Robert Kahn Tuesday, July 15, 2014

Leaders of the BRICS–Brazil, Russia, India, China, and South Africa–meet in Rio today to swap World Cup stories and launch a long-discussed “BRICS Bank.” The bank creates two funds–a development lending facility (New Development Bank or NDB) backed by $50 billion in capital ($10 billion from each of the BRICs), and a $100 billion rescue fund (Contingent Reserve Arrangement, CRA) for countries suffering from exogenous shocks.

Read more »

Russian Contagion, Geopolitical Risk, and Markets

by Robert Kahn Thursday, May 8, 2014

Yesterday, I published my Global Economics Monthly. I argue that further economic sanctions against Russia would have significant global economic effects because of the Russia’s connectedness to energy and financial markets. Why then, are markets apparently so sanguine? Is it because investors, by and large, expect de-escalation? Is it a view that Russia does not matter for the global economy? Could it be a search for yield? Or is it the inherent difficultly that markets face in pricing in hard-to-quantify, large geopolitical dislocations? Probably a little bit of all of the above.

Read more »

Changing Course: Financial Sanctions on Russia

by Robert Kahn Friday, April 25, 2014

There are reports this morning that the Obama administration is contemplating extending economic sanctions against two large Russian banks– Gazprombank and  Vnesheconombank (VEB).  This is a step I have called for here and here.  If true, this is a significant event and, given the magnitude of Russia’s links to global financial markets, introduces a new era in the use of economic sanctions.  It also makes sense to do this now, as the current strategy is not working to deter Russian aggression against Ukraine.

Read more »

Tunisia’s Historic Transformation Deserves U.S. Support

by Guest Author Friday, April 4, 2014

Read more »