Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Financing Ukraine: Time for an Honest Assessment

by Robert Kahn

Russia’s invasion of Ukraine (“incursion” is far too polite a term) represents a major intensification of the conflict and should cross all red lines the West has established.  The logic of the earlier, incremental approach—put modest sanctions in place, and let the threat of worse create a chilling effect on investment and trade—has reached a dead end.  Whether President Putin seeks a stalemate within Ukraine or something more menacing, full sectoral sanctions (including, importantly, Russia’s access to payments systems) should now be put in place as a firm signal of western resolve.  The real cost-benefit to be done is not the costs on the West compared to Russia. Rather it is those relative costs contrasted against doing nothing and risking a situation that brings us closer to either armed conflict or acceptance of a new rule that states can redraw boundaries by force. German President Merkel has signaled that further sanctions are on the agenda for the September 30 EU leaders summit, and I expect the Obama Administration will move with them if not before.

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BRICS and Mortals

by Robert Kahn

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.

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Ukraine and IMF: Step Forward Now

by Robert Kahn

The IMF announced today that it has reached an agreement in principle on a two-year program (stand-by arrangement) with Ukraine. The headline numbers are $14-18 billion of IMF money and overall financing of $27 billion, which is lower than some had hoped, but don’t be fooled. This is a three-to-six month program, designed to meet Ukraine’s critical near-term financing needs and to get reforms going. Both are essential tasks, and rightfully the focus. The program will be revised (and likely boosted) after elections. It will be at that point that thorny issues like debt restructuring will be addressed.

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IMF Reform and the Ukraine Package

by Robert Kahn

The debate over congressional passage of IMF reform has reached a critical juncture. The Senate Foreign Relations Committee  today approved legislation providing loan guarantees for Ukraine and supporting sanctions, and the bill includes language implementing the long-delayed IMF reform. Assuming passage by the full Senate, the debate next moves to conference, where both sides will need to step up and negotiate in good faith. In her companion piece on this blog, Heidi Crebo-Rediker makes a compelling argument that there are significant geo-strategic benefits from this legislation.  There are meaningful economic benefits as well that make it important to reach a deal.

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Ukraine: Economy Matters

by Robert Kahn
Value of the Ukrainian hryvnia against the dollar—closely watched by Ukrainians as an economic signal—has sharply depreciated due to recent turmoil in Kiev. (Source: Oanda.com) Value of the Ukrainian hryvnia against the dollar—closely watched by Ukrainians as an economic signal—has sharply depreciated due to recent turmoil in Kiev. (Source: Oanda.com)

A deal that would end the violence in Ukraine appears to be holding. It would produce early elections, a return to the 2004 constitution, and a national unity government. It would also set the stage for an urgent western effort to provide financing supported by an IMF program. Good news on the politics, though, does not equate to good news on the economy.

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Five Financial Questions for Ukraine

by Robert Kahn

There is an interesting debate going on in Western capitals over financial support for Ukraine.  The possibility of political change, coupled with Russia’s decision to suspend disbursements on its $12 billion financial package, has created an opening for meaningful economic reforms and renewed ties with global financial bodies.  There are compelling political arguments for the West to respond with a financing program that makes it economically viable for Ukraine to choose the EU Association Agreement that it rejected last year.  But the economics make a deal hard to put together.  For now, the ball is in Ukraine’s court—tensions remain high and Western aid will require at a minimum a technocratic and reform oriented government be put in place.  But should that happen, here are five economic questions on the table. Read more »

Guest Post: The Year of Womenomics

by Heidi Crebo-Rediker
IMF's Managing Director Christine Lagarde (L) is greeted by U.S. Secretary Hillary Clinton (R) at the State Department on December 15, 2011 in Washington, DC. (Courtesy IMF Staff Photograph/Stephen Jaffe). IMF's Managing Director Christine Lagarde (L) is greeted by U.S. Secretary Hillary Clinton (R) at the State Department on December 15, 2011 in Washington, DC. (Courtesy IMF Staff Photograph/Stephen Jaffe).

Today we are please to have the following guest post written by Heidi Crebo-Rediker, a CFR Senior Fellow. Prior to joining CFR, Heidi served as the State Department’s first chief economist. 

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