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June 14 – 16, 2006
Wequassett Inn
Chatham, Massachusetts
Agenda, Papers, and Presentations
Participants'
Biographies 
“Global
imbalances” are currently attracting much attention
in policy and financial circles. In most official forecasts
the threat of a disorderly correction of these huge imbalances
appears as a key risk to the global outlook. While the
phrase generally refers to net deficits or surpluses
in international trade and investment, when these imbalances
are large and persistent, they usually reflect major
structural shifts in the distribution of global resources.
Frequently cited explanations for today’s historic
imbalances range from policy mistakes like ill-advised
exchange rate arrangements to a savings glut in Asia
juxtaposed with inadequate savings in the United States.
Other candidate explanations include the remarkable productivity
gains experienced in this country in recent years and
the development of large pools of surplus labor released
from agriculture and state-controlled enterprises in
China, India, and Eastern Europe. Indeed, one of the
more basic causal factors, linking others and explaining
their current salience, may well be the recent arrival
of these giant economies on the global stage. Together
China and India—still very poor on a per capita
basis—account for almost 40 percent of the world’s
population. China is now the world’s second largest
economy using purchasing power parity measures, and India
is not far behind.
This
conference will gather economists, business leaders,
and policymakers from around the world to explore the
fundamental structural changes underlying today’s
large global imbalances. We’ll consider the pressures
and opportunities presented by China’s and India’s
recent emergence as important actors in the global
economy, and examine how demographic change and the
ongoing evolution of the most advanced economies affect
international resource flows. Our goal is to gain a
better understanding of the required adjustments, the
potential correction mechanisms, and the policies most
likely to smooth the way.
Please
join us as we explore the fundamental structural changes,
risks, and opportunities underlying today's large global
imbalances. |
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Wednesday,
June 14
Thursday, June 15
Friday, June 16
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Wednesday,
June 14, 2006 |
| 6:00
p.m. |
Reception |
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| 7:00
p.m. |
Welcome
Cathy E. Minehan
President and Chief Executive Officer
Federal Reserve Bank of Boston
Dinner |
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| Thursday,
June 15, 2006 |
| 7:00
a.m. |
Breakfast
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| 8:00
a.m. |
Introductory
Remarks
Cathy E. Minehan
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| 8:15 a.m. |
Lessons from History
This session will review major episodes
of external imbalance and subsequent adjustment
over the past 150 years to seek perspectives
on current developments. Looking for evidence
of underlying shifts in the global distribution
of labor, capital, and technology like those
occurring today, the presenters begin with the
mid 19th century when capital and labor released
from agriculture, and cottage industry flowed
from Europe to the United States and the rest
of the New World. Other episodes might include
the interwar period, the 1960s when post-WWII
reconstruction in Europe and Japan led to the
reintegration of the European and Japanese workforces
into the global economy, and, possibly, the imbalances
of the 1980s, which economists tend to view as
caused by policy mistakes. In what ways were
the fundamental forces driving these episodes
similar to or different from those prevailing
today? What were the exchange rate arrangements
of the time, and did they contribute to a smooth
adjustment? How were internal and external balance
restored? What are the lessons for today?
Presenters:
Discussants:
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| 9:30 a.m. |
Labor Market Imbalances
Development, industrialization, and increases
in productivity have led to large pools of
very inexpensive surplus labor—today
in China, India, Eastern Europe, and Brazil,
tomorrow in Bangladesh, Nigeria, and other
emerging areas. Importantly, a small share
but large number of these workers have accumulated
considerable human capital. And improved communications
allow many of these workers to participate
in the world economy without emigrating. How
are these pools of surplus labor influencing
policy in the home country? What is their short-
and long-term impact on areas where labor is
relatively scarce? In particular, how is this
vast new addition to the world’s supply
of skilled and unskilled labor affecting mature
economies’ employment, labor compensation,
and labor productivity? What is the best policy
response from the emerging countries’ points
of view? What is the most constructive response
in the industrial world?
Presenter:
Discussants:
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| 10:45 a.m. |
Break |
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| 11:00 a.m. |
Savings/Investment Imbalances
A potential black hole for capital, China
devotes an extraordinary 45 percent of its
GDP to investment, but, at 50 percent of output,
its savings rate is even higher. The “extra” savings
fund the U.S. Treasury. With its underemployed,
undercapitalized workforce, should China be
saving less or investing more? By contrast,
the U.S. savings rate is just 14 percent of
GDP, its investment rate near 20 percent. Half
of its investment buys IT equipment, software,
and housing. Is the United States saving too
little or investing too much? Why have savings
rates in the advanced countries been declining
for decades? Do demographic trends, the strength
of social safety nets, the degree of financial
market development, or the (related) growth
in housing and financial wealth explain international
differences in household savings rates? How
have public policy and corporate spending decisions
contributed to these imbalances? Does fiscal
policy in the advanced countries encourage
consumption? Has fiscal policy in the emerging
regions turned too prudent? Does the changing
distribution of global savings largely reflect
new stages of economic evolution or policy
choice?
Presenter:
Discussants:
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| 12:30 p.m. |
Lunch |
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| 1:15 p.m. |
Address |
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| 2:00 p.m. |
Afternoon Break (2:00-6:00 p.m.) |
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| 6:00 p.m. |
Address
Dancing with Giants – Geopolitics in the Twenty-First Century
Stephen W. Bosworth
Dean of The Fletcher School
Tufts University |
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| 6:45 p.m. |
Reception |
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| 7:30 p.m. |
Dinner |
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|
Friday, June 16, 2006 |
| 7:00
a.m. |
Breakfast
|
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|
| 8:15
a.m. |
Capital and its Complements
Realizing the productive potential of underemployed
labor and developing a natural resource base
requires investment in complementary physical
capital and the technology it embodies. Yet,
capital/labor ratios vary widely across countries.
What keeps the marginal product of capital from
equilibrating rapidly and smoothly around the
globe? What creates a wedge between the marginal
product of capital and financial returns to investment?
Why are some countries far more productive than
others—and for extended periods? What brings
these eras to an end? This session will emphasize
the role of human capital and technology, agglomeration
dynamics, and appropriate financial, social,
and political institutions in enabling economies
to combine physical resources effectively or
in undermining their ability to do so. What are
the welfare and policy implications?
Presenter:
Discussants:
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| 9:30 a.m. |
Adjustment Mechanisms
This session will address the possible adjustment
mechanisms, their probability, and their consequences.
How will adjustment to the current fundamental
imbalances likely occur? What role could exchange
rates play and are they likely to do so? Given
current interests and constraints, what exchange
rate arrangements would be most appropriate in
Asia and elsewhere? What are the implications
for the international role of the U.S. dollar?
Absent any significant change in existing exchange
rate arrangements, how is adjustment likely to
occur? Ongoing trade and investment flows would
eventually produce a new equilibrium, but are
such large imbalances indefinitely sustainable?
Do all the relevant players have the necessary
endurance?
Presenter:
Discussants:
Catherine
L. Mann
Senior Fellow
Institute for International
Economics |
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Eswar
S. Prasad
Division Chief, Financial Studies
Division
Research Department
International
Monetary Fund |
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| General
Discussion |
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| 10:45 a.m. |
Break |
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| 11:00 a.m. |
Policy Recommendations: Panel
How are policy mistakes in the emerging and
advanced economies aggravating internal imbalances
and delaying global adjustment? What policies
would be more constructive? Panel members will
recommend the most appropriate policy response
to the massive global imbalances triggered by
China’s and India’s recent emergence as economic
powers at a time of major demographic change
and ongoing evolution in the post industrial
societies. What fiscal, monetary, exchange rate,
and education policies should the advanced countries
embrace to ensure that the extraordinary opportunities
presented by rapid growth in China, India, and
other emerging regions are widely shared? How
can improved policy in the emerging economies
contribute?
Panelists:
Shankar Acharya
Member, Board of Governors and Honorary Professor
Indian Council for Research on International Economic Relations |
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Jagdish N.
Bhagwati - CANCELLED
University Professor, Economics and Law
Columbia University |
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Donald
L. Kohn
Board Member
Board of Governors of the Federal Reserve System
Comments  |
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Lawrence H. Summers
President
Harvard University |
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| General
Discussion |
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| 12:45 p.m. |
Adjournment and Lunch |
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| 1:45 p.m. |
Motor Coach |
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