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How can international institutions support the G7 tax proposals?

The quest backed by the Biden administration for a global minimum corporate tax rate and reallocation of taxable profits of large multinational corporations (MNCs) faces the next big test when finance ministers and central bank governors of the Group of Twenty (G20) economies meet in Venice on July 9-10.[1] Some 130 countries, including all G20 governments, have embraced the two proposals, which the Organization for Economic Cooperation and Development (OECD) developed over the last several...

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Pace of US job growth picks up as signs point to tight labor market

The US economy added 850,000 jobs in June, a noticeable pickup from the average of 546,000 jobs over the previous three months and much faster than the pace in the three months before that. This still leaves the economy 9 million jobs short of its trend. At the same time the unemployment rate rose to 5.9 percent while labor force participation was unchanged. The “realistic” unemployment rate (which adjusts for the unusually large reduction in labor force participation) was flat. While the...

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COVID-19 will not leave a lasting negative imprint on South Korea’s economy

South Korea’s macroeconomic response to the COVID-19 pandemic has been moderate compared with many other member countries of the Organization for Economic Cooperation and Development (OECD) in Asia and especially Europe and North America. This blog analyzes the drivers of South Korea’s economic rebound, the macroeconomic circumstances of their operation, and prospects for continued contributions to economic growth in the short to medium term. Resolute and Competent Management of the Pandemic...

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US workers are quitting jobs at historic rates, and many unemployed are not coming back despite record job openings

The US labor market has added an average of 541,000 jobs per month over the last three months, a pace that would be rapid in normal times but is slower than expected given the 10 million jobs shortfall from the pre-pandemic trend and the record number of job openings. The main reason for the lack of much faster job growth has been the unusually low number of people transitioning from unemployment to employment—a flow that should be at or near record levels given the overall labor market....

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Third-party auditing won’t solve US solar industry’s Xinjiang problem

The US solar industry is justifiably concerned about the US government's hardening stance on China's human rights abuses in the Xinjiang Uyghur Autonomous Region (henceforth Xinjiang), a key supplier of polysilicon used for making the photovoltaic cells used in solar panels. In response, the industry is looking to third-party auditing and verification as a way of ensuring its supply chains aren't tainted by forced labor. Unfortunately, this approach is unlikely to be effective in China's...

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Who are the better forecasters of inflation, bond traders or economists?

Consumer price index (CPI) inflation hit a multi-decade high of 5 percent in May 2021 (12-month change), sparking considerable speculation as to how long inflation will remain high. Readings from the bond market suggest inflation will drop all the way to the Federal Reserve’s 2 percent target in 2022, whereas economic forecasters see continued above-target inflation of around 2.5 percent.[1] The bond market has been somewhat better than economists at predicting inflation over a...

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It’s about to get even more dangerous in largely unvaccinated US states

Just as Americans are returning to their normal lives, a cloud is gathering in the form of reports that a “variant” of SARS-CoV-2, the virus that causes COVID-19, is spreading in the United States. Dr. Rochelle Walensky, director of the Centers for Disease Control and Prevention (CDC), is warning that the Delta variant could soon predominate in the United States, making those already vaccinated somewhat more vulnerable to the disease. But the main threat is to localities where vaccination...

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Decoding the FOMC’s surprise change in rate expectations for 2023

Much of the immediate post-game analysis since the end of the June meeting of the Federal Open Market Committee (FOMC) has centered on the fact that the median FOMC participant now sees two rate hikes in 2023, whereas in March the median participant saw none. The adjustment in rate expectations came despite the fact that the FOMC’s forecasts for the unemployment rate and inflation in 2022 and 2023 are barely revised. The sudden emergence of rate hikes into plain view left some commentators...

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In reforming global taxes, don’t forget small countries’ interests

The long-running debate over how to prevent big multinational corporations from parking money in low-tax countries like Ireland, Bermuda, and Luxembourg has so far taken place among the world’s wealthiest democracies. Rich countries, after all, are those most eager to prevent the erosion of their own tax bases. That debate is about to enlarge and become even more challenging. Dozens of small countries that rely on tax policy for their growth strategies are lining up to have their say about...

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A billion COVID-19 vaccine doses are only the first step

The Group of Seven (G7) countries’ recently announced target of donating 1 billion doses of COVID-19 vaccines to poor and middle-income countries was certainly welcome news. But if the doses are not matched by a buildup of infrastructure to administer them, accompanied by technical assistance to help poor countries mount mass immunization campaigns, the goal of taming SARS-CoV-2, the virus that causes COVID-19, will remain out of reach. A sweeping reform of the COVAX (short for COVID-19...

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