October 21, 2010
Currency Wars and (Macro) Competitiveness
With the cover page of the Economist [1] [2] worrying about currency wars, and various analysts arguing whether the US can or cannot win such a "war" (see Naked Capitalism for a discussion), I thought it would be useful to see where we now stand, in terms of "competitiveness", as understood by open economy macroeconomists.
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October 20, 2010
Arguments against QE2
Having earlier reviewed some of the reasons in favor of additional quantitative easing (QE2), I'd like to acknowledge some of the dissenting views.
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October 17, 2010
More than one tool for the Fed
One theme that emerged from the monetary policy conference at the Federal Reserve Bank of Boston on Friday and Saturday is that, as I stressed in my discussion of the recent FOMC minutes, the Fed is not thinking of large-scale asset purchases as the only tool available in the current environment.
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October 15, 2010
More discussion of options for the Fed
I'm in Boston today at a conference at the Federal Reserve Bank. Fed Chair Ben Bernanke spoke this morning and this afternoon I presented results from my research with Cynthia Wu. I hope to have time later this weekend to say a little more about some of the presentations and discussion. But for now let me provide a link to an interview with CNBC on some of these issues.
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October 13, 2010
The "Ever-Expanding" Government Sector, Illustrated (Part II)
I've been lecturing on the government sector in my macro course. In updating my lecture notes, I plotted out some interesting graphs, which link up nicely with this previous post. The following four figures highlight: (1) normalized Federal outlays are not much higher than in 1986; (2) government consumption to GDP is back up to 1991 levels; (3) the cyclically adjusted budget deficit is only 2 ppts larger than that recorded in 1987; and (4) Federal consumption remains far below the previous peak in 2007.
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Why is the Fed doing this?
Most observers now seem convinced that the Federal Reserve will shortly implement QE2, a second round of quantitative easing. It's worth taking a look at what QE2 is and is not expected to accomplish.
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October 11, 2010
"Transforming China's Economic Development Model"
That was the title of a seminar at the annual IMF-World Bank meetings I participated in last Thursday (agenda here).
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October 10, 2010
The market moves ahead of the Fed
Over the last month, a consensus seems to have emerged that (1) the Fed has the ability to depress long-term yields further, and (2) the Fed has the intention to implement such measures. That raises the possibility that recent market moves represent a bet already placed by market participants on the basis of the logical implications of (1) and (2).
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October 07, 2010
Some thoughts on the IMF reform debate
Today, we're fortunate to have Mark Copelovitch, Assistant Professor of Political Science and Public Affairs at the University of Wisconsin, as a Guest Contributor. He is also author of The International Monetary Fund in the Global Economy: Banks, Bonds, and Bailouts (Cambridge University Press, 2010).
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October 06, 2010
Hangin' in there
Recent economic indicators tell more of the same story-- disappointingly weak growth.
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October 05, 2010
The Incidence of Unemployment and Underemployment, by Income
As we ponder the plight of the over-$250K household income group (see the poignant story here), I think it worthwhile to examine the unemployment and underemployment rates for lower-income households. In researching statistics for our forthcoming book, Lost Decades, Jeff Frieden and I stumbled upon this study by Andrew Sum and Ishwar Khatiwada, with Sheila Palma, of Center for Labor Market Studies at Northeastern University. They characterized the mid-2010 employment situation as "A Truly Great Depression Among the Nation's Low Income Workers Amidst Full Employment Among the Most Affluent".
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October 04, 2010
Prospects for Growth And Rebalancing
From an article in the newest issue of GlobalAsia:
Only a few months ago, policymakers around the world were confronted with a series of challenges that, while substantial, seemed relatively well defined. International organizations such as the International Monetary Fund and the Organization for Economic Cooperation and Development highlighted the challenges of a two-speed recovery: emerging markets racing ahead, advanced economies plodding along. Global financial imbalances, particularly in current accounts, were a worry, but there were promising signs that growth and rebalancing in the United States and China would prove durable.
The prospects for a sustained global recovery now seem much less certain. ...
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October 03, 2010
QE2: estimates of the potential effects
As the conviction grows that the Federal Reserve will adopt a second round of quantitative easing (dubbed by some as "QE2"), I thought it might be helpful to survey some of the different estimates of what effect this might have on long-term interest rates.
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October 02, 2010
Causes of the flash crash
Donald Marron calls our attention to the report of the CFTC and the SEC on the causes of bizarre prices at which some stocks traded last May.
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September 30, 2010
IMF World Economic Outlook online
Or at least, WEO Chapters 3 and 4.
Chapter 3 is entitled "Will It Hurt? Macroeconomic Effects of Fiscal Consolidation", and Chapter 4 is "Do Financial Crises Have Lasting Effects on Trade?". Also online are Chapters 3 and 4 from the IMF Global Financial Stability Report.
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Frank Warnock on Two Myths about the Dollar
Frank Warnock, an expert on US capital flows and stocks, has just written a piece for CFR entitled Two Myths About the U.S. Dollar. In it, he examines "two factors that could substantially alter the long-run value of the U.S. dollar: the dollar's reserve status and the sustainability of U.S. international debt."
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September 29, 2010
When do recessions end?
Warren Buffett thinks the U.S. is still in a recession, declaring in a CNBC interview last week:
I think we're in a recession until real per capita GDP gets back up to where it was before. That is not the way the National Bureau of Economic Research measures it. But I will tell you that to any-- on any common-sense definition, the average American is below where he was before, or his family, in terms of real income, GDP.
I don't presume to be able to tell Warren Buffett what investment strategies work best. But I can provide some clarity on how economists use the term "recession," and hopefully shed some light on the issue that Buffett and others have raised.
Continue reading "When do recessions end?"
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September 27, 2010
Portfolio Crowding Out, Illustrated
I have been updating graphs for my money and banking course, and here is the graph I generated to illustrate the tremendous impact of government borrowing on interest rates via portfolio crowding out (as argued in this post).
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September 25, 2010
Back of the Envelope Estimates of Chinese Trade Elasticities
And pitfalls in partial equilibrium analyses
Following up on my previous post, I want to examine what would happen if the Chinese yuan appreciated in real terms, either because of nominal appreciation, or because of more rapid inflation in China versus its trade partners. Here are some back of the envelope estimates.
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September 24, 2010
The Yuan's Course, Updated and Extended
Since China's currency is in the news [NYT], [Reuters] [Economix/Leonhardt], I thought it useful to update and extend the data depictions from the post a week ago.
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September 23, 2010
What's the Fed signaling?
There's an aspect of Tuesday's statement from the FOMC that's not being emphasized by many analysts.
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September 22, 2010
Some Policy Implications of the Interdependence of Cyclical and Structural Unemployment
I have decided to forego discussion of the potentially heavy burdens faced by households with incomes in excess of $250,000 should the tax cuts not be extended for income in excess of $250K (see the poignant story here), and focus on the challenges of the unemployed, and what challenges persistent unemployment in turn poses for macroeconomic policy. (Side note: our assessment of the plight of the +$250K income households should be tempered by the knowledge that even those households with income in excess of $250K will see a tax cut under the President's proposal, since household income below the $250K threshold would be taxed at the current lower marginal rate [0])
Posted by Menzie Chinn at 07:40 AM permalink | Comments (27) | digg this | reddit
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