January 31, 2008
Thinking about Monetary Policy Efficacy: Back to the Textbooks
As the Fed drops interest rates, I've been trying to sort out all the channels that monetary policy will affect output, and which ones are likely to be short circuited this time around.
January 30, 2008
Fed rate cut
Today the Federal Reserve announced a further 50-basis-point cut in its target for the fed funds interest rate, bringing it down to 3.0% for a total reduction in January of 125 basis points. How long should it take before this has an effect on the economy?
Weak GDP report
The Bureau of Economic Analysis reported today that U.S. real GDP grew at a 0.6% annual rate in the fourth quarter of 2007, a weaker report than many of us had been expecting.
January 29, 2008
IMF Cuts Growth Forecasts
Decoupling seems ever more unlikely...
January 27, 2008
How Much Stimulus? Dollar Amounts versus Efficacy
The stimulus package seems near a done deal, and the critiques are abounding -- as they should be. Greg Mankiw says no fiscal stimulus package is necessary, given the current state of the economy. Andrew Samwick says implementing a stimulus package ill conceived given that excessive deficits are what got us into this mess (a view I have some sympathy with). Jim Hamilton argues that a properly constructed fiscal stimulus is unlikely to be implemented in time, and may additionally further erode the dollar's role as a safe haven. Paul Krugman argues that the structure of the package leaves much to be desired.
January 24, 2008
Betting on recession
There was also some interesting action on the Intrade betting exchange this week.
January 22, 2008
Another day, another dollar
It was a fun day to be a macroeconomist, don't you think?
The Fed makes its move
The Federal Reserve announced today it was lowering its target for the fed funds rate 75 basis points, from its previous value of 4.25% to a new value of 3.5%.
January 21, 2008
Why One Percent of GDP? Opportunity Cost Illustrated (Part III)
As the decoupling thesis becomes more and more tenuous , and the rest of the world exhibits greater evidence of a slowdown , , , leading to predictions of a more persistent and deeper slump in the US than previously anticipated , I wonder -- where did that presciption of a one percentage point of GDP fiscal stimulus come from?
January 18, 2008
More Thoughts on Fiscal Stimulus: Business Incentives
What does the literature say about the efficacy of incentives for investment?
January 17, 2008
The case against fiscal stimulus
Everybody else seemed to hear Bernanke say he was in favor of fiscal stimulus as one approach to our economic problems. But I instead heard him articulate very intelligently the potential pitfalls of the strategy.
More Things I Learned at ASSA: Inflation and Labor Cost Measures
One of the AEA sessions I attended (at least in part -- I missed the first paper) was titled (excitingly) "Reconciliation of Seemingly Inconsistent Data Series".
January 16, 2008
Will inflation fears restrain the Fed?
I think not, and here's why.
January 15, 2008
December retail sales
Disappointing yes, but the financial press is getting a little carried away.
January 14, 2008
The Implications of a Textbook Analysis of Macro Stabilization via Discretionary Fiscal Policy
If Bush and Congress are to act at all, they will have to move quickly to have any impact, says Alan Auerbach, an economics professor at the University of California, Berkeley, who has done research on the effects of fiscal stimulus.
"Timing is extremely important," he says. "Recessions typically last less than a year, so unless you can be pretty quick, it's not worth doing."
January 13, 2008
How low will Ben go?
Was 25, now we have 50. Do I hear 75?
January 11, 2008
I thought it might be helpful to summarize some of the background on how we got into our present mortgage mess.
January 09, 2008
What Are the Prospects for a Two Recession Bush Presidency?
With recession calls becoming more frequent (, , , , ) it might pay to revisit the indicators that the NBER looks at in determining the turning points in recessions (The fact that NBER put up some new recession-dating-FAQs just a couple days ago might be a leading indicator of sorts).
January 08, 2008
International Reserves: Messages from the ASSA
I did not get a chance to go to too many sessions at the ASSA meetings in New Orleans (the AEA agenda is here). That being said, I did manage to squeeze in a few on international economics, and the topic of several papers was foreign exchange reserves.
January 06, 2008
Ongoing slump in autos
The weak performance of auto sales continues, with a new twist.
January 04, 2008
Economic indicators take a turn for the worse
No cheer for the New Year from the numbers released this week.
January 03, 2008
Do We Really Know that a Flexible Exchange Rate Regime Facilitates Current Account Adjustment?
In an post in VoxEU, Shang-Jin Wei alluded to work we have undertaken examining whether de facto exchange rate regimes have an impact on current account reversion.
Financial Globalization and the US Current Account Deficit
Matthew Higgins and Thomas Klitgaard at the Federal Reserve Bank of New York discuss the outlook for financing the deficit, going forward, in a new Current Issues. From the introduction:
January 01, 2008
The Dollar in the New Year
Is there (an "equlibrium" exchange rate) model for all seasons?