July 31, 2008
Not quite a recession
The Bureau of Economic Analysis reported today that U.S. real GDP grew at a 1.9% annual rate in the second quarter of 2008, less than many analysts had been predicting a week ago, but substantially better than the 6-month-ahead predictions for that number that we were hearing back in January.
July 30, 2008
July 29, 2008
Oil prices and demand
More evidence of significant changes in the behavior of American consumers.
July 28, 2008
Taylor rules, exchange rates, and the speculation about the dollar/euro rate
As Europe teeters on the edge of recession , and the United States remains mired in slow growth, expectations of what interest rates, and hence exchange rates, are shifting. Here's a familiar depiction of where policy rates in the US and the euro area have been, and where they are predicted to go.
July 25, 2008
Oil prices and economic fundamentals
Oil was selling for $123 a barrel on May 7, and that's where it closed this week. Sounds like a calm and rational market, except for the fact that just last week it was going for $145.
July 23, 2008
Implications of adjustment to riskier dollar assets in a portfolio balance framework, illustrated in three steps
Consider a hypothetical world economy with assets denominated in dollars and euros.
July 21, 2008
Why a lot of people think the CPI is not representative of their experience ... and are right. At least partly.
This post focuses on issue separate from the mathematics of the index forumulation, and has to do with what the typical weights at any given instant in time should pertain to. Should one use the expenditure weights that pertain to all the households aggregated in the economy? Or should one use the expenditure weights that pertain to the "typical" household? Kokoski (2003) summarizes the distinction thus:
In the democratic index, the expenditure pattern of each household counts in equal measure in determining the population index; in essence, it is a case of "one household--one vote". In the plutocratic case, the contribution of each household's expenditure pattern is positively related to the total expenditure of that household relative to other households--in essence, "one dollar, one vote".
July 20, 2008
Quarter 2 may come out OK, but challenges remain
July 18, 2008
IMF on the Global Macroeconomy, CBO on US-China Trade
The IMF released an update to it's World Economic Outlook yesterday.
- Global economic growth to slow significantly in second half of 2008.
- Rising energy, commodity prices have boosted inflationary pressure
- Need to adapt to shift in purchasing power from commodity users to producers
July 17, 2008
New estimates of the high school dropout rate
I was shocked by today's report that the high school dropout rate in California has reached 24%.
July 16, 2008
The Expansion: Retrospect and Prospect, Whine-Free
The President's press conference yesterday was meant to buttress consumer and investor confidence. I will leave it to others to evaluate whether he was successful in this endeavor . I will also ignore his disingenuous remarks concerning how allowing drilling offshore and in ANWR  would somehow affect gasoline prices today in a noticeable manner, and focus instead on his repeated emphasis on the fact that the economy is still growing (although he never mentioned at what pace).
July 15, 2008
Did Fannie and Freddie cause the mortgage crisis?
Some thoughts about the role played by the GSEs in the run-up in mortgage debt and house prices.
July 14, 2008
Index Theory and the CPI
My previous post regarding government statistics elicited a lot of commentary, with a tremendous amount of vitriolic commentary directed at the current approach to calculating the CPI. Rather than provide more of my own thoughts on what constitutes an appropriate mix of theory and pragmatism, I will quote from the author whose work I had to read in graduate school, W. Erwin Diewert. From his entry in the 1998 Journal of Economic Perspectives which had a symposium on the Boskin commission report:
July 13, 2008
The Fannie and Freddie assistance plan
I see much to like about this.
July 12, 2008
Fannie Mae and Freddie Mac
How did we get into this mess, and how do we get out of it?
July 10, 2008
Two Interesting Facts of the Day
As of 2008Q1, wholly 100% of the increase in the trade deficit since 2001Q4 is accounted for (in a mechanical sense) by the increase in the value of oil imports. And the dollar share of reserves appears to continue its decline.
July 09, 2008
The Government's Macroeconomic Series: X-Files, Dilbert, or Resource Constraints?
Or, is the model for explaining why macro data sometimes appear so counter to intuition best explained by willful deception (Iraq and WMDs), incompetence (the FEMA response to Katrina), or prosaic (resource constraints)? The casual reader might think I'm overstating the extreme hypotheses, but there is, after all, a whole website devoted to the proposition of conspiracy:
Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.
July 08, 2008
UAE & Other Gulf Countries Urged to Switch Currency Peg from the Dollar to a Basket That Includes Oil
By Jeffrey Frankel
The possibility that some Gulf states, particularly the UAE, might abandon their long-time pegs to the dollar is getting increasing attention (from Martin Feldstein and Brad Setser, for instance). It makes sense. The combination of high oil prices, rapid growth, a tightly fixed exchange rate, and the big depreciation of the dollar against other currencies (especially the euro, important for Gulf imports) was always going to be a recipe for strong money inflows and inflation in these countries. The economic dynamism -- most striking in Dubai -- is admirable and fascinating, but also now clearly indicative of overheating. Indeed inflation, as predicted, has risen alarmingly. Among other ill effects, it is producing unrest among immigrant workers. An appreciation of the dirham and riyal is the obvious solution.
July 07, 2008
Janet Yellen on risks and prospects for the U.S. economy
This morning we were pleased to welcome Janet Yellen, President of the Federal Reserve Bank of San Francisco, to our UCSD Economics Roundtable. She focused on three main challenges: the housing slump, financial market turmoil, and commodity prices, which she likened to the three witches from Macbeth. Her complete speech is available from the FRB SFO Here are some excerpts.
July 06, 2008
The International Investment Position: Latest Estimates, and What's Missing
The BEA released the end-2007 International Investment Position data on June 27.
July 05, 2008
Iraq is a success if...
...oil was the objective. Maybe.
July 03, 2008
Links for July 3
Today we outsource with some interesting links on oil markets and housing.
July 02, 2008
Recession and the oil shock of 2008
Unfortunately, this seems to be unfolding according to script.
Lecture on regional business cycles
The lecture I gave at the Society for Nonlinear Dynamics and Econometrics Symposium in San Francisco two months ago on regional business cycles (earlier summarized here and here) is now available via video streaming (courtesy of Bruce Mizrach and the SNDE). Note you have to click through the slides yourself as the lecture proceeds, and it seems to work with Internet Explorer but not Firefox.