March 31, 2009
As the G-20 leaders meet in London, one graph should remind the representatives of these disparate countries of their shared interest in restoring the health of the financial systems of the developed countries.
A Table and a Picture from the OECD Economic Outlook
According to the OECD, America's economy will be shrinking throughout 2009. The rest-of-the-world won't be doing so hot either.
March 29, 2009
The Fed's new balance sheet
My previous post reviewed the profound changes in the balance sheet of the U.S. Federal Reserve over the last 18 months. Here I comment on some of the concerns that the new Fed balance sheet raises for the conduct of monetary policy.
March 27, 2009
Money creation and the Fed
A lot of people have seen this picture of the recent behavior of the monetary base and wondered what it means.
March 26, 2009
The Debt to GDP Trajectory in Perspective
There's been substantial discussion of how the debt-to-GDP ratio evolves under the Obama plan. In part, the House attempts to pare back certain provisions of the Obama budget are a reaction to the projected rise in the debt-to-GDP ratio .
March 25, 2009
Is the worst behind us?
A couple of weeks ago we received the encouraging news that retail sales for both January and February were 1.8% above December. On Monday the National Association of Realtors reported that February sales of existing homes were 5.1% above January levels on a seasonally adjusted basis. Today the Census Bureau reported that new orders for manufactured durable goods rose 3.4% in February, with new orders for nondefense capital goods up 7.4%. And also today the Census Bureau reported that new home sales in February were up 4.7% (on a seasonally adjusted basis) relative to January. Is the tide starting to turn?
March 23, 2009
The Stimulus Package Considered against a Deteriorating Macro Backdrop
Here are the latest CBO forecasts of the output gap and unemployment rate, as well as counterfactual gap and rate that would have taken place in the absence of the stimulus package.
March 22, 2009
The first votes are in
The Federal Reserve can't be entirely pleased with markets' reaction to its announcement on Wednesday of quantitative goals for purchases of long-term assets.
March 21, 2009
2009 NCAA Bracket: Round 1
Congratulations to J. Graham, who successfully predicted 7 of the 10 NCAA round 1 upsets to lead the 2009 NCAA Bracket Econbrowser Challenge and come in ahead of 99.9% of the global ESPN entries. The future for Graham 1 does not look so bright, however, since Wakeforest's first-round loss blew a pretty big hole in the rest of that nice bracket.
March 20, 2009
Guest Post: President Obama's Plan to Improve Small Business Credit
By Robert Fairlie
On Monday, President Obama announced a plan to unfreeze capital for small businesses (see here). With the potential of creating new jobs and helping the country move out of the recession, the White House offered several actions to help small businesses obtain the capital that they need. The financial crisis has taken a devastating toll on entrepreneurs as capital has become increasingly scarce. This year's projections for loans guaranteed by the Small Business Administration are down to $10 billion, which is half the amount of loans guaranteed last year.
March 19, 2009
The U.S. Federal Reserve yesterday finally took the step many of us had been urging for some time.
March 18, 2009
2009 NCAA Bracket Econbrowser Challenge
OK, I said I wouldn't give you any hints, but decided to pass one along anyway. Here are President Obama's picks.
March 17, 2009
New York Attorney General Andrew Cuomo (hat tip: LA Times) asserted that on Friday insurance company AIG, recipient so far of perhaps $170 billion in bailout assistance, distributed over $160 million in "retention payments to members of its Financial Products Subsidiary." These payments apparently included "retention" payments of over $1 million each to eleven individuals who are no longer working at AIG.
March 16, 2009
It's tournament time!
I know, you've been regretting all year that you didn't get a chance to enter the the 2008 NCAA Bracket Econbrowser Challenge. Well guess what? Here it is March of 2009 and you have a brand new chance!
GDP Forecasts from the WSJ
With talk of a second stimulus package circulating, it's of interest to see what the current forecasts are indicating about the depth of the recession, as well as the "bounceback". Jim has presented some of his views here. In this post, I examine the implications of the consensus coming from the March WSJ survey article, which indicates continued deterioration in the outlook, but a recovery beginning in 2009Q3.
March 15, 2009
What will recovery look like?
When good news comes, what should we expect to see?
March 13, 2009
Trend Stationarity/Difference Stationarity over the (Very) Long Run
The Mankiw-DeLong inspired debate over the time series characteristics of GDP continues.    Here is a very long run (1867-2008) extension of my 1967-2008 quarterly analysis covered in this post.
March 12, 2009
Chinese Exports: "no hope"
From Bloomberg two days ago:
..."There's no hope for export demand to recover any time soon," said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. "How fast imports recover depends on how soon the government's stimulus package kicks in and creates real demand in major industries."
March 10, 2009
Moral hazard and AIG
We are now suffering the consequences of one of the most spectacular financial miscalculations in history, after investors around the world discovered that trillions of dollars invested in securities derived from U.S. home mortgages were far riskier than they had originally believed.
March 09, 2009
The Great Multiplier Debate, New Keynesian Edition
Greg Mankiw cites a study by Cogan, Cwik, Taylor, and Wieland to buttress his arguments that fiscal multipliers are small, especially when considering New Keynesian models. He also provides a startling graphic showing the dynamic multipliers from Romer-Bernstein versus the Taylor (1993) model, incorporating model consistent expectations; this graphic motivates Wieland et al. to remark:
We first show that the assumptions made by Romer and Bernstein about monetary policy -- essentially an interest rate peg for the Federal Reserve -- are highly questionable according to new Keynesian models. We therefore modify that assumption and look at the impacts of a permanent increase in government purchases of goods and services in the alternative model. According to the alternative model the impacts are much smaller than those reported by Romer and Bernstein.
Cogan et al. use a New Keynesian dynamic stochastic general equilibrium (DSGE) model, specifically the Smets-Wouter model (Working Paper version of AER paper here).
March 08, 2009
Update on the auto sector
Detroit is still down, and the count begins on whether that means out.
March 06, 2009
The February Employment Situation
March 04, 2009
Interesting Econometric Result of the Day: And the Prospects for a Growth Bounceback
The exchange between Brad Delong and Greg Mankiw ( , followed up by  ) reminded me of some earlier work I'd done with Yin-Wong Cheung on the time series properties of real GDP, back in the "unit root" wars. Briefly, Mankiw was alluding to work with Campbell indicating GDP was well approximated as an ARIMA process, while Delong is arguing that using unemployment, which is trend stationary, indicates that indeed sharper increases in unemployment presage more rapid GDP growth. The former characterization is univariate in nature and the latter is bivariate. Of course, we've moved on since those days -- the entire VAR and SVAR literature expands the set of variables, but at the cost of greater complexity -- but simple characterizations can still be useful.
March 03, 2009
How much is a trillion?
A trillion dollars used to be a sum that never naturally came up in normal conversation. Now all of a sudden, it's the standard unit we seem to be using to talk about our economic problems and what we're trying to do about them. Fortunately, I think I finally got a handle on what $1 trillion really means.
March 02, 2009
Is the Administration's GDP Forecast Too Rosy?
March 01, 2009
Stock prices and fundamentals
How low can stock prices go, and how worried should you be?