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February 28, 2010
What drives media slant?
University of Chicago professors Matthew Gentzkow and Jesse Shapiro propose an answer.
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Posted by James Hamilton at 07:03 AM permalink | Comments (32)
February 25, 2010
Exports: Productivity, Factor Proportions, and Policy Implications
Bringing New Research Developments to Bear
The President's goal of doubling exports elicited a lot of discussion, and skepticism. In a previous blog post, I examined the prospects of accomplishing this goal from a macroeconomic perspective. However, a few discussions I've had with journalists have reminded me that the frontier of international trade theory has moved considerably over the past few years, even as the much of the economic commentary remains mired in the older models. In this respect, the most recent edition of the Economic Report of the President was extremely welcome, as it brought to bear recent innovations in the trade literature.
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Posted by Menzie Chinn at 01:40 PM permalink | Comments (20)
February 23, 2010
Treasury Supplementary Financing Program (SFP)
The SFP, the U.S. Treasury's program for assisting with the balance sheet of the Federal Reserve, is making a sudden and dramatic comeback.
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Posted by James Hamilton at 08:53 PM permalink | Comments (21)
Real Wage Decline Ended the 1981-82 Recession?
David Henderson writes in his "Reply to DeLong":
In the 1981-82 recession, the fall in real wages helped end the recession.
I don't see it in BLS series Nonfarm Business Sector: Real Compensation Per Hour.
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Posted by Menzie Chinn at 04:28 PM permalink | Comments (21)
February 22, 2010
In Search of...Crowding Out
There are various definitions of crowding out. There's crowding out in the financial markets, and crowding out of actual economic activity. In order for crowding out in the financial markets to translate into a reduction of the interest sensitive components of aggregate demand, one needs to see an impact on interest rates. So, what is happening to real (inflation adjusted) interest rates?
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Posted by Menzie Chinn at 06:20 PM permalink | Comments (20)
The Demand for Stimulus Funds
From Bloomberg today:
...more than 100 congressional Republicans and several Democrats who, after voting against the stimulus bill, wrote Transportation Secretary Ray LaHood seeking money from $1.5 billion the plan set aside for local road, bridge, rail and transit grants. The $862 billion American Recovery and Reinvestment Act passed last year with no Republican votes in the House and three in the Senate.
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Posted by Menzie Chinn at 11:52 AM permalink | Comments (11)
February 20, 2010
The Fed's discount rate hike
The Federal Reserve Board announced on Thursday that it is raising the interest rate at which banks borrow from the Fed's discount window to 0.75%, a 25-basis-point increase, and intends to return discount lending primarily to the traditional overnight loans. "The rate hike cycle begins," declared 24/7 Wall St, and Business Week reported:
Treasuries fell, pushing yields to the highest levels in at least five weeks, amid concern the Federal Reserve's increase in the discount rate signaled policy makers are moving closer to lifting benchmark borrowing costs.
But I don't believe that's what the discount rate hike means at all.
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Posted by James Hamilton at 01:39 PM permalink | Comments (33)
February 19, 2010
Macroeconomic Advisers: On the Stimulus Package
From today's Macroeconomic Advisers blogpost, by Joel Prakken:
Frequently, partisan commentators -- and even some economists -- exclaim that the stimulus has failed because the unemployment rate now exceeds the peak shown in projections prepared before ARRA was implemented. This argument, which clearly -- and perhaps intentionally -- confuses the pre-stimulus baseline with the incremental effects of the stimulus, would be laughable if it was not taken so seriously in some quarters. For the record, last spring, as the financial crisis that engulfed the economy worsened unexpectedly -- but before the stimulus could possibly have had any real effect on the economy -- the unemployment rate already had moved above the Administration's (and many others') last pre-stimulus projection. So, this is simple: the baseline forecasts were optimistic, but unemployment would be even higher now without the benefit of the stimulus package.
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Posted by Menzie Chinn at 12:02 PM permalink | Comments (30)
February 17, 2010
Assessing the Stimulus, One Year In: A View from the Mainstream
On the one year anniversary of the passage of the ARRA, it seems appropriate to recap, not what the academics say, but what the business sector forecasters say about the impact of the stimulus package.
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Posted by Menzie Chinn at 08:04 PM permalink | Comments (46)
February 16, 2010
The new normal
Also included in Federal Reserve Chair Ben Bernanke's statement to Congress last week were some guidelines for what we might expect Federal Reserve decisions and communications to look like as we make the gradual adjustment to more normal conditions.
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Posted by James Hamilton at 08:04 PM permalink | Comments (8)
February 15, 2010
The December Trade Release: Implications for GDP Growth, Rebalancing, Doubling Exports and the US-China Deficit
The December trade release surprised some observers in terms of the rise in imports. [0] I think there are some other interesting implications. First, the implied downward revision in GDP is minimal. Second, the drop was less pronounced in the ex-oil trade balance. Third, although real trade flows are rising from their troughs, they have not re-attained pre-Lehman levels. Fourth, the US-China goods trade balance continues to improve.
Posted by Menzie Chinn at 07:01 PM permalink | Comments (11)
February 14, 2010
Bernanke on the Fed's balance sheet
Federal Reserve Chair Ben Bernanke last week released a statement of how the Fed intends to manage its bloated balance sheet over the next few years. Here I offer my interpretation of what his plan involves.
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Posted by James Hamilton at 06:53 AM permalink | Comments (42)
February 11, 2010
Economic Report of the President, 2010
The 2010 ERP was released today. The entire document is here. CEA Chair's discussion is here.
Posted by Menzie Chinn at 06:13 PM permalink | Comments (2)
Fiscal Situation: A Cross-Country Perspective
Torsten Slok has a whole set of interesting pictures, two of which are particularly relevant in thinking about the US fiscal situation as compared to other advanced countries.
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Posted by Menzie Chinn at 05:37 PM permalink | Comments (49)
February 09, 2010
The Heritage Foundation Confuses Me
The Heritage Foundation critiques the CEA assessment of the stimulus. In WebMemo #2799, Dr. Campbell writes:
The CEA's method, in brief, compared a statistical forecast of the economy based on historical patterns (no stimulus) with the actual economic results in 2009. On this basis, it claims that there are 2 million more jobs in the economy than otherwise would have been the case. The CEA then concludes that this difference between this statistical forecast and the actual results were the effect of the stimulus.
...
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Posted by Menzie Chinn at 01:58 PM permalink | Comments (37)
February 08, 2010
Letting the EGTRRA and JGTRRA Provisions Expire
Or, what would happen if we "Let Bush Be Bush". Recall the 2001 and 2003 tax cuts were written to expire, for the most part, in FY2011. The impact of extending those cuts (along with some others) is strikingly depicted in this Figure from the Center for Budget and Policy Priorities (h/t Brad Delong).
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Posted by Menzie Chinn at 08:47 PM permalink | Comments (19)
February 07, 2010
Reactions to last week's economic data
Here I offer some thoughts on last week's numbers for employment, auto sales, and commodity prices.
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Posted by James Hamilton at 07:26 AM permalink | Comments (24)
February 06, 2010
Federal Debt: More Time Series
Augmenting my previous post, here are two additional graphs, motivated respectively by comments by Econbrowser readers Eric Swanson (for Figure 1) and Cedric Regula and tim kemper (for Figure 2).
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Posted by Menzie Chinn at 09:38 AM permalink | Comments (10)
February 05, 2010
The January Employment Situation: Four Pictures
Downward revision in the level of nonfarm payroll (NFP) employment; stabilization in employment measures (establishment, household, research series); aggregate weekly hours trend up.
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Posted by Menzie Chinn at 10:52 AM permalink | Comments (4)
February 04, 2010
Doubling Exports
The Administration has committed itself to doubling exports in five years, via the National Export Initiative. Much of the journalistic coverage has focused on the regulatory, trade-credit financing, and export promotion measures being considered [0]. I wanted to take a macro oriented approach to the viewing the plausibility of this goal. Let me address this issue from a variety of perspectives.
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Posted by Menzie Chinn at 11:18 PM permalink | Comments (16)
February 03, 2010
Forecasts Compared
How does the Administration's forecast of the levels of real GDP compare against those of the CBO, and the Blue Chip and Wall Street Journal surveys?
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Posted by Menzie Chinn at 06:15 PM permalink | Comments (5)
February 02, 2010
Commodity inflation update
The view I have been forming of near-term inflationary pressures is that we're seeing two very different dynamics in play, with the dollar prices of things the Chinese can stockpile and import going up and the dollar prices of everything else (like U.S. wages and rents) under significant downward pressure. The last week seemed to bring some reprieve on the first front.
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Posted by James Hamilton at 03:48 PM permalink | Comments (18)