August 31, 2010
Policy tools that could lower interest rates further
Even though the overnight interest rate has been stuck near zero for 20 months, are there options available to the Federal Reserve or the U.S. Treasury to bring longer-term yields down further? I have been looking into this question with Cynthia Wu, an extremely talented UCSD graduate student. We present our findings in a new research paper, some of whose results I summarize here.
August 30, 2010
What Can Sustain GDP Growth? Open Economy Version
With the consumer in the doldrums, residential investment unlikely to rebound in the near future, and government stimulus constrained by political gridlock, it's hard to see where the sources of aggregate demand will be. I'm going to extend Jim's search for silver linings in the latest GDP release.
August 29, 2010
New database on the maturity structure of publicly-held debt
I have been working on a project with UCSD graduate student Cynthia Wu to try to assess the potential for the Federal Reserve to continue to influence long-term interest rates even when the short-term interest rate is essentially at zero. I'll be relating the conclusions from that research in a few days. But first I'd like to call attention to a new data set that we developed on the maturity structure of publicly-held debt which may be of interest to other researchers. As Paul Krugman likes to warn, this one is just for the wonks.
August 27, 2010
GDP revised down
The Bureau of Economic Analysis, which last month had estimated that U.S. real GDP had grown at a 2.4% annual rate during the second quarter, today revised that estimate down to a 1.6% annual rate. But the revision isn't quite as discouraging as it might sound.
August 26, 2010
A quantitative assessment of the scientific consensus on anthropogenic climate change
From the abstract to the paper:
... we use an extensive dataset of 1,372 climate researchers and their publication and citation data to show that (i) 97-98% of the climate researchers most actively publishing in the field support the tenets of ACC outlined by the Intergovernmental Panel on Climate Change, and (ii) the relative climate expertise and scientific prominence of the researchers unconvinced of ACC are substantially below that of the convinced researchers.
August 25, 2010
More thoughts on what to expect from the Fed
There is disagreement within the FOMC. How will it be resolved?
August 24, 2010
Kevin "Dow 36,000" Hassett* Speaks on "Keynesian Economics"
The biggest Keynesian stimulus in U.S. history was a bust.
Incredibly, some Keynesians who supported Barack Obama's $862 billion stimulus now claim it fell short of their goals not because the idea was flawed, but because the spending package was too small.
August 22, 2010
Long-term perspective on the stock market
Nobody can tell you for sure what's going to happen next in the stock market. But thanks to the nice data set collected and maintained by Yale Professor Robert Shiller we can speak with authority about what it's been doing for the last 140 years.
August 19, 2010
The June Trade Release: A Clash of Narratives
The recent trade release for June sparked some consternation, as it indicated
2009Q2 2010Q2 growth, conditional on data already released, would be lower. But there was also some unhappiness as it was taken by some to mark the return of the spendthrift consumer. Yet, everywhere I see discussion of how consumption is lackluster, because households are deleveraging and beset by uncertainty.  These two narratives clash. Which one is right?
August 18, 2010
Will the Fed do more?
If conditions deteriorate further, I believe the answer is yes.
August 16, 2010
Financing U.S. Debt
Is There Enough Money in the World -- and At What Cost?
This paper examines the potential role for foreign official holdings of U.S. Treasury securities and the associated implications for Treasury security interest rates, international portfolio allocations, net international income flows, and the U.S. net international debt position, using a baseline outlook of current and projected U.S. budget deficits and growing debt. ...
August 14, 2010
Escape from arbitrage: the movie
Two of my favorite economists, Bilkent University Professor Refet Gurkaynak and Johns Hopkins University Professor Jonathan Wright, have a nice new paper in which they survey macroeconomic theories of the term structure of interest rates. As an unusual digital supplement to their paper, they put together a movie in which you can watch the arbitrage glue that normally holds markets together start to fail as financial markets literally fell apart at the end of 2008.
August 13, 2010
Chinn-Ito Capital Account Index up to 2008
August 12, 2010
Persistent Large Output Gaps, Disinflation and Deflation
Or, what if the Accelerationist hypothesis doesn't hold. I'm sure this question will drive some apoplectic -- but I think it a reasonable question. First, let's look at the empirical evidence on what happens to inflation in the wake of persistent large output gaps. Fortuitously, Andre Meier has just written on this subject, in Still Minding the Gap:
August 11, 2010
Ever so slightly less contractionary
What is the significance of yesterday's statement from the FOMC?
August 09, 2010
From Disinflation to Deflation?
It's a schizophrenic world. On one side, there are lots of people worried about hyperinflation , despite forward looking indicators of inflation signalling quiescence  and actual price indicators going downward.
"Future Recession Risks"
An unstable economic environment has rekindled talk of a double-dip recession. The Conference Board's Leading Economic Index provides data for predicting the probability of a recession but is limited by the weight assigned to its indicators and the varying efficacy of those indicators over different time horizons. Statistical experiments with LEI data can mitigate these limitations and suggest that a recessionary relapse is a significant possibility sometime in the next two years.
August 08, 2010
Current economic conditions
Last week's new economics data were a mixed bag. But on balance I'd have to say I'm more discouraged than when the week began.
August 07, 2010
Vast Ice 'Island' Breaks Free of Greenland Glacier
From NYT, a quote of researcher Jason Box:
Petermann [glacier] is a sleeping giant that is slowly awakening. Removing flow resistance leads to flow acceleration... The coincidence of this area loss and a 30 square kilometer loss in 2008 with abnormal warmth this year, the setting of increasing sea surface temperatures and sea ice decline are all part of a climate warming pattern.
August 06, 2010
A Sputtering Economy?
The employment situation July release indicated a decrease in overall payroll employment. Does this outcome indicate a sputtering* economy
August 05, 2010
For a while, contagion had dropped off the (research) map. But it's now back (thanks to Greece et al!), in both research and policy arenas. A new symposium published in Pacific Economic Review covers the topic.
August 04, 2010
Lessons from the Gulf Spill: Do's and Don'ts
We're pleased to feature another post from Steven Kopits of Douglas-Westwood, this time on lessons to be learned from the BP oil disaster.
August 03, 2010
Macro Advisers on Expiration of EGTRRA/JGTRRA
From Macroeconomic Advisers "The impact of sunset of tax cuts on GDP, employment, inflation & interest rates", released today:
August 02, 2010
Let Bush Be Bush...on Taxes
Recall the 2001 and 2003 tax cuts were written to expire, for the most part, in FY2011. I wrote in February that one way to start fixing the Nation's finances is to let the EGTRRA and JGTRRA expire as they were originally designed to. Via EconomistMom comes Bill Gale's additional reasons why we should, despite the lackluster recovery  (more on that below).
August 01, 2010
Options for monetary stimulus
The latest economic data have surely warranted a downward revision in the Federal Reserve's assessment of near-term economic performance. It therefore might be a good time to review the steps the Fed could take if it wishes to provide further economic stimulus.