September 30, 2011
"International Policy Implications and Lessons From the Global Financial Crisis"
Last Friday and Saturday, the JIMF 4th Annual Conference at UC Santa Cruz took place, organized by Joshua Aizenman (UCSC & NBER), Robert Dekle (USC) & James Lothian (Fordham University & JIMF) and sponsored by JIMF, SCCIE-UCSC, and the FRBs of Atlanta and San Francisco. I didn't get a chance to go, which was unfortunate as the papers were relevant to thinking about how the international financial system is linked to the events of 2008.
September 28, 2011
Links for 2011-09-28
Social anthropologist David Graeber claims that barter economies never operate the way that economists assume.
James Kahn and Robert Rich worry that the U.S. has entered a phase of weak productivity growth.
September 26, 2011
Lost Decades: The Lost Graphs
In our book Lost Decades, Jeffry Frieden and I tried to be as comprehensive as possible in documenting the history we described, the analytical results we reported, and the data we used. We had intended to rely to a greater degree on graphical depictions, but for a variety of reasons, not all the proposed graphs made it in. Hence, we present the graphs that didn't make it into Lost Decades. (And, by virtue of the just-in-time nature of the web, updated!). The graphs are organized by chapters:
September 25, 2011
The Trillion Dollar War of Choice, and the Constraints on Macro Policy
Or at least $805.6 billion as of the end of September, not including debt service and additional reset costs; around $940 billion including interest payments.
As the US economy faces the prospects of stagnant growth or recession, it is of interest to see why the scope for fiscal policy is so circumscribed -- that is why is the debt level so high given that in the last year of the Clinton Administration, we were paying down debt? Figure 1 depicts part of the answer (other parts, here).
"What Predicts a Credit Boom Bust?"
From Chapter 1 of the IMF’s recent World Economic Outlook (Box 1.2), a set of findings by Jörg Decressin and Marco Terrones:
The econometric results confirm that net capital inflows, financial sector reform, and total factor productivity are good predictors of a credit boom. Net capital inflows appear to have an important predictive edge over the other two factors.
September 23, 2011
Effects of operation twist
The Federal Reserve announced on Wednesday (, ) that it will sell some of its shorter-term assets in order to buy more longer-term assets. Here I assess some of the possible consequences of this move.
September 21, 2011
Changing behavior of crude oil futures prices
I've just finished a new research paper with my former student (and now University of Chicago Professor) Cynthia Wu. In our new paper, we study how increased purchases of crude oil futures contracts by financial investors may have affected the prices on those contracts.
September 20, 2011
More thoughts on peak oil
In Saturday's Wall Street Journal, Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, gave his explanation of what's wrong with peak oil. Here's why I don't find his analysis altogether convincing.
September 19, 2011
Lost Decades: The Making of America's Debt Crisis and the Long Recovery
From the preface to Lost Decades, published today (9/19) by W.W. Norton:
The United States ... lost the first decade of the twenty-first century to an ill-conceived boom and a subsequent bust. It is in danger of losing another decade to an incomplete recovery and economic stagnation.
In order to not lose the decade to come, the United States will have to bring order to financial disarray, gain control of a burgeoning burden of debt, and re-create the conditions for sound economic growth and social progress. None of this will be easy. The tasks are made more difficult by the fact, which we have learned to our alarm, that all too many policymakers and observers cling to the failed notions that got the country into such trouble in the first place. If Americans do not learn from this painful episode, and from others like it, they will condemn the nation to another lost decade.. (p. xvi).
September 17, 2011
Guest Contribution: "Europe's Lehman Moment"
Today, we're fortunate to have a guest contribution by Jeffry Frieden, Stanfield Professor of International Peace at Harvard University, and coauthor of Lost Decades: The Making of America's Debt Crisis and the Long Recovery. This article first appeared on Reuter's Opinion.
Europe's Lehman Moment
By Jeffry Frieden
Europe is in the midst of its variant of the great debt crisis that hit the United States in 2008. Fears abound that if things go wrong, the continent will face its own "Lehman moment" -- a recurrence of the sheer panic that hit American and world markets after the collapse of Lehman Brothers in October 2008. How did Europe arrive at this dire strait? What are its options? What is likely to happen?
September 16, 2011
The Wrong Track, in Figures
Mike Rosenberg (Bloomberg) notes that, when viewing the policy mix from the perspective of fiscal and financial conditions, we are on the following path, even as there is a large amount of slack in the economy :
The Fall 2011 World Economic Outlook
The analytic chapters were released yesterday.
- Chapter 3: Target What You Can Hit: Commodity Price Swings and Monetary Policy
- Chapter 4: Separated at Birth? The Twin Budget and Trade Balances
September 15, 2011
What could America be good at?
A vision of what American economic growth over the next decade could look like might also help us address our immediate economic problems.
September 13, 2011
Investment Behavior and Policy Implications
Over the weekend, both Professors Barro and Mankiw wrote on investment in the New York Times. As Modeled Behavior observed, the focus on business fixed investment (BFI) or nonresidential investment was somewhat odd because BFI behavior had not been particularly anomalous in the recovery. Here, I extend upon that analysis, and draw some policy implications.
September 11, 2011
What do low government bond yields signify?
September 09, 2011
We Can All Be Like Texas!
From Fort Worth Star Telegram:
As the Texas Forest Service battles what may be the state's most destructive wildfire outbreak ever, state lawmakers are facing criticism that they have has taken a penny-wise-pound-foolish approach to funding the agency.
September 08, 2011
Recovery, or Replaying 1937 (and 2008)?
The President laid out a series of policy measures in today’s speech which are, by textbook standards, entirely reasonable. And yet, many have been declared by the pundits to be DOA. I’ll leave the assessment of political feasibility to others, but the very fact that these specific measures  are so reasonable by textbook standards makes me wonder if we have in fact experienced technological regress in our politico-economic discourse. Maybe those shocks in RBC models are just the fact that so many individuals with influence never took an intermediate macro course, let alone an economics course  (I highly recommend Robert Hall and John Taylor’s Macroeconomics, or the later editions, by Hall and David Papell).
September 07, 2011
Following the Swiss lead
Today Econbrowser is pleased to feature a guest post from Johns Hopkins University Professor Jonathan Wright, in which he proposes an option for economic stimulus by the Federal Reserve.
Double Dip or Not? The Data and Policy Implications
We know that in the aftermath of combined housing busts, financial crises, and recessions, recoveries are typically modest if not halting, even if the recession is deep.  This characterization appears to have held true, with the question now whether we will enter into a new recession, or merely plug along with growth that technically constitutes a recovery, but is not sufficient to close the output gap with appreciable speed.
September 06, 2011
Links for 2011-09-06
Swiss National Bank announces it will buy foreign currency in unlimited quantities to achieve a target exchange rate. That's quantitative easing with real meat on it.
Jim Brown on the importance of immediately opening up Alaska to more oil exploration and development.
Felix Salmon on why it's depressing to see S&P giving AAA rating to a new security structured from subprime loans.
Felix Salmon again on how to solve the problems with the U.S. Post Office.
Journal of Statistical Software on estimating state-space models.
September 02, 2011
Current economic conditions
The economic data arriving during the last week have been deeply discouraging, though are slightly less grim than some may have been concluding.
September 01, 2011
The CPI, and Some Key Components
A perennial topic of discussion is the deficiencies of the CPI in measuring the things that are important to “real people”. I actually believe that there is a point to some of these critiques. In particular, we know the CPI is “plutocratic” in that the weights associated with the CPI bundle are consistent with the expenditure shares of a household somewhere in the 4th income quintile.   However, I think that other critiques -- namely that food, health, and transportation, are missed -- are misguided.