Econbrowser

Some Thoughts Elicited by Reading Some Calibration Papers

Menzie Chinn — 2009-11-05T11:28:53-08:00

(Warning: Might be considered "wonky" by some) In many economic analyses, one wants to isolate the "business cycle" component of macroeconomic series. Here is one such series, which has had a detrending technique applied to it. Try to guess what it is.

Current economic conditions

James Hamilton — 2009-11-04T06:14:29-08:00

The U.S. recovery is underway. But so far it doesn't look as strong as we had been hoping.

Prospects for Employment under Differing Econometric Specifications

Menzie Chinn — 2009-11-02T18:32:13-08:00

Most economists are projecting a slow recovery in terms of employment. What do historical correlations imply?

On Revisions and on Conditioning

Menzie Chinn — 2009-10-31T09:50:01-08:00

Both have to be "handled with care".

Revisions

We're all tempted to make predictions on the basis of the last data point. And even more difficult to resist is the temptation to make definitive statements on the basis of data that are sure to be revised. For instance, we see this question from Casey Mulligan, "Where's the GDP Disaster?".

Last October, when we were told that spending and incomes were about to collapse, I predicted that "real GDP will not drop below $11 trillion (chained 2000 $)."

A welcome GDP report

James Hamilton — 2009-10-29T17:14:05-08:00

The Commerce Department reported today that the seasonally adjusted real value of the nation's production of goods and services grew at a 3.5% annual rate during the third quarter, a little better than the 3.2% average seen since 1947.

The 2009Q3 Advance GDP Release and Stimulus Measures

Menzie Chinn — 2009-10-29T16:46:01-08:00

The 3.5% growth rate was, in my view, in large part attributable to direct measures to stimulate the economy, including direct spending on goods and services by the government (Federal, state and local), as well as tax measures. First, let's take a look at how each category of final demand accounted for total growth, in the context of a mechanical decomposition, in Figure 1.

Futures As Predictors of Commodity Prices

Menzie Chinn — 2009-10-28T20:21:48-08:00

As commodity prices start rising again -- at least some -- the question of whether futures are useful indicators seems relevant. Figure 1 shows the IMF commodity price indices, as reported in the October World Economic Outlook:

Improving financial regulation and supervision

James Hamilton — 2009-10-27T19:03:58-08:00

There were some other very interesting presentations at the conference hosted by the Federal Reserve Bank of Boston last week. Fed Chair Ben Bernanke spoke on Financial Regulation and Supervision after the Crisis while Princeton Professor Alan Blinder's message was It's Broke, Let's Fix It: Rethinking Financial Regulation. Here I summarize four key reforms these speakers addressed.

The National Saving Identity: Private Saving, Household Saving, and Rebalancing

Menzie Chinn — 2009-10-26T17:17:09-08:00

The National Saving Identity states:

CA ≡ (T-G) + (S-I)

Where CA is the current account, (T-G) is the consolidated government budget balance, and (S-I) is the private sector saving-investment balance. Figure 1 depicts the profound shifts that have occurred in these components (normalized by nominal GDP).

Evaluating the new tools of monetary policy

James Hamilton — 2009-10-25T06:03:13-08:00

Last week I participated in a conference hosted by the Federal Reserve Bank of Boston, at which I discussed the new lending programs and asset acquisitions pursued by the Federal Reserve over the last two years. Previously I shared with Econbrowser readers empirical evidence on the effects these targeted liquidity operations seem to have had. Below I reproduce my remarks from the conference on the underlying motivation for using such measures, in which I suggested that the critical question is what was the underlying cause of the financial stress to which the Fed was responding. I distinguished between two possible interpretations of how the financial crisis arose.

The Political Economy of Recovery and Rebalancing

Menzie Chinn — 2009-10-22T15:29:56-08:00

Jeffry Frieden, Professor of Government at Harvard, has a new Council of Foreign Relations working paper "Global Imbalances, National Rebalancing, and the Political Economy of Recovery" :

Global macroeconomic imbalances -- massive borrowing by some countries and massive lending by others -- drove the financial boom and bubble that eventually burst into the current crisis. There is now nearly universal agreement that such imbalances cannot be sustained, and that the former deficit and surplus nations need to move toward macroeconomic balance.

One Interpretation of Recession Causes... with Really Long and Really Variable Lags

Menzie Chinn — 2009-10-21T20:35:33-08:00

In an Economix post today, titled "The Panic of '08: Recession Cause or Effect?" Professor Mulligan writes:

...recent research questions the claim that the financial panics themselves contributed to their contemporaneous and severe employment downturns.

Unemployment and inflation

James Hamilton — 2009-10-20T19:58:36-08:00

Does high unemployment mean that there's nothing to worry about in terms of inflation?

Guest Contribution: East Asian Production Networks, Global Imbalances, and Exchange Rate Coordination

Menzie Chinn — 2009-10-19T16:00:32-08:00

By Willem Thorbecke

Today, we're fortunate to have Willem Thorbecke, Senior Research Fellow at Asian Development Bank Institute and a Consulting Fellow at Japan's Research Institute of Economy, Trade and Industry, as a guest contributor.

Asia's role in the propagation of the global recession has been a subject of study, but relatively little attention has been devoted to the interaction of exchange rates and production chains. The structure of East Asian production networks and the severity of the recession places a premium on policy coordination in the region.

No L

James Hamilton — 2009-10-18T07:31:41-08:00

Real output grew significantly this quarter. Will employment follow?