"With the passage of Cap and Trade there is a good chance that unemployment will be worse than 1933 by the end of 2010."

So writes an Econbrowser reader. Well, anything can happen, but that is not the outcome I predict. Nor the CBO, EPA, and other informed analysts.

The incidence of the gains and losses associated with the cap-and-trade program in H.R. 2454 would vary from year to year because the distribution of the allowance value would change over the life of the program. In the initial years of the program, the bulk of allowances would be distributed at no cost to various entities that would be affected by the constraint on emissions. Most of those free allocations would be phased out over time, and by 2035, roughly 70 percent of the allowances would be sold by the federal government, with a large share of revenues returned to households on a per capita basis. This analysis focuses on the effect of the legislation in the year 2020, a point at which the cap would have been in effect for eight years (giving the economy time to adjust) and at which the allocation of allowances would be representative of the situation prior to the phase-down of free allowances. The incidence of gains and losses would be considerably different once the free allocation of allowances had mostly ended. Although the analysis examines the effects of the bill as it would apply in 2020, those effects are described in the context of the current economy --that is, the costs that would result if the policies set for 2020 were in effect in 2010.

On that basis, the Congressional Budget Office (CBO) estimates that the net annual economywide cost of the cap-and-trade program in 2020 would be $22 billion -- or about $175 per household. That figure includes the cost of restructuring the production and use of energy and of payments made to foreign entities under the program, but it does not include the economic benefits and other benefits of the reduction in GHG emissions and the associated slowing of climate change. CBO could not determine the incidence of certain pieces (including both costs and benefits) that represent, on net, about 8 percent of the total. For the remaining portion of the net cost, households in the lowest income quintile would see an average net benefit of about $40 in 2020, while households in the highest income quintile would see a net cost of $245. Added costs for households in the second lowest quintile would be about $40 that year; in the middle quintile, about $235; and in the fourth quintile, about $340. Overall net costs would average 0.2 percent of households' after-tax income.

From the EPA Analysis of the American Clean Energy and Security Act of 2009 H.R. 2454 in the 111th Congress (6/23/09):

The cap & trade policy has a relatively modest impact on U.S. consumers assuming the bulk of revenues from the program are returned to households.

• Average household consumption is reduced by 0.03-0.08% in 2015 and 0.10-0.11% in 2020 and 0.31-0.30% in 2030, relative to the no policy case.
• Average household consumption will increase by 8-10% between 2010 and 2015 and 15-19% between 2010 and 2020 in the H.R. 2454 scenario.
• In comparison to the baseline, the 5 and 10 year average household consumption growth under the policy is only 0.1 percentage points lower for 2015 and 2020.
• Average annual household consumption is estimated to decline by $80 to $111 dollars per year* relative to the no policy case. This represents 0.1 to 0.2 percent of household consumption.
• These costs include the effects of higher energy prices, price changes for other goods and services, impacts on wages and returns to capital. Cost estimates also reflect the value of some of the emissions allowances returned to households, which offsets much of the cap and trade program’s effect on household consumption. The cost estimates do not account for the benefits of avoiding the effects of climate change.
• A policy that failed to return revenues from the program to consumers would lead to substantially larger losses in consumption.

While this analysis contains a set of scenarios that cover some of the important uncertainties when modeling the economic impacts of a comprehensive climate policy, there are still remaining uncertainties that could significantly affect the results.

*Annual net present value cost per household (discount rate = 5%) averaged over 2010-2050 under the core scenario

Here's a set of graphs and figures detailing these results.

Of course, this tabulation only includes the costs. In order to do a benefit-cost analysis, one would need to know the benefits of avoiding global climate change associated with green house gas emissions. CBO has its recent analysis Potential Impacts of Climate Change in the United States (May 2009).

Despite the wide range of projected impacts of climate change over the course of the 21st century, published estimates of the economic costs of direct impacts in the United States tend to be modest.110 Most of the economy involves activities that are not likely to be directly affected by changes in climate. Moreover, researchers generally expect the U.S. economy to grow dramatically over the coming century, mainly in sectors (such as information technology and medical care) that are relatively insulated from climate effects. Damages are therefore likely to be a smaller share of the future economy than they would be if they occurred today. As a consequence, a relatively pessimistic estimate for the loss in projected real (inflation-adjusted) U.S. gross domestic product is about 3 percent for warming of about 7 degrees F by 2100. 111

However, such estimates tend to mask larger losses in subsectors of the economy. Some sectors in certain regions are likely to bear sizable costs requiring significant adjustments and adaptations, and a few sectors in a few regions may be eliminated altogether. Even at the low end of the projected range of warming, for example, changing winter conditions would cut the Western ski season by up to four months and would virtually eliminate the Eastern snowmobiling season.112

...

The most comprehensive published study includes estimates of nonmarket damages as well as costs arising from the risk of catastrophic outcomes associated with about 11 degrees F of warming by 2100. That study projects a loss equivalent to about 5 percent of U.S. output and, with substantially larger losses in a number of other countries, a loss of about 10 percent of global output.116

CBO has many of its analyses compiled here; EPA here. EIA has collected its analyses of previous climate change and other legislation here.

Martin Feldstein has recently raised the possibility that we might experience a relapse into recession (a beautiful symmetrical W), with the next dip in 2010. In my view, this means (1) we should have opted for a bigger and better composed stimulus package, and (2) the timing of expenditures in the stimulus package might not be as problematic as many commentators have indicated. From Bloomberg:

"I think we"re going to see a temporary substantial improvement," Feldstein, the former head of the National Bureau of Economic Research and a Reagan administration adviser, said today in an interview on Bloomberg Radio. "I emphasize the words temporary and substantial."

Feldstein -- a member of the private panel that dates the start of recessions and recoveries -- suggested the economy will contract into next year, and that the pattern of economic turnaround will be more of a seesaw than what he called "a beautiful symmetrical W."

Interestingly, neither the OECD nor Deutsche Bank project such a "W" shaped trajectory. Nor do any of the forecasters in the May WSJ survey.

That doesn't rule out the possibility of this occurring. I can think of several reasons for thinking a W shaped recession would be plausible. The most plausible in my mind would be if the world economy failed to rebound sufficiently to provide enough externally generated aggregate demand via exports. The other possibility is that monetary policy tightens too soon, as inflation hawks press their case (see FRBSF President Janet Yellen's assessment, as well as this post).

The Timing of Stimulus Spending, Again

At this juncture, it's useful to recall that the peak in spending would be in FY2010. As shown in this figure from this post, roughly half of the stimulus occurs in from October 2009 to September 2010.

I know that there's going to be a big group of commentators who will argue the multiplier is 0, but I'll go with the CBO and assert there will be some impact of indeterminate amount. In addition, if the critics who have argued that the spending is occurring much too slowly are correct [0], then the actual spending will more likely occur in this "dip" period that Feldstein is predicting. (Previously, I argued that the recession was likely to be long, so speed would not be of the essence [1]).

Mendacity Alert

Figure 1 also demonstrates why the critics of the stimulus bill that cite today's nonfarm payroll losses are being disingenuous. It was understood that most of the spending would not occur in FY2009, and even that which occurred within FY2009 would be toward the end of the year. (Really, did anyone expect the impact to be discernable in four months after the bill's passage?).

The series in Figure 3 are plotted in log terms. This means that changes in the slope indicate changes in the percentage rate of change in the indices. The fact that the slopes for the blue and green lines are flattening means the rate of deterioration in employment is declining. However, there was little evidence before that the labor market was improving even before this morning's release [2], and that point is reiterated today by Jeff Frankel.

Interestingly, if the critics of the stimulus bill focus on changes in trends post ARRA [i] [ii] [iii], they might regret it in the future (well, assuming they're interested in internal consistency of argument). That's because the rate of GDP decline does look like it's stabilizing in 2009Q2, at least based on early readings from e-forecasting and Macroeconomic Advisers. (Once again, the series are plotted in log terms, so changes in slope can be identified as changes in the percentage growth rates.)

Valid, and Not so Valid, Criticisms of the Stimulus Bill

I do think the one big failings of the stimulus package that I highlighted back in March is now coming to light: the cut in the transfers to states that came about as a result of the compromise with the Senate Republican moderates [3]. As the states grapple with truly challenging budget shortfalls [4] [5] [6], they are cutting spending and raising taxes -- exactly the measures that the textbooks say are not ideal from a countercyclical stabilization policy standpoint.

One digression on bureaucratic procedures. In the day before yesterday's NYT, David Leonhardt chastises the Administration for using models that were too optimistic. I certainly agree in retrospect the Administration's baseline forecast was too optimistic. Two observations: First, it's important to realize that the end-February assessments were based upon early January forecasts completed by the previous (Bush) Administration, and finalized on February 3 [7]. When taken in that light, I don't believe the forecasts were that much out of line with private sector forecasts [8]. Second, (in my limited experience) if one is to deviate from a model, it helps to have a formal alternative model to use. It's not clear to me an alternative formal model that had widespread acceptance exists, so, it's all fine and good to say a more pessimistic model should've been used, but it's hard to make a case for that in a bureaucratic setting, especially if it deviated from the Blue Chip.

Data source: Wardsauto.com

Americans bought fewer light vehicles in June 09 than they did in May 09, and that holds for every category-- car or light truck, domestic or import. You'll have to look elsewhere for your latest "green shoot" fix.

Data source: Wardsauto.com

Data source: Wardsauto.com

Data source: Wardsauto.com

Data source: Wardsauto.com

Black line: 100 times the ratio of additions to inventories (nominal dollar value) to nominal GDP, 1947:Q1 to 2009:Q1. Data source: BEA Table 1.1.5. Blue line: linear time trend. Shaded regions: NBER recessions.

The typical pattern is for inventory investment to fall well below trend during an economic downturn. The cumulative drawdown of inventories since the current recession began in 2007:Q4 amounts to 0.58% of one year's GDP. The time trend suggests that, in the absence of a recession, we might have expected inventory investment to have been about 0.22% of GDP, and building inventories at that normal rate would have justified an increase in inventories over the last 6 quarters whose value would amount to 1.5 x 0.22 = 0.33% of one year's GDP. In other words, according to these calculations the level of inventories is lower than you would have expected in the absence of a recession by about 0.33 + 0.58 = 0.91% of one year's GDP. Add that restocking to the normal 0.21% inventory investment that we'd expect from the time trend as of 2009:Q3, and you get a possible contribution of inventory investment of 0.91 + 0.21 = 1.12% of GDP during the first year of the recovery.

If we are looking at the growth rate of real GDP, which is how we usually think about these numbers, the potential contribution of inventory investment is even more dramatic. If inventory investment goes from subtracting 0.49% from GDP (as it did over the last 4 quarters) to adding 1.12% to GDP (as I'm arguing it could well over the first four quarters of the recovery), the contribution to the growth rate of real GDP would be 1.12 - -0.49 = 1.61%.

How plausible is such a number? The table at the right reports the average contribution of inventory investment to real GDP growth over the first 4 quarters of each of the previous 10 expansions. Inventories made a positive contribution in every case, giving an average kick to real GDP growth of 2.1%. However, that average is heavily influenced by the outlier associated with the Korean War. Leaving 1950 out, inventories contributed an average of 1.6% to real GDP growth in the first year of previous expansions, exactly the amount I'm claiming they might be expected to contribute this time as well. That calculation reflects both the fact that the inventory liquidation this time has been more significant than in an average recession (on which basis you'd expect inventory restocking this time to be bigger than average) and the time trend's presumed decrease in the desired ratio of inventory investment to GDP (on which basis you'd expect inventory restocking this time to be smaller than average). From my quick calculations, those two factors exactly balance each other out, and I would expect inventory investment to be able to make the same significant contribution it has made in previous recoveries.

I have reviewed this potential for inventory investment, but similar dynamics also apply to a number of other components of GDP. For example, recent sales levels for motor vehicle appear to be significantly below normal scrappage rates, and this is another area where a big rebound effect is quite possible.

So why would anyone predict anything other than a robust rebound? General Electric Co. Vice Chairman John Rice expressed the core concern:

We see a world where good companies and good consumers can't get all the credit we would like," Rice said. "Companies with lots of cash on their balance sheet are worried about whether they will get what they need for working capital" and are cutting spending. "Until that changes I don't think you will see a significant rebound," Rice said. "We are preparing for 12 or 18 months of tough sledding."

The question is whether our financial system is willing and able to extend the credit that would fuel the recovery. The key battering ram so far has been the deterioration in the value of residential-mortgage-backed securities aggravated by the collapse in real estate prices, which collapse could easily continue. Calculated Risk doesn't share the enthusiasm over the latest house price numbers:

So house prices were falling at about a 10% annualized rate in April-- and that apparently feels like "stabilization"!

And there are other shoes yet to drop on the financial system, including commercial real estate as 1 in 5 U.S. hotels may default and credit card debt.

Will we see a robust recovery? I can't rule it out. But personally, I'll believe it when I see it.

Notice that the USD share has not declined, despite a decline in the dollar's value against major currencies. Following Brad Setser's observation that the reason the demand for the dollar as a reserve currency rose is because total demand for reserves increased, I also plotted the levels -- rather than shares -- for the most recent data.

I think it's an interesting that reserves have been shrinking for the past three quarters -- and at a pretty rapid clip. They were declining by an annualized 10.3% in 2009Q1 (q/q in log terms; 9.8% in base terms). This development suggests that, even if the dollar retains its share of total reserves, demand for dollar assets might still decline.

While this might constitute a secular force for dollar weakness, it's important that there are forces in working in the other direction, including cyclical factors. Deutsche Bank for instance projects 12.7% appreciation in the DB dollar index by end-2009 (16.1% against the euro, both in log terms). Their forecast implies only a slight depreciation in the dollar index by end-2010, and further appreciation against the euro (20.4% relative to June 26).

In the abstract to "Free Flows, Limited Diversification: Openness and the Fall and Rise of Stock Market Correlations, 1890-2001", Dennis Quinn and Hans-Joachim Voth write:

Using a new dataset on capital account openness, we investigate why equity return correlations changed over the last century. Based on a new, long-run dataset on capital account regulations in a group of 16 countries over the period 1890-2001, we show that correlations increase as financial markets are liberalized. These findings are robust to controlling for both the Forbes-Rigobon bias and global averages in equity return correlations. We test the robustness of our conclusions, and show that greater synchronization of fundamentals is not the main cause of increasing correlations. These results imply that the home bias puzzle may be smaller than traditionally claimed.

The abstract to "The Default Puzzle: Underwriters and Sovereign Bond Markets 1815-2007", by Marc Flandreau, Juan H. Flores, Norbert Gaillard, Sebastian Nieto-Parra reads:

We provide a comparison of salient organizational features of primary markets for foreign government debt over the very long run. We focus on output, quality control, information provision, competition, pricing, charging and signaling. We find that the market set up experienced a radical transformation in the recent period and interpret this as resulting from the rise of liability insurance provided by rating agencies. Underwriters have given up their former role as gatekeepers of liquidity and certification agencies to become aggressive competitors in a new speculative grade market.

Romaine Ranciere and Aaron Tornell summarize their paper, "Systemic Risk-Taking and the US Financial Crisis", thus:

The recent macroeconomic experience of the US resembles the boom-bust cycles of emerging markets more so than the tame postwar US business cycles. We present a model in which a feebdack loop between credit and prices generates the boom and the bust, and accounts for several stylized facts that characterize of the US experience.

The next section of the conference departed from the issues of crises, and moved onto puzzles. The first puzzle tackled was a prominent one in international finance, namely the Feldstein-Horioka finding that saving and investment are highly correlated, despite the fact that capital mobility is widely perceived to be high (see additional discussion here).

In "The Feldstein-Horioka fact", Domenico Giannone and Michele Lenza, write:

This paper shows that general equilibrium effects can partly rationalize the high correlation between saving and investment rates observed in OECD countries. We find that once controlling for general equilibrium effects the saving-retention coefficient remains high in the 70's but decreases considerably since the 80's, consistently with the increased capital mobility in OECD countries.

The next paper addressed the reason for the famous Meese-Rogoff finding that ex post historical simulations using structural models cannot outperform a random walk (see discussion here). From the abstract of the paper "Can Parameter Instability Explain the Meese-Rogoff Puzzle?" by Philippe Bacchetta, Eric van Wincoop and Toni Beutler:

The empirical literature on nominal exchange rates shows that the current exchange rate is often a better predictor of future exchange rates than a linear combination of macroeconomic fundamentals. This result is behind the famous Meese-Rogoff puzzle. In this paper we evaluate whether parameter instability can account for this puzzle. We consider a theoretical reduced-form relationship between the exchange rate and fundamentals in which parameters are either constant or time varying. We calibrate the model to data for exchange rates and fundamentals and conduct the exact same Meese-Rogoff exercise with data generated by the model. Our main finding is that the impact of time-varying parameters on the prediction performance is either very small or goes in the wrong direction. To help interpret the fndings, we derive theoretical results on the impact of time-varying parameters on the out-of-sample forecasting performance of the model. We conclude that it is not time-varying parameters, but rather small sample estimation bias, that explains the Meese-Rogoff puzzle.

(This paper is closely related to a very interesting paper "On the Unstable Relationship between Exchange Rates and Macroeconomic Fundamentals", by Bachetta and van Wincoop). My comments are here [ppt], while my update (with Cheung and Fujii) of the Meese-Rogoff exercise is here [pdf].

In the final section, the first paper presented was by Kathryn M. E. Dominguez, entitled " International Reserves and Underdeveloped Capital Markets". From the abstract:

International reserve accumulation by developing countries is just one example of the puzzling behavior of international capital flows. Capital should flow to where its return is highest, which ought to be where capital is scare. Yet recent data suggest the opposite -- net capital flows from developing countries to industrialized countries. This paper examines the role of financial market development in the accumulation of international reserves. In countries with underdeveloped capital markets the government's accumulation of reserves may substitute for what would otherwise be private sector capital outflows. Effectively, these governments are acting as financial intermediaries, channeling domestic savings away from local uses and into international capital markets, thereby offsetting the effects of domestic financial constraints that lead to excessive private sector exposure to potential capital shortfalls.

For a slightly different perspective on reserve accumulation, see this post.

Next, in "The Nontradable Goods' Real Exchage Rate Puzzle", my colleague Lukasz Drozd, and Jaromir Nosal write:

This paper studies empirically and theoretically the decomposition of the real exchange rates into tradable and nontradable components, in the spirit of Engel (1999). Empirically, using an extended decomposition, we find that the contribution of the relative price of nontradable goods to local nontradable output to the overall real exchange rate movements is at best modest. Theoretically, we argue that this finding is a puzzle for the standard models in which the law of one price holds, and fluctuations of the real exchange rate for tradable goods are fully accounted for by the relative price movements of the differentiated home and foreign tradable goods. Specifically, we find that, in the best case scenario, the standard model overshoots the contribution of non-tradable goods to the overall real exchange rate fluctuations by a factor of two.

The final paper, by Lone Christiansen, Alessandro Prati, Luca Antonio Ricci, Stephen Tokarick, and Thierry Tressel, tackled a difficult issue, namely "Assessing External Equilibrium in Low Income Countries". From the abstract:

This paper investigates empirically the external performance of low income countries, as measured by the real exchange rate, the current account, and the net foreign assets. The paper focuses on indicators which are specific to low income countries, such as the quality of policies and institutions, the special financing access, and the role of shocks. It also offers a metric for linking the external indicators via a calibration of trade elasticities.

The paper builds upon the research program at the Fund which uses the macroeconomic balance approach to inferring norms in current account balances; this approach is closely related to the methodology implemented in Chinn and Prasad (JIE, 2003) (discussed in this post.)

The final segment involved a panel discussion on "Monetary Policy in a Low Interest Rate Environment," chaired by Athanasios Orphanides (the Governor of the Central Bank of Cyprus). The participants were:

• Huw Pill, European Central Bank
• Vincent Reinhart, American Enterprise Institute
• Volker Wieland, Goethe University Frankfurt
• John Williams, Federal Reserve Bank of San Francisco

This was a fascinating panel discussion, which covered among other things quantitative easing/credit easing, whether QE can occur even above the zero interest rate bound, and the lessons from Japan's (successful) experience in QE without inflation.

Some representative pieces here: For Pill; for Reinhart; for Volker; and for Williams.

Bernanke faced open hostility from lawmakers who barraged him during a Congressional hearing over his handling of the financial crisis and the central bank's role in reshaping the banking system.

Setting aside the deferential tone usually reserved for Fed chairmen, members of the House Committee on Oversight and Government Reform repeatedly interrupted Mr. Bernanke at Thursday's hearing to review the Fed's role in engineering a government aid package for Bank of America Corp. The lawmakers pored over internal Fed emails subpoenaed by the committee and projected on a screen in the hearing room.

It is one thing to have different views from those of the Fed Chair on particular decisions that have been made-- I certainly have plenty of areas of disagreement of my own. But it is another matter to question Bernanke's intellect or personal integrity. As someone who's known him for 25 years, I would place him above 99.9% of those recently in power in Washington on the integrity dimension, not to mention IQ. His actions over the past two years have been guided by one and only one motive, that being to minimize the harm caused to ordinary people by the financial turmoil. Whether you agree or disagree with all the steps he's taken, let's start with an understanding that that's been his overriding goal.

These interrogations reveal more about those doing the grilling than they reveal about Bernanke. I see this as pure political theater, and I don't like it.

If Congress wants to explore more usefully the wisdom and motives behind some of the decisions that have been made, it might want to investigate why some legislators are now pushing for Fannie and Freddie to guarantee a riskier category of mortgage condo loans.

The BEA reported that disposable personal income increased 1.6% between April and May. In the absence of the stimulus cuts to personal taxes and increases in social benefit payments, the number would have been 0.2%. Real personal consumption expenditures were up 0.2% for the month, though that leaves the April-May average 0.1% below the January-March average. Calculated Risk, always your go-to source for these matters, sums it up this way:

Usually PCE and Residential Investment (RI) lead the economy out of recession, and right now both remain weak. As households increase their savings rate to repair their balance sheets, it seems unlikely that PCE will increase significantly any time soon.

And via Craig Newmark, earn $11 a day by working in hell.

...and asked if "gravity can be defied?" At the time, I argued the answer was "no", and observed that NIIP reversion to the cumulated current account series often occurred around recessions (see also [0]). The new release is likely to also provide the answer "no".

Gian Maria Milesi-Ferretti's VoxEU post from January this year anticipated this conclusion. He wrote:

To be sure, the US current account deficit remains large, but with a dramatic decline in domestic demand, plummeting oil prices, and the lagged effects of past dollar depreciation helping US exports, recourse to external borrowing in the US has declined and is projected to fall further the next few years. Yet preliminary estimates suggest that last year featured the most significant deterioration in the US net external position to-date: over 2 trillion dollars. What explains such a large decline? And what consequences will it have going forward? [Emphasis added -- mdc]

In his Figure 1, he shows what was implied by cumulated current account balances going forward from 2002, and what the actual evolution of the NIIP was.

Figure 1 from Milesi-Ferretti (2009).

He also provides an estimate for end-2008 NIIP to GDP ratio. As Milesi-Ferretti observe, end-2008 will see a drastic deterioration in the US NIIP. Cline (2009), discussed in this Peterson IIE piece, provides a similar estimate of 30.8 ppts of GDP for 2008, while John Kitchen's own personal estimate is somewhat less pessimistic, although the differences may arise from how FDI is valued (i.e., market vs. cost basis). But the deterioration is still significant.

Figure 2: Estimated US NIIP. Source: John Kitchen.

Frankel's point, regarding exorbitant privilege (and by extension "dark matter"), is relevant here:

Some argue that the privilege to incur dollar liabilities has been earned in a different way: The United States has been appropriately exploiting its comparative advantage in supplying high-quality assets to the rest of the world. Recent examples include Caballero, Farhi and Gourinchas; Cline; Cooper (2005); Forbes (2008); Hausmann and Sturzenegger (2006a, 2006b); Ju and Wei (2008) and Mendoza, Quadrini, and Rios-Rull (2007a, b). In one version, the United States has been operating as the World's Banker or the World's Venture Capitalist, accepting short-term liquid deposits and making long-term or risky investments (Gourinchas and Rey). Recurrent upward revaluations in the dollar price of US overseas assets have in effect financed much of the US deficits; some believe that the valuation effects are not an unsustainable coincidence, but rather a component of the sustainable returns that the United States enjoys as world banker.

Put me in the camp that says the revaluations are an "unsustainable coincidence".

Some longer term prediction from Peterson Institute for International Economics here.

(By the way, some people might wonder why I'm writing about the release before the release -- it's because it's the only way I could beat Brad Setser to the punch...)

[Update 7:35AM Pacific, 6/26/09: The new NIIP data is out]

Figure 2: Net International Investment Position, end-year (blue squares), and NIIP ex. derivatives, (red triangles), as a ratio to GDP. NBER recession dates in gray shading. Sources: BEA International Investment Position release of June 2009, BEA final 2009Q1 GDP release, NBER, and author's calculations.

[Update 2:40pm Pacific]

Brad Setser discusses the release here.

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