February 16, 2012
Guest Contribution: “International Reserves and the Composition of Equity Capital Inflowsâ€
By Xingwang Qian and Andreas Steiner
Today, we’re fortunate to have Xingwang Qian, Assistant Professor of Economics at SUNY Buffalo State and Andreas Steiner, Assistant Professor at University of Osnabrück , as Guest Contributors.
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February 15, 2012
Measuring the consequences of the zero lower bound constraint
In a period of deleveraging such as the U.S. has been going through, it is possible for the natural rate of interest to become negative. Since cash is always an option for earning at least a yield of zero, no asset should ever pay less than zero. This lower bound of zero on nominal interest rates can put a constraint on the ability of the economy to self-correct or the Fed to provide stimulus in such a situation.
The Fed still has some tools to try to reduce longer-term yields, namely large-scale asset purchases and signaling the Fed's future intentions. A new research paper by Federal Reserve Bank of San Francisco President John Williams and Senior Research Advisor Eric Swanson proposes a creative new approach to measuring when and to what extent the zero lower bound is a relevant constraint on interest rates of any maturity.
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February 14, 2012
The Budget Forecasts. . .
And forecasts in general
The Administration released its budget proposal yesterday. Others have dissected the implications [1] [2] [3]. Here I want to focus on the Administration forecast.
The forecasts, and comparisons against alternatives, are presented in Table 2-2 of the Analytical Perspectives of the Budget.
Continue reading "The Budget Forecasts. . . "
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February 13, 2012
Send a valentine to the Fed
Have a Valentine's message you want to send to the Fed? Justin Wolfers and Binyamin Applebaum collect some of the proposals from Twitter:
NPR's Planet Money: You had me at QE1.
Michael McKee: The sight of you fills me with irrational exuberance.
Annalyn Censky: Our love isn’t transitory baby, it's gonna be exceptional for an extended period.
NPR's Planet Money: I'll be your lover of last resort.
Posted by James Hamilton at 01:52 PM permalink | Comments (2) | digg this | reddit
February 12, 2012
Why not abolish the Fed and return to the gold standard?
Via Mike Shedlock, this item from MarketWatch caught my eye:
Newt Gingrich said that if elected president, he'd name [James] Grant to help run a commission looking at a possible return to the gold standard. And Ron Paul said, if elected president, he'd go all-in and name Grant-- one of Wall Street’s best-known gold bugs-- as the new chairman of the Federal Reserve....
"Unfortunately, I haven't heard from Mr. Romney yet," joked Grant when I called on him in his offices down on Wall Street. "I'm sitting by the phone, I'm ready."
I presume that Grant would be advising any would-be policy-makers who listen to him the sort of thing that he wrote in 2010:
The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it.
I thought it would be worthwhile reviewing some of the reasons why I disagree with Grant on this point.
Continue reading "Why not abolish the Fed and return to the gold standard?"
Posted by James Hamilton at 07:21 AM permalink | Comments (49) | digg this | reddit
February 09, 2012
Miscellanea: Deficit Hypocrisy Watch, Conspiracy at the BLS, and Wisconsin’s Continuing Downward Trend
Deficit Hypocrisy Watch
The WSJ editorial page last Thursday remarked upon:
"...the worst fiscal record of any President in modern times..."
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February 08, 2012
Value added
How could we boost American employment and GDP? One philosophy is to try to do more of what's already working.
Continue reading "Value added"
Posted by James Hamilton at 12:05 PM permalink | Comments (37) | digg this | reddit
February 07, 2012
A Conference on "Analyzing (External) Imbalances"
Last week I had the opportunity to attend an IMF conference (organized by Olivier Blanchard, Krishna Srinivasan, and Hamid Faruqee) focusing on the critical issue of assessing the sources of the pre-crisis imbalances in systemically key countries. The proceedings also had a forward looking component, highlighting the difficulties of determining when external imbalances are problematic. The conference proceedings are here.
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February 06, 2012
A Plea for Aspiring Economic Analysts to Read the Footnotes
Actually, not even the footnotes -- just the text accompanying data releases (in this case it's the second paragraph, in a box, of the release). Although, I must admit, this long rant by FoxForum contributing writer Noel Sheppard just made me laugh and laugh and laugh, thus making an otherwise bleak Monday brighter. From "CNN's Crowley Does Two Segments on Jobs Numbers Without Mentioning Plummeting Participation Rate"
Continue reading "A Plea for Aspiring Economic Analysts to Read the Footnotes"
Posted by Menzie Chinn at 11:29 AM permalink | Comments (30) | digg this | reddit
February 05, 2012
Economic conditions improving
Last week's data suggest that the U.S. economic recovery is continuing to gain some strength.
Continue reading "Economic conditions improving"
Posted by James Hamilton at 02:55 PM permalink | Comments (8) | digg this | reddit
February 03, 2012
Messages from the January Employment Release: Accelerating Improvement for Now
Employment growth accelerates along several dimensions: nonfarm payroll, an alternative measure of nonfarm payroll, private employment, hours, and civilian employment (report here). However, JEC vice chairman Brady (JEC-Republicans) states in a press release: "Job Numbers Mask Underlying Job Weakness."
Continue reading "Messages from the January Employment Release: Accelerating Improvement for Now"
Posted by Menzie Chinn at 02:35 PM permalink | Comments (7) | digg this | reddit
February 02, 2012
Net Exports, Exports, Real Exchange Rates and Manufacturing
Several observers have noted that exports have increased substantially since the President made his commitment to doubling exports. [1] The most recent GDP release confirms improvement in the net exports to GDP ratio (ex. oil imports) and real exports, and a BEA release from a month and a half ago confirms a rebound in manufacturing value added.
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Posted by Menzie Chinn at 05:00 AM permalink | Comments (8) | digg this | reddit
February 01, 2012
Links for 2012-02-01
Quick links to a few items I found interesting.
Continue reading "Links for 2012-02-01"
Posted by James Hamilton at 01:09 PM permalink | Comments (12) | digg this | reddit
January 31, 2012
CBO's Budget and Economic Outlook: Tax Expenditures
The CBO has just released the Budget and Economic Outlook. The document is full of extremely useful information, and provides a useful anodyne for some of the reality-free analyses floating around (examples here). For now, I'll just highlight two interesting graphs regarding tax expenditures:
Continue reading "CBO's Budget and Economic Outlook: Tax Expenditures"
Posted by Menzie Chinn at 08:29 AM permalink | Comments (9) | digg this | reddit
January 29, 2012
Inflation expectations and the Fed
The Fed has begun implementing its new communication strategy. Here's what the message seems to be.
Continue reading "Inflation expectations and the Fed"
Posted by James Hamilton at 07:32 AM permalink | Comments (32) | digg this | reddit
January 28, 2012
Wisconsin Governor Walker: "We are heading in the right direction."
That statement is from Wisconsin Governor Scott Walker's State of the State address. Here are some additional remarks:
Continue reading "Wisconsin Governor Walker: "We are heading in the right direction.""
Posted by Menzie Chinn at 03:10 PM permalink | Comments (17) | digg this | reddit
January 27, 2012
U.S. GDP: not a recession, but still not very encouraging
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 2.8% during the fourth quarter of 2011. That's better than any of the previous 5 quarters, which tells you more about how disappointing the previous year and a half has been than it does about how great the fourth quarter was. The average historical growth rate for the U.S. economy over the last 60 years has been about 3.2%.
Continue reading "U.S. GDP: not a recession, but still not very encouraging"
Posted by James Hamilton at 10:22 AM permalink | Comments (34) | digg this | reddit
January 25, 2012
UK: Into Recession
So much for expansionary fiscal contraction in the UK. Not that that’s a surprise.
Continue reading "UK: Into Recession"
Posted by Menzie Chinn at 06:51 PM permalink | Comments (15) | digg this | reddit
January 23, 2012
In Search Of: Fiscal Responsibility
Given all the talk about taxes, I wondered how the Republican candidates plans stack up on the fiscal responsibility dimension, which Jeffry Frieden and I define thus:
[T]rue fiscal responsibility involves a willingness to raise sufficient tax revenue, over the longer term, to pay for the programs the government implements. Fiscal responsibility should not be equated with a small government, but rather with a commitment to pay for the government services provided. ...
Continue reading "In Search Of: Fiscal Responsibility"
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January 22, 2012
Wealth creation
Here's my suggestion for how to become rich: buy low and sell high.
Continue reading "Wealth creation"
Posted by James Hamilton at 06:36 AM permalink | Comments (60) | digg this | reddit
January 20, 2012
Dispatches (XIX): Wisconsin Employment Hemorrhaging Continues
Wisconsin's Department of Workforce Development yesterday released preliminary employment figures for December, and revised figures for November. Both nonfarm payroll employment and private nonfarm payroll employment continue to decline (Figures 1 and 2). Total nonfarm payroll employment is now below levels recorded in January 2011, when Governor Walker took office. The divergence between the national employment trend and Wisconsin's over the past six months is highlighted in Figure 3.
Continue reading "Dispatches (XIX): Wisconsin Employment Hemorrhaging Continues"
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January 19, 2012
Miscellanea: America's Lost Decades, Wisconsin’s Lost Year, Hi Frequency Measures, Europe, and Conditional Inflation Targeting
Lost Decades
Here’s my 25 minute presentation of Lost Decades at the Rotary Club of Madison, on January 4th (as recorded by Wisconsin Eye) Powerpoint. One point I made was that the global financial crisis and ensuing recession have exacted a tremendous cost on the US economy. In the absence of more aggressive action, another 2.4 trillion Ch.2005$ loss will be incurred through 2013Q4. The blithe indifference with which opponents of extended payroll tax reductions, extended unemployment benefits, food stamp expenditures and infrastructure investment contemplate the damage continues to astound me.
Posted by Menzie Chinn at 08:10 AM permalink | Comments (12) | digg this | reddit
January 18, 2012
Links for 2012-01-18
FT Alphaville on crude oil and the eurozone crisis.
Jeff Miller does not buy into recent forecasts of a U.S. recession. On a related note, Bonddad deconstructs the ECRI Weekly Leading Index.
VoxEu notes the systematic international tendency for official deficit figures to understate the magnitude of the change in public debt.
Liberty Street Economics on forecasting with internet search data.
Posted by James Hamilton at 09:30 AM permalink | Comments (5) | digg this | reddit
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