Brad DeLong reminds me of how badly Kansas is doing, when viewed from a longer perspective.
Minnesota, US series continue to rise.
I was talking about prediction markets and asset prices (the Mexican peso and the Presidential election, and the pound and Brexit) in my classes this week. It struck me a good time to update this post on the peso’s movements as the odds for a Democratic win change.
Figure 1: USD/MXN exchange rate (blue), and odds of Democratic win in Presidential election, end of day (red). Observation for 10/20/2016 is as of 2:30PM Eastern time. Exchange rate defined so up is MXN appreciation. Source: FRED, Pacific Exchange Services, and Iowa Election Markets.
The adjusted R2 of a bivariate regression of first differences regression (exchange rate in logs) is 0.08, pretty good on a high frequency time series, in my book (t-stat with HAC robust errors is 2.06).
The highest point estimate for the anomaly is for 2016. For 2014, the 95% interval is ±0.09°C . If that is ballpark for the 9 months estimate, then one can’t say that 2016 is hotter than 2015 (with statistical significance at the 5% msl), but can say it is hotter than 1998, a year often focused on by the “hiatus”-ers.
Update, 5:08PM Pacific: Here is a trailing 60 month moving average, ending observation for September 2016.
In tonight’s Presidential debate, the moderator Chris Wallace stated:
Secretary Clinton, I want to pursue your [economic] plan, because in many ways it is similar to the Obama stimulus plan in 2009, which has led to the slowest GDP growth since 1949.
One of the problems in conducting cross-country analyses of infrequent macroeconomic episodes (such as financial crises) is absence of a comprehensive historical dataset. That has been partly remedied by the publication of the Macrohistory Database, assembled by Oscar Jordà, Moritz Schularick, and Alan Taylor (see the paper utilizing this database, discussed here by Jim).
On China, from the Report (page 4):
China has a significant bilateral trade surplus with the United States. The country’s current account surplus fell from 3.0 percent of GDP over the full year 2015 to 2.4 percent for the four quarters through June 2016, moving below the established threshold for that criterion. China’s intervention in foreign exchange markets has sought to prevent a rapid RMB depreciation that would have negative consequences for the Chinese and global economies. Treasury estimates that from August 2015 through August 2016, China sold more than $570 billion in foreign currency assets to prevent more rapid RMB depreciation. More transparency over exchange rate management and goals, and strong adherence to G‐20 commitments to refrain from competitive devaluation and not to target exchange rates for competitive purposes, will enhance the credibility of China’s exchange rate regime. At the same time, China has a very large bilateral goods trade surplus with the United States. This underscores the need for further implementation of reforms to rebalance the Chinese economy to household consumption. Fiscal policy can support structural reform and provide consumption‐friendly stimulus to support demand if growth slows more than expected.
Detailed discussion of China on pages 15-18.
Note that the Peterson Institute’s William Cline has recently taken issue with the Cheung-Chinn-Nong (2016) methodology; however, even there, based on the FEER methodology, they find neither under- nor overvaluation of the RMB.
Those are the topics covered tomorrow (Friday, 10/14) at the 5th annual West Coast Workshop in International Finance 2016, taking place at Santa Clara University. As usual, these look like a set of fascinating papers, and a must-see for those interested in international finance/open economy macro (A post discussing last year’s conference proceedings is here).