These topics are the subject of two special issues, the first in IMF Staff Papers, and the second in the Review of International Economics.
Monthly Archives: September 2009
Regulating compensation in the banking sector
I see a good case for this, but also some big things to worry about.
Credit Stock Growth versus New Credit
Deleveraging implies slow growth in total credit, and according to the usual reasoning, slow growth in GDP. Several of Deutsche Bank’s economists, however, focus on what they call the credit impulse. They provide the following provocative graph, which suggests a rapid recovery:
Scott Sumner on the Fed’s mistakes
The Cato Institute is hosting a discussion this month of the extent to which monetary policy may have contributed to our current economic problems. In the lead essay that appeared on Monday, Professor Scott Sumner of Bentley University suggested that the Fed erred in allowing nominal GDP to grow as slowly as it did.
My response
appeared this morning. I agree that faster growth of nominal GDP would have been a good thing, but argue that, particularly if you start the clock in the fall of 2008, the Fed lacked the tools to prevent a decline in nominal GDP.
Guest Contribution: Reforming Banking by Reforming Housing
By Simon van Norden
Today, we’re fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), continue as a guest contributor.
In my previous post, I wrote about some of the evidence linking serious banking crises to real estate market collapses. That evidence is far from iron clad; it is simply the observation that many banking crises in mature economies have their origins in a real estate boom and bust cycle. However, the idea is also intuitively appealing.
The ARRA’s Progress
…and a Rejoinder to Posner.
The CEA Analysis of ARRA’s Impact
Yesterday, the Council of Economic Advisers released the first of its mandated reports on the impact of the ARRA on economic activity. Based upon a variety of approaches (VAR, multiplier based), it concludes:
“…our multiplier analysis and estimates from a wide range of private and public sector forecasters confirm the estimates from the statistical projection analysis. There is broad agreement that the ARRA has added between 2 and 3 percentage points to baseline real GDP growth in the second quarter of 2009 and around 3 percentage points in the third quarter.
Guest contribution from Michael Dueker on the economic recovery
Michael Dueker is Head Economist for North America at Russell Investments and a member of the Blue Chip forecasting panel. In February of 2008 he warned Econbrowser readers that it appeared unlikely that the economy was going to escape the slowdown without a recession. In December of 2008, he predicted in this forum that the recession would last until July or August of 2009, but that employment growth would not resume until March of 2010.
With that track record, we were very interested to learn the latest macroeconomic predictions stemming from Russell’s Business Cycle Index, subject to the disclaimer that the content
does not constitute investment advice or projections of the stock market or any specific investment.
Tracking the Consumption Decline
The new semester has begun, and I was reviewing economic trends in my macro courses. In my lectures, I highlighted the sharp drop-off in consumption. In the following, I discuss how well my predictions for consumption from last November have held up.
Supply and demand for judicial services
I’ve been trying to understand changes over time in the California state budget, though the data are presented in a way that makes that extremely difficult to do. I did spend enough time to discover one component of the budget that seems to have grown at a pretty healthy pace if you look at the last decade as a whole.
Guest Blog: Financial Crisis and Reform Déjà Vu
By Simon van Norden
Today, we’re fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), as a guest blogger.
“Once you’ve seen one financial market crisis…you’ve seen one financial market crisis.”
— Attributed to Federal Reserve Board Governor Kevin Warsh by former US Treasury Assistant Secretary for Economic Policy Phillip Swagel in The Financial Crisis: an Inside View, March 2009, p. 4.