Monthly Archives: January 2010

Assessing Stimulus Measures: Statistical and Economic Significance

The CEA has updated its estimates of the impact of the stimulus plan on output. As I observed in my earlier post on assessing the results on 2009Q3 impact, one could use either a model approach (using multipliers, which can be derived from either neo-Classical synthesis, New Classical, New Keynesian models [0] [1]) or examine the actual versus some counterfactual based upon historical correlations (what CEA calls the “projection approach”).

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Links for 2010-01-13

Stuart Staniford, who earlier had been persuaded that global oil production might have already peaked, now comments on the potential for increased production from Iraq to push the peak up to a decade down the road.

King Banaian on disturbing developments in Argentina and Venezuela.

Economists comment on the role of the Fed in the housing bubble. Two in particular worth emphasizing:

Marvin Goodfriend: Interest rate policy was appropriately stimulative in the 2002-3 period. But rates should have been raised less mechanically and more aggressively in 2004-5 on grounds of the usual macroeconomic conditions…. A somewhat tighter stance of interest rate policy then could have cut off the last year or so of the house price appreciation and prevented the worst part of the subsequent adjustment.

Mark Gertler: If we could go back in history and make one policy change, I’d go after sub-prime lending. Absent non-prime lending, the likely outcome of the housing correction of 2007 would have been a mild recession like 2000-2001, and not the debacle we experienced.

Marsh and Pfleiderer on the Financial Crisis

From “Analysis of the 2008-2009 Financial Crisis”, by Terry Marsh and Paul Pfleiderer:

In this Preface, we offer some analysis of the 2008-2009 financial crisis and its implications for financial industry reform and research. We primarily focus on issues relating to transparency and the measurement of risk and how these are affected by management incentives that are often misaligned with the incentives of those who are exposed in various ways to the risk being measured. In the aftermath of the crisis many have called for increased transparency; we suggest that while transparency is no doubt a desirable goal in many ways, enhancing it could prove to be quite difficult.

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