In my post on modeling the Kansas economy, Rick Stryker takes me to task for modeling the Palmer Drought Severity Index (PDSI) for Kansas as an I(1) process:
I wouldn’t bother with the ADF test, since its null is non-stationarity and it has low power to reject. I would focus on the KPSS, since its null of stationarity is almost certainly what’s really true.
Last year’s recap was subtitled “Ascent of the Blowhards”. Let’s hope the triumph is only temporary, and rational policy analysis once again becomes a valued commodity.
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared on December 22nd in Project Syndicate.
Both Missouri and BEA Plains region (ex-Kansas) outpace Kansas GDP growth.
Today the idea of a 10% across-the-board tariff rate increase was mooted. As Noland et al. (2016), pp.9-10 observe, the President has authority to undertake such measures. However, as a member of the WTO, other members have a right to dispute. More likely, they’ll retaliate.
Since President-elect Trump has nominated Peter Navarro* to direct the newly formed Trade Policy Council, now seems a good time to review some trade data.
Take England+Wales log daily electricity consumption, detrend using Christiano-Fitzgerald band pass filter, and then regress on seasonal (calendar) terms, and temperature/wind/rain factors (Kirchmaier and de Guana de Santiago, 2016, h/t Simon Kennedy at Bloomberg), through April 2016. Then forecast out of sample; the residual looks like this:
Figure 3 from Kirchmaier and de Guana de Santiago, (2016).
Electricity consumption is way under what would be expected from historical correlations, suggesting a decline in economic — particularly industrial — activity.
While monthly estimates of November GDP are up 1.1% relative to June, industrial output is down by 1.2%, according to NIESR (Dec. 7).
It is always useful to keep in mind that economic statistics are sometimes revised by large amounts.
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers.
A year ago, the Federal Reserve decided to raise its target for the fed funds rate by 25 basis points above the floor of 0-0.25% at which we’d been stuck for 7 years. FOMC members indicated at the time that they were expecting to end 2016 at 1.4%, or four rate hikes during the last year. We started this December at 0.41%, and the first hike of 2016 didn’t come until last week. Now FOMC members say they are expecting to end 2017 at 1.4%, or three more hikes from here during the next year. The January 2018 fed funds futures contract is currently priced at 1.23%, suggesting that the market is buying into two, not three hikes during 2017.
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