Monthly Archives: May 2018

What Will Policy Uncertainty Be Tomorrow?

Below is reported Economic Policy Uncertainty through 5/31/2018, reflecting newspaper accounts through 5/30.

Figure 1: US Economic Policy Uncertainty index (blue) and centered 7-day moving average (bold red). Source: accessed 31 May 2018, and author’s calculations.

As of 2PM EST, Dow down 1%, VIX up 6.69%.

All that is old is new again


Nearly century and a half ago, political cartoonist Tomas Nast presents a “harsh commentary on the hypocrisy of these new Americans and their willingness to oppress others who are in the same circumstances in which they found themselves 30 years earlier. The once oppressed have now become the oppressors.”:

“Throwing Down the Ladder by Which They Rose,” by Thomas Nast, 23 July 1870. Source

For more, see this.

Heckuva Job, Donny! Puerto Rico Edition

From New England Journal of Medicine, results of a study led by researchers at Harvard T.H. Chan School of Public Health and Beth Israel Deaconess Medical Center:

Figure 4. Estimates of Excess Deaths and Reported Causes of Death.
Panel A shows a comparison of estimates of excess deaths from official reports, press (New York Times)8 and academic (Santos–Lozada and Howard)9 reports, and from our survey. Panel B shows deaths according to the month of death and the age at death as reported in our survey, categorized according to the cause of death reported by the household member. Two persons who died of similar causes at the same age are represented by dots that are superimposed in December; thus, the 37 points shown represent 38 deaths after the hurricane.

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Recession 2020?

Goldman Sachs (Hatzius et al., May 24):

Ongoing rate hikes are likely to tighten financial conditions, at least gradually, and we expect growth to slow to a trend pace through 2019 even with fiscal stimulus still helping. From 2020, when the fiscal impulse ends, the risk of recession looks set to rise, but the lack of cyclical excesses in borrowing and spending suggest that an outright contraction is far from a foregone conclusion—so long as Fed officials manage to prevent a big overheating.

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Inclusion: What’s It Good For?

(Once again, apologies to Seinfeld). PBS presents a documentary on “The Chinese Exclusion Act”,” the 1882 law that made it illegal for Chinese workers to come to America and for Chinese nationals already here ever to become U.S. citizens. The first in a long line of acts targeting the Chinese for exclusion, it remained in force for more than 60 years.” Some will say it should be a template for our times.

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Long Horizon Uncovered Interest Parity, Updated

About twenty years ago, while visiting the Research Department of the IMF, Guy Meredith poked his head in my office and wondered aloud whether interest differentials could reliably predict (in the right direction) subsequent exchange rate changes at horizons of three to five years. The resulting paper led in turn to production of this graph:


Figure 1: Panel beta coefficients at different horizons. Notes: up to 12 months, panel estimates for 6 currencies against US$, euro deposit rates, 1980Q1-2000Q4; 3-year results are zero-coupon yields, 1976Q1-1999Q2; 5 and 10 years, constant yields to maturity, 1980Q1-2000Q4 and 1983Q1-2000Q4 (last observation corresponds to exchange rate data). Source: Chinn (2006).

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