It’s that time of year again! By which I mean, the once-in-a-lifetime opportunity to enter the eleventh annual Econbrowser NCAA tournament challenge! All right, so last year you had a chance to enter the tenth annual challenge, which was kind of similar. But whether or not you tried it last year, here’s an all new roll of the dice to see how well you can predict the outcome of this year’s U.S. college men’s basketball tournament. If you want to participate, go to the Econbrowser group at ESPN, do some minor registering to create a free ESPN account if you haven’t used that site before, and fill in your bracket before Thursday at noon!
That’s the title of a paper with David Greenlaw, Managing Director of Morgan Stanley, Ethan Harris, head of global economics research at Bank of America Merrill Lynch, and Kenneth West, professor of economics at the University of Wisconsin, which we presented at the U.S. Monetary Policy Forum annual conference in New York on Friday.
The Bureau of Economic Analysis announced today that U.S. real GDP grew at a 2.6% annual rate in the fourth quarter. That is better than the 2.2% we’ve seen on average since the Great Recession ended in 2009, though below the historical average growth rate for the U.S. economy of 3.1%.
A few years ago, most economic models presumed that interest rates were subject to a lower bound of zero. Why lend a dollar to someone who only promises to pay you back 99 cents, when you could just hold on to the dollar yourself? But we now have several years of experience from Sweden, Denmark, Switzerland, Japan, and the European Central Bank in which the central bank successfully induced negative interest rates in hopes of stimulating a greater level of spending on goods and services. We have enough data now to take a look at how much that seems to have accomplished, and update my earlier discussion of this topic.
One of the ways economists have tried to estimate the effects of the Fed’s program of large-scale asset purchases (LSAP) is using event studies of how the market responds in the thirty minutes following Fed statements of changes in the program. Yesterday’s announcement from the Federal Reserve that it is starting a gradual process of reducing its balance sheet gives us one new data point for such efforts.
The Federal Reserve announced today that it will begin reducing the size of its balance sheet next month in very modest and deliberate steps. One reason the Fed is moving so slowly is that they don’t want a repeat of the May 2013 taper tantrum, in which a surprise hint that the Fed might slow the rate at which it would be growing its balance sheet led to a spike up in long-term interest rates. But there may also be another reason why the Fed is contracting its balance sheet so cautiously.
Four years ago, I made the case why Janet Yellen would make an excellent chair of the Federal Reserve. As testimony to the power of our mighty blog, President Obama followed our advice and nominated her for a four-year term. So I thought I’d call attention now to a few of the reasons why President Trump should ask Yellen to serve a second term.
Federal Reserve Bank of Chicago President Charles Evans got some attention recently with the following statement:
In a world of global competition and new technology, I think competition is coming from new places. New partners are choosing to merge and sort of changing the marketplace and [bringing] more competitive pressures on price margins…If that’s the case, and I think that’s just speculative at this point, then it means that we need even more accommodation to get inflation up.