Author Archives: Menzie Chinn

What Remains of the High Policy Uncertainty-Lagging Investment Thesis?

The abstract from the recent IMF’s World Economic Outlook chapter on investment:

Private fixed investment in advanced economies contracted sharply during the global financial crisis, and there has been little recovery since. … business investment accounts for the bulk of the slump, and the overriding factor holding it back has been the overall weakness of economic activity. In some countries, other contributing factors include financial constraints and policy uncertainty. These findings suggest that addressing the general weakness in economic activity is crucial for restoring growth in private investment.

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Divergences: Interest Rates, Nominal, Real, Short, and Long

I’ve been wrapping up some long term projects (not planned as long term — they just took longer than expected) on interest rate parity and term spreads, and that spurred me to look at current patterns in interest rates. Some quick observations: interest rates remain higher in emerging markets than in core industrial countries. So too are real rates are higher despite higher inflation rates. And term spreads are larger in the US than other countries.

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