Author Archives: Menzie Chinn

Term Spread, September 5, 2017

As I was compiling background notes for the new semester, I found the current level and trend in the term spread of interest.



Figure 1: Ten year minus three month Treasury spread (blue), and ten year minus two year spread (red), %. Observations for September are 9/5. NBER defined recession dates shaded gray. Source: FRED, Bloomberg, NBER and author’s calculations.

Run the probit regression

    recessiont+6 = -0.81 -0.474×(GS10-TB3MS)t + 0.065×TB3MSt + ut

over the 1967M01-2017M02 period (McFadden R2 = 0.24); the implied probability of recession is 10% for February 2018.

Using a specification without the level of the short rate included leads to a slightly higher probability, 14% or so.

The detail is also interesting. The spreads are smaller than they were in October 2016.



Figure 2: Ten year minus three month Treasury spread (blue), and ten year minus two year spread (red), %. Observations for September are 9/5. Source: FRED, Bloomberg, and author’s calculations.

Thoughts on Trade, Growth and Inequality from “Fostering a Dynamic Global Economy”

The Kansas City Fed’s Jackson Hole symposium this year focused on the causes, implications and remedies for the slowdown in economic growth. Major themes revolved around productivity, fiscal policy, and international trade. Here I discuss some of the major points relating to international trade and inequality, encompassing a paper by Nina Pavcnik (Dartmouth), comments by David Dorn (Zurich), and panel remarks by Ann Harrison (UPenn), Catherine Mann (OECD), Peter Schott (Yale), and John Van Reenen (MIT).

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How Will the Wall Be Funded?

Donald Trump has reaffirmed: “One way or the other Mexico will pay for the wall.” At the same time, as recently as today, Trump threatened a government shutdown if Congress did not provide funding for the wall. Time to consider how these points are — or are not — internally consistent, even allowing for the possibility that Mexico might “ultimately” pay.

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“Fostering a Dynamic Global Economy”

Here at this conference today:

Friday, August 25, 2017
Chair: Susan M. Collins
Former Dean, Gerald R. Ford School of Public Policy

University of Michigan

8 a.m.
Opening Remarks

Janet L. Yellen | Speech
Chair
Board of Governors of the Federal Reserve System

8:30 a.m.
Fostering Business Dynamism and Ensuring Competitive Markets

Authors: Chang-Tai Hsieh | Paper
Professor
University of Chicago

Pete Klenow | Paper, Remarks
Professor
Stanford University

Discussant: Gita Gopinath | Remarks
Professor
Harvard University

9:05 a.m.
General Discussion

9:55 a.m.
Income Inequality and the Distribution Aspects of International Trade

Author: Nina Pavcnik | Paper, Remarks
Professor
Dartmouth College

Discussant: David Dorn | Remarks
Professor
University of Zurich

10:30 a.m.
General Discussion

10:55 a.m.
Panel on the Changing Landscape of International Trade

Panelists: Ann E. Harrison | Remarks
Professor
University of Pennsylvania

Catherine L. Mann | Remarks
Chief Economist

Organisation for Economic Co-operation and Development

Peter K. Schott | Remarks
Professor
Yale University

John Van Reenen | Paper, Remarks
Professor
Massachusetts Institute of Technology

11:55 a.m.
General Discussion

1 p.m.
Luncheon Address

Mario Draghi | Speech
President

European Central Bank

2 p.m.
Adjournment

Saturday, August 26, 2017
Chair: Randall S. Kroszner
Professor

University of Chicago

8 a.m.
Balancing Short-term Fiscal Stimulus with Longer-term Sustainability

Authors: Alan J. Auerbach | Paper
Professor

University of California-Berkeley

Yuriy Gorodnichenko| Paper
Professor
University of California-Berkeley

Discussant: Jason Furman | Remarks
Professor

Harvard University

8:35 a.m.
General Discussion

9 a.m.
Achieving Balanced Global Growth

Author: Menzie Chinn | Paper, Remarks
Professor

University of Wisconsin

Discussant:
Maurice Obstfeld |Remarks

Economic Counsellor
International Monetary Fund

10 a.m.
General Discussion

10:25 a.m.
Overview Panel

Panelists: Norman Chan | Remarks
Chief Executive
Hong Kong Monetary Authority

Timothy J. Kehoe | Remarks
Professor
University of Minnesota

Carmen M. Reinhart
Professor
Harvard University

11:25 a.m.
General Discussion