“Uncovered Interest Parity and Monetary Policy Near and Far from the Zero Lower Bound”

Why do interest rate differentials point in the wrong direction for subsequent exchange rate changes at short horizons, and not at long? And why have interest differentials at long maturities failed in recent years to predict subsequent exchange rate changes as well as in the past, especially for interest rates near the zero lower bound. Those are two topics taken up in a recent paper by myself and Yi Zhang (University of Wisconsin).

Continue reading

The Low-Pay Recovery, Re-Assessed

From the Senate Republican Policy Committee Chair, John Barrasso, commenting on the December employment report:

The December jobs report, while posting 252,000 new jobs, reveals it’s still too soon to be bullish on an economic recovery. Wage data and labor force participation remain concerning.

Stagnant wage growth remains a weight on America’s economic recovery. In December, average hourly earnings for all employees on private nonfarm payrolls fell by five cents, to $24.57.

Continue reading

Sovereign debt scares– is the U.S. immune?

Many people are finally coming to a realization that should have been evident long ago: Greece’s debts are not going to be repaid. And as discussion turns to who might be next, it seems a good time to revisit the question of whether the United States could some day find itself in similar trouble. I am substantially more optimistic about this than I was a couple of years ago, and here is why.
Continue reading