Regimes in macroeconomics

For academic researchers who are readers of this blog (and I know you’re lurking out there), I wanted to call attention to my new paper on Macroeconomic Regimes and Regime Shifts:

Many economic time series exhibit dramatic breaks associated with events such as economic recessions, financial panics, and currency crises. Such changes in regime may arise from tipping points or other nonlinear dynamics and are core to some of the most important questions in macroeconomics. This chapter surveys the literature on regime changes. Section 1 begins with an interpretation of the move of an economy into and out of recession as an example of a change in regime and introduces some of the basic tools for analyzing such phenomena. Section 2 provides a detailed overview of econometric methods that are appropriate for time series that are subject to changes in regime. Section 3 summarizes the ways in which changes in regime can be incorporated into theoretical economic models and briefly reviews applications in a number of areas of macroeconomics.

From October 2013: “The Obamacare implosion is worse than you think”

That’s a title from an oped by former GW Bush speechwriter and current AEI scholar Marc Thiessen nearly a year ago. We can now evaluate whether in fact the implementation of individual insurance mandate component of the ACA did implode. From “New Data Show Early Progress in Expanding Coverage, with More Gains to Come,” White House blog today:

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“Facts are Stupid Things”

As Ronald Reagan once said (although he did mean to say “stubborn”)

Regarding the implications of optimal currency area theory and Scottish independence, Reader Patrick Sullivan continues his reign of error, trying to argue that Canada did just fine, just like a bank crisis-free Scotland in a currency union would:

Canada didn’t have a central bank until sometime in the 1930s, and had a less severe depression than the USA.

Well, with a little help from Louis Johnston, (who knows economic history much better than I), I generate the following plot:


Figure 1: Log per capita income in 1990 International dollars for Canada (blue) and United States (red), normalized to 1929=0. Source: Maddison and author’s calculations.

I dunno, but these seem to be comparable declines in output. So, yes, no central bank operating until 1935 [1] (p.22), but no, Canada suffers a pretty big shock (Canada on a de facto gold standard until 1931 (p.21)).

It constantly amazes me how people make easily falsifiable statements with such astounding confidence…

So, I think Scotland should consider very carefully independence conjoined with monetary union with England.