The U.S. Federal Reserve yesterday finally took the step many of us had been urging for some time.
Monthly Archives: March 2009
2009 NCAA Bracket Econbrowser Challenge
OK, I said I wouldn’t give you any hints, but decided to pass one along anyway. Here are President Obama’s picks.
AIG outrage
New York Attorney General Andrew Cuomo (hat tip: LA Times) asserted that on Friday insurance company AIG, recipient so far of perhaps $170 billion in bailout assistance, distributed over $160 million in “retention payments to members of its Financial Products Subsidiary.” These payments apparently included “retention” payments of over $1 million each to eleven individuals who are no longer working at AIG.
It’s tournament time!
I know, you’ve been regretting all year that you didn’t get a chance to enter the the 2008 NCAA Bracket Econbrowser Challenge. Well guess what? Here it is March of 2009 and you have a brand new chance!
GDP Forecasts from the WSJ
With talk of a second stimulus package circulating, it’s of interest to see what the current forecasts are indicating about the depth of the recession, as well as the “bounceback”. Jim has presented some of his views here. In this post, I examine the implications of the consensus coming from the March WSJ survey article, which indicates continued deterioration in the outlook, but a recovery beginning in 2009Q3.
What will recovery look like?
When good news comes, what should we expect to see?
Trend Stationarity/Difference Stationarity over the (Very) Long Run
Chinese Exports: “no hope”
From Bloomberg two days ago:
…”There’s no hope for export demand to recover any time soon,” said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. “How fast imports recover depends on how soon the government’s stimulus package kicks in and creates real demand in major industries.”
Moral hazard and AIG
We are now suffering the consequences of one of the most spectacular financial miscalculations in history, after investors around the world discovered that trillions of dollars invested in securities derived from U.S. home mortgages were far riskier than they had originally believed.
The Great Multiplier Debate, New Keynesian Edition
Greg Mankiw cites a study by Cogan, Cwik, Taylor, and Wieland to buttress his arguments that fiscal multipliers are small, especially when considering New Keynesian models. He also provides a startling graphic showing the dynamic multipliers from Romer-Bernstein versus the Taylor (1993) model, incorporating model consistent expectations; this graphic motivates Wieland et al. to remark:
We first show that the assumptions made by Romer and Bernstein about monetary
policy — essentially an interest rate peg for the Federal Reserve — are highly questionable
according to new Keynesian models. We therefore modify that assumption and look at the
impacts of a permanent increase in government purchases of goods and services in the
alternative model. According to the alternative model the impacts are much smaller than
those reported by Romer and Bernstein.
Cogan et al. use a New Keynesian dynamic stochastic general equilibrium (DSGE) model, specifically the Smets-Wouter model (Working Paper version of AER paper here).