By Hiro Ito
Today, we’re fortunate to have Hiro Ito, Associate Professor of Economics at Portland State University as a guest blogger.
In my last posting, I introduced a recent paper coauthored with Menzie Chinn and Joshua Aizenman (UC, Santa Cruz) on the “trilemma,” or “impossible trinity” — a country simultaneously may choose any two, but not all, of the three goals, monetary independence, exchange rate stability and financial integration.
Time to review trends in reserves, against the backdrop of financial crisis, recession, and dollar gyrations. (I’ll try to be original, but Brad Setser has been more diligent than I in covering these issues over the past few months. [0] [1] [2])
A few observations:
I’m still looking for, and still not seeing, the economic recovery that everybody is talking about.
There was a wonderful story in today’s WSJ about how some big banks managed to lose some of their hard-earned TARP money.
This is a tough question to answer. But I can provide an answer of a mechanical sort. Consider how big the Chinese economy is, compared against the US, the Euro area and Japan.
I’d like to mention two more useful analyses of the disaggregated behavior of bank lending over the last year. The first is from James Kwak at the Baseline Scenario, and the second is a new research paper by Silvio Contessi
and Johanna Francis.
It’s not news that the US current account, trade balance and trade balance ex.-oil are all moving toward zero percentage points of GDP. As I’ve observed before, time will tell how much of this movement is durable (see Bertaut, Kamin and Thomas for skeptical look; see also Cline-Williamson); this in turn depends on whether the adjustment reflects standard macro effects, including a permanent downshift in US consumption growth [0], and how much reflects perhaps transitory effects like a credit crunch in trade financing (as speculated upon here). Here’s the trade balance situation for the US.
Often after a sharp economic downturn we observe an equally dramatic recovery. But nobody can claim to be seeing that so far in the currently available data.
Hmm. I’m not sure about this statement.
Keith Hennessey critiques the stimulus package. Some points make sense, some points, well, I wonder. For instance, Hennessey argues the stimulus is not timely. As I’ve noted before, it’s not timely only if you think this will be a relatively short recession, characterized by a rapidly dissipating negative output gap. [0] [1] [2].