Yearly Archives: 2009

Two Books

…and the Financial and Economic Crisis

I don’t read very many books. At least not during the academic year. But I have read two books recently that are quite germane to thinking about the buildup to the financial crisis, and thinking about how to respond to the current economic downturn. The first is Akerlof and Shiller’s Animal Spirits. The second one is actually not yet out — it’s Justin Fox’s The Myth of the Rational Market (I got a prepublication copy; here’s a hint of it). They are both important books, well worth reading.

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Initial claims for unemployment insurance

The Labor Department reported today that initial claims for unemployment insurance rose by 27,000 in the most recent available week. Although that’s a disappointing development, it’s still a small enough increase to allow the 4-week average to fall for the second week in a row. Since that declining 4-week average is one of the few encouraging pieces of news in an otherwise discouraging economic landscape, I wanted to take a closer look at just how significant a statistical signal it really sends.

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The Great Recession Goes Global

One of the most interesting “boxes” in the IMF’s World Economic Outlook (in Chapter 1) is the one entitled, somewhat innocuously “Global Business Cycles”, by Marco Terrones, Ayhan Kose and Prakash Loungani at the IMF. Yet, it’s important to read until the ending paragraph:

To summarize, the 2009 forecasts
of economic activity, if realized, would qualify this year as the most severe global recession during the postwar period. Most indicators are expected to register sharper declines than in previous
episodes of global recession. In addition to its severity, this global recession also qualifies as the most synchronized, as
virtually all the advanced economies and many emerging and developing economies are in recession.

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Hi Frequency Output Indicators

The advance release for 2009Q1 GDP will come out on April 29. Until then, we have some readings from the monthly GDP nowcasts, two of which were released on April 15. e-Forecasting identifies an annualized 9.6% decline in first quarter GDP. Macroeconomic Advisers (whose monthly estimates only extend to February) writes “Our latest tracking estimate of a 5.1% decline in GDP in the first quarter includes a 1.2% decline in monthly GDP in March, reflecting a partial reversal in net exports and weakness in PCE and inventory investment.” A lot hinges, then, on what happens to net exports.

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The Allocation of Stimulus Funds

From Daniel Wilson, “Are Fiscal Stimulus Funds
Going to the ‘Right’ States?” at the SF Fed (h/t Torsten Slok at DB):

…While
it is too early to tell whether the overall stimulus
package will have its intended effects, this review
suggests that, by and large, the distribution of federal
stimulus funds is indeed tilted toward those states most
likely to spend the funds quickly and effectively.

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