And other non-Neoclassical tales
Finance and Development has a profile of one of my teachers, Nobel Laureate George Akerlof, written by Prakash Loungani. Akerlof’s views are critical to recall in these times when some individuals think supply and demand are sufficient to answer all policy issues. Akerlof’s research highlighted the role of information asymmetries that prevent prices for setting quantity demanded equal to quantity supplied. From the article
…you need to know how you got where you are. From the abstract to a working paper by myself, Barry Eichengreen and Hiro Ito, entitled A Forensic Analysis of Global Imbalances:
We re-examine the determinants of current account balances applying updated data to the framework based on Chinn and Ito (2007). …
From a new IMF working paper by Prakash Loungani:
We document information rigidity in forecasts for real GDP growth in 46 countries over the past two decades….
The Employment Situation release for May was not entirely a surprise, given Jim’s post yesterday, but contained unwelcome news nonetheless. WSJ RTE quotes Stephen Stanley of Pierpoint Securities thus: “…consider me worried”.
Sovereign default experiences are a staple in international finance. Here are a couple bits of information from a vast literature.
Steven Englander, Global Head of G-10 FX strategy for Citi is not very sanguine about a Treasury default, especially as it pertains to foreign holders of Treasurys. From an email today (not online):
The output gap is big and negative; the unemployment gap is big and positive. From “Unemployment in an Estimated New Keynesian Model” (ungated version), by Jordi Galí, Frank Smets, and Rafael Wouters:
Such as they are
In reading this short document (a word count was 2069, essentially a 8 page paper, shorter than the term papers I assign), I was pervaded by a sense of déjà vu. There are many interesting assertions (not a single footnote in the entire document). Rejoinders to some assertions are here. I’ll focus on some key guffaw-inducing assertions, relying largely upon previous Econbrowser posts.
The WSJ and Philadelphia Fed surveys of economists were released last week. It’s of interest to consider what they imply for the macro outlook, and additionally, how they believe inflation will evolve as a function of other variables.