According to news accounts [0], rebalancing is going to be a central topic. Brad Setser, now in his official capacity as NEC/NSC director of international economics, blogs:
We will press the G-20 to agree on a framework for strong, balanced and sustainable growth. As the U.S. starts to act more responsibility, it will borrow less and spend a bit less on the rest of the world’s goods. That means borrowing by U.S. households cannot be the main source of global demand growth in the future.
From today’s chapters 3 and 4 of the IMF World Economic Outlook, released today. From Chapter 4:
“…the results based on the small-scale regressions suggest that economies with larger current account deficits, rising inflation, and a deteriorating fiscal balance before a crisis experienced significantly larger output losses [from financial crises].
Chapters 2 and 3 of the IMF’s Global Financial Stability Report are out.
These topics are the subject of two special issues, the first in IMF Staff Papers, and the second in the Review of International Economics.
Deleveraging implies slow growth in total credit, and according to the usual reasoning, slow growth in GDP. Several of Deutsche Bank’s economists, however, focus on what they call the credit impulse. They provide the following provocative graph, which suggests a rapid recovery:
By Simon van Norden
Today, we’re fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), continue as a guest contributor.
In my previous post, I wrote about some of the evidence linking serious banking crises to real estate market collapses. That evidence is far from iron clad; it is simply the observation that many banking crises in mature economies have their origins in a real estate boom and bust cycle. However, the idea is also intuitively appealing.
…and a Rejoinder to Posner.
The CEA Analysis of ARRA’s Impact
Yesterday, the Council of Economic Advisers released the first of its mandated reports on the impact of the ARRA on economic activity. Based upon a variety of approaches (VAR, multiplier based), it concludes:
“…our multiplier analysis and estimates from a wide range of private and public sector forecasters confirm the estimates from the statistical projection analysis. There is broad agreement that the ARRA has added between 2 and 3 percentage points to baseline real GDP growth in the second quarter of 2009 and around 3 percentage points in the third quarter.
The new semester has begun, and I was reviewing economic trends in my macro courses. In my lectures, I highlighted the sharp drop-off in consumption. In the following, I discuss how well my predictions for consumption from last November have held up.
By Simon van Norden
Today, we’re fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), as a guest blogger.
“Once you’ve seen one financial market crisis…you’ve seen one financial market crisis.”
— Attributed to Federal Reserve Board Governor Kevin Warsh by former US Treasury Assistant Secretary for Economic Policy Phillip Swagel in The Financial Crisis: an Inside View, March 2009, p. 4.
In a recent Economix post, Casey Mulligan asserts that aid to the states and localities is unwarranted given that state and local government employment is doing just fine. His graph highlighting cumulative gains/losses ends in January 2009, to show what had transpired by the time the stimulus bill was being debated. How do things look if one extends the sample to August 2009? And what about spending as opposed to employment?