Author Archives: Menzie Chinn

Guest Contribution: Reforming Banking by Reforming Housing

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.

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The ARRA’s Progress

…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.

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Guest Blog: Financial Crisis and Reform Déjà Vu

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.

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State and Local Employment and Spending Trends

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?

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The Lasting Legacy of the Bush Tax Cuts

From The 2009 Budget Deficit: How did we get here? by John Irons, Kathryn Edwards, and Anna Turner:

This Issue Brief examines the details and causes of the current budget deficit and the role the current recession has played. The years between 2001 and 2007 saw a large deterioration in the budget balance, which was driven chiefly by legislated policy changes. The Bush-era tax cuts are the largest contributors to this period of policy-induced increases to the federal budget deficit. . . .

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Of Ideologues and Ranters

From Arnold Kling‘s entry yesterday:

Kwak goes on to endorse Chinn’s ideological rant that the Bush tax cuts caused the financial crisis. Yes, I know that Chinn is speaking in the tone of economic analysis rather than a rant, but only a left-wing ideologue would take the thesis seriously. I bet Kwak cannot find a blog post of Chinn’s where he made a policy point against Democrats/liberals or for Republicans/conservatives.

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Reflections on the Causes and Consequences of the Debt Crisis of 2008

From “Reflections on the Causes and Consequences of the Debt Crisis of 2008,” in the La Follette Policy Report by Menzie Chinn and Jeffry Frieden:

In late 2008, the world’s financial system seized up. Billions of dollars worth of financial assets were frozen in place, the value of securities uncertain, and hence the solvency of seemingly rock solid financial institutions in question. By the
end of the year, growth rates in the industrial world had gone negative, and even developing country growth had declined sharply.

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