Casey Mulligan asks:
So a year later, in September 2009, after living through a year of “disaster,” how did real consumption expenditure (one economists’ favorite measures of living standards) compare to what it was in September 2008?
Author Archives: Menzie Chinn
Guest Contribution: The Liquidity Trap Does Not Make Monetary Policy Ineffective
By Joseph E. Gagnon
Today, we’re fortunate to have Joe Gagnon, senior fellow at the Peterson Institute for International Economics, as a guest contributor.
Some Thoughts Elicited by Reading Some Calibration Papers
(Warning: Might be considered “wonky” by some) In many economic analyses, one wants to isolate the “business cycle” component of macroeconomic series. Here is one such series, which has had a detrending technique applied to it. Try to guess what it is.
Prospects for Employment under Differing Econometric Specifications
Most economists are projecting a slow recovery in terms of employment. What do historical correlations imply?
On Revisions and on Conditioning
Both have to be “handled with care”.
Revisions
We’re all tempted to make predictions on the basis of the last data point. And even more difficult to resist is the temptation to make definitive statements on the basis of data that are sure to be revised. For instance, we see this question from Casey Mulligan, “Where’s the GDP Disaster?”.
Last October, when we were told that spending and incomes were about to collapse, I predicted that “real GDP will not drop below $11 trillion (chained 2000 $).”
The 2009Q3 Advance GDP Release and Stimulus Measures
The 3.5% growth rate was, in my view, in large part attributable to direct measures to stimulate the economy, including direct spending on goods and services by the government (Federal, state and local), as well as tax measures. First, let’s take a look at how each category of final demand accounted for total growth, in the context of a mechanical decomposition, in Figure 1.
Futures As Predictors of Commodity Prices
As commodity prices start rising again — at least some — the question of whether futures are useful indicators seems relevant. Figure 1 shows the IMF commodity price indices, as reported in the October World Economic Outlook:
The National Saving Identity: Private Saving, Household Saving, and Rebalancing
The National Saving Identity states:
CA ≡ (T-G) + (S-I)
Where CA is the current account, (T-G) is the consolidated government budget balance, and (S-I) is the private sector saving-investment balance. Figure 1 depicts the profound shifts that have occurred in these components (normalized by nominal GDP).
The Political Economy of Recovery and Rebalancing
Jeffry Frieden, Professor of Government at Harvard, has a new Council of Foreign Relations working paper “Global Imbalances, National Rebalancing, and the Political Economy of Recovery” :
Global macroeconomic imbalances — massive borrowing by some countries and massive lending by others — drove the financial boom and bubble that eventually burst into the current crisis. There is now nearly universal agreement that such imbalances cannot be sustained, and that the former deficit and surplus nations need to move toward macroeconomic balance.
One Interpretation of Recession Causes… with Really Long and Really Variable Lags
In an Economix post today, titled “The Panic of ’08: Recession Cause or Effect?” Professor Mulligan writes:
…recent research questions the claim that the financial panics themselves contributed to their contemporaneous and severe employment downturns.