In my last post, I cited Jeff Frankel’s keynote speech from a recent Bank of Canada-ECB workshop. He also pointed to the end of “Exorbitant Privilege” and “Dark Matter”, and other arguments of American exceptionalism. I think we’ll see resounding evidence of this in Friday’s release of the US end-2008 Net International Investment Position (NIIP).
Author Archives: Menzie Chinn
Update on US Exports and Imports: The Collapse Continues
Here’s an update of US imports and export behavior. The trade collapse remarked upon a couple of months ago is still in play.
The Global Saving Glut: Rest in Peace? Mirage? Bete noir?
I’ve just come back from two weeks on the road, during which time I attended a couple of conferences. The first conference (NBER International Seminar on Macroeconomics) dealt with issues of exchange rates, reserve accumulation and financial crises (more on that later). The second one, a joint Bank of Canada-ECB workshop (not online), focused on exchange rates in the global economy. At the latter, Jeff Frankel delivered the keynote speech, entitled “On Global Currency Issues”, in which he outlined what’s “out” and what’s “in” in international finance (Powerpoint presentation here). One of the phenomena he concluded was no longer relevant was “the global saving glut”.
Guest Blog: The Impact of the Trilemma Configurations on Macroeconomic Performance
By Hiro Ito
Today, we’re fortunate to have Hiro Ito, Associate Professor of Economics at Portland State University as a guest blogger.
In my last posting, I introduced a recent paper coauthored with Menzie Chinn and Joshua Aizenman (UC, Santa Cruz) on the “trilemma,” or “impossible trinity” — a country simultaneously may choose any two, but not all, of the three goals, monetary independence, exchange rate stability and financial integration.
The Dollar as a Reserve Currency: Apres le Deluge
Time to review trends in reserves, against the backdrop of financial crisis, recession, and dollar gyrations. (I’ll try to be original, but Brad Setser has been more diligent than I in covering these issues over the past few months. [0] [1] [2])
A few observations:
- Known dollar reserves as a share of world reserves appear to be falling.
- Total dollar reserves have likely not declined as precipitously.
- Even with the decline in the dollar share, it is probably not as low as it was during the early 1990’s.
- The dollar share is (mechanically) linked to the dollar’s value.
- Known dollar reserves at end-2008 are less than predicted by a historical correlation.
- But this differential is infinitesimal compared to the “unallocated” share of total reserves.
How Important Is China to World Growth?
This is a tough question to answer. But I can provide an answer of a mechanical sort. Consider how big the Chinese economy is, compared against the US, the Euro area and Japan.
DeGlobalization: Transitory or Persistent?
It’s not news that the US current account, trade balance and trade balance ex.-oil are all moving toward zero percentage points of GDP. As I’ve observed before, time will tell how much of this movement is durable (see Bertaut, Kamin and Thomas for skeptical look; see also Cline-Williamson); this in turn depends on whether the adjustment reflects standard macro effects, including a permanent downshift in US consumption growth [0], and how much reflects perhaps transitory effects like a credit crunch in trade financing (as speculated upon here). Here’s the trade balance situation for the US.
James Pethokoukis: “An improving job market”
Hmm. I’m not sure about this statement.
Relevant and Irrelevant Criticisms of the Stimulus Package
Keith Hennessey critiques the stimulus package. Some points make sense, some points, well, I wonder. For instance, Hennessey argues the stimulus is not timely. As I’ve noted before, it’s not timely only if you think this will be a relatively short recession, characterized by a rapidly dissipating negative output gap. [0] [1] [2].
Output, Employment and Industrial Production in the “1980-82 Recession”
In today’s NYT, Casey Mulligan presents an interesting picture of GDP during the “1980-82 recession” — the conjoining of the two NBER defined recessions in 1980 and 1981-82. Based on the comparison with the current recession, he concludes:
While the job losses, foreclosures, stock declines and other casualties of the current recession have been very painful, substantially more bad economic news is needed to make this recession worse than the downturns of 1980-’82, at least in G.D.P. terms.