As the G-20 leaders meet in London, one graph should remind the representatives of these disparate countries of their shared interest in restoring the health of the financial systems of the developed countries.
Author Archives: Menzie Chinn
A Table and a Picture from the OECD Economic Outlook
According to the OECD, America’s economy will be shrinking throughout 2009. The rest-of-the-world won’t be doing so hot either.
The Debt to GDP Trajectory in Perspective
There’s been substantial discussion of how the debt-to-GDP ratio evolves under the Obama plan. In part, the House attempts to pare back certain provisions of the Obama budget are a reaction to the projected rise in the debt-to-GDP ratio [0].
The Stimulus Package Considered against a Deteriorating Macro Backdrop
Here are the latest CBO forecasts of the output gap and unemployment rate, as well as counterfactual gap and rate that would have taken place in the absence of the stimulus package.
Guest Post: President Obama’s Plan to Improve Small Business Credit
By Robert Fairlie
Today, we’re fortunate to have Rob Fairlie, UC Santa Cruz Professor of Economics as a guest blogger. Some of his work was discussed in this earlier post.
On Monday, President Obama announced a plan to unfreeze capital for small businesses (see here). With the potential of creating new jobs and helping the country move out of the recession, the White House offered several actions to help small businesses obtain the capital that they need. The financial crisis has taken a devastating toll on entrepreneurs as capital has become increasingly scarce. This year’s projections for loans guaranteed by the Small Business Administration are down to $10 billion, which is half the amount of loans guaranteed last year.
GDP Forecasts from the WSJ
With talk of a second stimulus package circulating, it’s of interest to see what the current forecasts are indicating about the depth of the recession, as well as the “bounceback”. Jim has presented some of his views here. In this post, I examine the implications of the consensus coming from the March WSJ survey article, which indicates continued deterioration in the outlook, but a recovery beginning in 2009Q3.
Trend Stationarity/Difference Stationarity over the (Very) Long Run
Chinese Exports: “no hope”
From Bloomberg two days ago:
…”There’s no hope for export demand to recover any time soon,” said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. “How fast imports recover depends on how soon the government’s stimulus package kicks in and creates real demand in major industries.”
The Great Multiplier Debate, New Keynesian Edition
Greg Mankiw cites a study by Cogan, Cwik, Taylor, and Wieland to buttress his arguments that fiscal multipliers are small, especially when considering New Keynesian models. He also provides a startling graphic showing the dynamic multipliers from Romer-Bernstein versus the Taylor (1993) model, incorporating model consistent expectations; this graphic motivates Wieland et al. to remark:
We first show that the assumptions made by Romer and Bernstein about monetary
policy — essentially an interest rate peg for the Federal Reserve — are highly questionable
according to new Keynesian models. We therefore modify that assumption and look at the
impacts of a permanent increase in government purchases of goods and services in the
alternative model. According to the alternative model the impacts are much smaller than
those reported by Romer and Bernstein.
Cogan et al. use a New Keynesian dynamic stochastic general equilibrium (DSGE) model, specifically the Smets-Wouter model (Working Paper version of AER paper here).