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:
Author Archives: Menzie Chinn
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.
Guest Contribution: East Asian Production Networks, Global Imbalances, and Exchange Rate Coordination
By Willem Thorbecke
Today, we’re fortunate to have Willem Thorbecke, Senior Research Fellow at Asian Development Bank Institute and a Consulting Fellow at Japan’s Research Institute of Economy, Trade and Industry, as a guest contributor.
Asia’s role in the propagation of the global recession has been a subject of study, but relatively little attention has been devoted to the interaction of exchange rates and production chains. The structure of East Asian production networks and the severity of the recession places a premium on policy coordination in the region.
Dollar Demise and Double Dip: Latest Forecasts
I thought it of interest to see what surveys of forecasters indicate about two questions being asked: Is a dollar collapse imminent — Martin Wolf is skeptical, while others [0] are convinced the end is nigh — and is a double dip recession likely? I take a look at the messages conveyed by FX4casts.com and the WSJ October survey of forecasters.
Two Views: Blame It on Beijing Redux, or Joint Determination
From the abstract to Why are we in a recession? The Financial Crisis is the Symptom not the Disease!, by Ravi Jagannathan, Mudit Kapoor, and Ernst Schaumburg:
…We argue that the large increase in the developed world’s labor supply, triggered by geo-political
events and technological innovations, is the major underlying cause of the global macro economic
imbalances that led to the great recession. …
Trade Procyclicality in the Current Recession: The View from the US
Paul Krugman recently characterized the current pace of trade activity as worse than that during the Great Depression. And indeed, Barry Eichengreen and Kevin O’Rourke have been diligent in illustrating how this is the case, most recently in this September VoxEU post. Caroline Freund ([pdf] here) as well as the IMF in its most recent World Economic Outlook (Box 1.1) attribute the sharp drop-off in world trade to high income elasticities, in part associated with the high degree of vertical integration that characterizes the globalized world economy. Below, I want to examine that explanation from the perspective of the US data. This follows up on several of my recent posts on the subject. [0] [1] [2] [3]
Guest Contribution: The Wisconsin Foreclosure and Unemployment Relief Plan (WI-FUR)
By Morris A. Davis
Today, we’re fortunate to have Morris A. Davis, Assistant Professor of Real Estate and Urban Land Economics at University of Wisconsin School of Business, as a guest contributor.
Research by economists inside the Federal Reserve system have shown that two events typically lead homeowners to default on their mortgage (see here). First, the value of the house must be less than the value of the mortgage (“under water”). This is necessary but not sufficient (see here). Second, homeowners must experience a significant disruption and loss of income. The available data suggest there might be a big increase in foreclosures in the immediate future. Zillow estimates that 22 percent of the 50 million homeowners with mortgages are currently under water; unemployment rates are high and are expected to remain high for the next two years.
“W” and the Stimulus Package in Perspective
In the wake of some recent economic reports, most prominently the employment report, there’s some discussion of how the recovery is in doubt [1], possibly leading to a “W”, or double dip, [2]. Anxieties focus on 2010 or possibly 2011. I think, in retrospect, such worries cast the criticisms of the stimulus bill in a different light than just a few months ago.