Yes, exchange rate prediction once again. Last Thursday, Michael Moore (of Queen’s University Belfast) and I presented a new paper at the IMF’s conference on International Macro-Finance (co-sponsored with the ESRC funded World Economy and Finance Program). Here’s the paper [pdf].
Author Archives: Menzie Chinn
Let’s Think Long and Hard about Extending Those Bush Tax Cuts
There was a time one could plausibly argue that importing lots of goods and services, and borrowing a lot from abroad (financing the budget deficits that we’ve incurred since 2001) was a great idea. But at the time, about two and a half years ago, I made the following warning in a Council of Foreign Relations report [pdf]:
The United States faces a wide variety of possible outcomes, with the most dire having a significant likelihood. One real possibility entails the satiation of global investors’ appetite for U.S. Treasury securities, combined with an endless vista of government budget deficits. After several years of large losses on dollar assets due to depreciation, they then demand a substantial premium for holding dollar-denominated assets; either the dollar must weaken so as to make Treasury securities cheap, or yields must rise relative to those on other assets.
What Does the President Know, and When Did He Know It: “We’re not in a recession…”
From Reuters:
“We’re not in a recession, we’re in a slowdown,” Bush said at a news conference at the end of a two-day summit with Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon.
Puzzled
I have been puzzled by the proposal for a tax holiday for gasoline purchases running from Memorial to Labor day (see [0], [1], [2]), with the objective of spurring the economy. First, the Federal tax is quite low, either in real or in relative terms. Second, the benefits that would accrue to consumers are probably pretty small, under reasonable assumptions.
Prospects for Federal Interest Payments to the Rest-of-the-World
I was struck at how Federal government interest payments to the rest of the world have risen even as interest rates have fallen.
Consumer Sentiment Indices: Do They Matter?
From Haver.com:
Michigan Consumer Sentiment Down Yet Again
April 11, 2008
By Tom Moeller
- The preliminary reading of April consumer sentiment from the University of Michigan fell another 9.1% m/m to 63.2. Consensus expectations had been for a lesser decline to 69.0. The decline dropped sentiment to near its lowest level since 1982.
The G-7 Communique and the Dollar
Was this the new (reverse) “Plaza Accord”? From Bloomberg:
Revisions: The Global Outlook in the WEO
The IMF released the World Economic Outlook‘s forecasts yesterday. There’s been plenty of coverage, so I won’t recap the main points, but rather focus in on some interesting aspects:
- The rapidity of the downshifting of estimates since January.
- Commodity price prospects and the LDCs.
Distressing Table of the Day
Here’s the basis for the $945 billion estimate of losses to the financial sector. From the IMF’s Global Financial Stability Report:
Downshifting and Reversion in Forecasts: Global Version
The decoupling thesis seems to be ever more out of fashion. From the FT today: