Today we learned that through March, the Federal budget deficit was 15% larger than the corresponding point in the last fiscal year — as expected given a not particularly stimulative tax cut (so much for tax cuts paying for themselves, as Stephen Moore claimed) and the ending of spending restraints. The dollar remains at elevated levels, as interest rates have risen. The trade deficit, excluding petroleum, continues to deteriorate. As I explained to my macro class today… it’s all textbook (notes).
Category Archives: exchange rates
What Would It Take to Implement Cain’s Gold Standard, Interest-Rate-Wise?
Stabilizing the price of gold in US dollars requires adjusting the interest rate (akin to how the exchange rate is managed). Herman Cain’s call for a return to the gold standard would imply that the Fed funds rate would have to be about 15 percentage points higher than it was in January 2000 in order to keep the dollar’s value stable at January 2000 levels — a rate 18 percentage points higher than actually recorded in March 2019.
The Fault Is … in Ourselves
Or more correctly, in Mr. Trump. As reported by Bloomberg, Mr. Trump has said:
“a gentleman that likes raising interest rates in the Fed, we have a gentleman that loves quantitative tightening in the Fed, we have a gentleman that likes a very strong dollar in the Fed.”
The VSD (“Very Stable Dollar”)
Is this what we want the Chinese to peg against?
Continue readingA Primer on Exchange Rate Misalignment (Updated)
As the administration pushes for “stability” in the Chinese exchange rate while imposing tariffs on China, it might be useful to recount the various ways in which different observers define currency “misalignment”. Here I update a primer first posted in 2010.
Continue reading“International Spillovers of Monetary Policy: Conventional Policy vs. Quantitative Easing”
That’s the title of a fascinating new paper with important policy implications.
Continue reading“A Third of a Century of Currency Expectations Data: The Carry Trade and the Risk Premium”
That’s the title of a new paper, coauthored with Jeffrey Frankel, using data extending back to August 1986.
Continue readingGuest Contribution: “Trade War is Not a Reason to Ease Money”
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared in Project Syndicate on November 26th.
Origins and Challenges of a Strong Dollar
That’s the title of an op-ed appearing in Nikkei newspaper (日本経済新聞):
JP Morgan Chase: “U.S.-China endgame involving 25 percent U.S. tariffs on all Chinese goods in 2019”
That’s according to Bloomberg.