Interest rates on government debt for a number of European countries– notably Greece, Portugal, Ireland, Italy, and Spain– shot up considerably during 2010-2012. Those yields have fallen significantly from their peaks, though these five countries still face higher borrowing costs than most other countries in Europe.
Category Archives: financial markets
George Akerlof on the Response to the Financial Crisis and Great Recession
In a blogpost taking stock of the IMF conference on lessons from the crisis, the Nobel laureate distills the lessons learned.
Crowding Out Watch, Heritage Edition
The Heritage Foundation’s Salim Furth writes:
How Fannie Mae made its profit
Mortgage buyer and insurer Fannie Mae was in the news again this week.
The soaring stock market
Broad market indicators like the S&P500 have been making all-time nominal highs. What’s the significance of that for investors and the economy?
Semester’s Coda
Crowding Out Watch, Continued
The end of the semester has arrived, and as I prepared my last lecture, I checked to see how the government deficits had impacted yields. Real yields were pretty much as they were when the semester began in January.
The contributions of Reinhart and Rogoff
With all the heated discussions of the last two weeks, it is important to keep perspective on which issues are in dispute and which are not. Let me state plainly something on which I think we ought to be agreed: Carmen Reinhart and Ken Rogoff’s 2009 book, This Time Is Different: Eight Centuries of Financial Folly, is a valuable work of scholarship that continues to deserve study and praise from any thinking person. Here I review some of my reasons for saying that.
Fiscal tipping points
At the recent U.S. Monetary Policy Forum I presented the paper Crunch Time: Fiscal Crises and the Role of Monetary Policy, along with co-authors David Greenlaw (Managing Director and Chief U.S. Fixed Income Economist for Morgan Stanley), Peter Hooper (Managing Director and Chief Economist for Deutsche Bank Securities Inc.), and Frederic Mishkin (professor at Columbia University and former governor of the Federal Reserve). One of the goals of our research was to try to understand the events that can lead a country to a tipping point in which it faces rapid increases in the interest rate on its sovereign debt, as a result of which the country finds itself with an unmanageable fiscal burden.
Is this a good time to buy stocks?
With the stock market setting new 5-year highs, I was interested to take another look at some of the long-term fundamentals underlying equity values.
Understanding risk aversion in financial markets
At the economics meetings here in San Diego this weekend, I learned about some very interesting new research on one of the core questions in finance and macroeconomics that had long puzzled me.