In our book Lost Decades, Jeffry Frieden and I tried to be as comprehensive as possible in documenting the history we described, the analytical results we reported, and the data we used. We had intended to rely to a greater degree on graphical depictions, but for a variety of reasons, not all the proposed graphs made it in. Hence, we present the graphs that didn’t make it into Lost Decades. (And, by virtue of the just-in-time nature of the web, updated!). The graphs are organized by chapters:
Category Archives: financial markets
“What Predicts a Credit Boom Bust?”
From Chapter 1 of the IMF’s recent World Economic Outlook (Box 1.2), a set of findings by Jörg Decressin and Marco Terrones:
The econometric results confirm that net capital inflows, financial sector reform, and total factor productivity are good predictors of a credit boom. Net capital inflows appear to have an important predictive edge over the other two factors.
Lost Decades: The Making of America’s Debt Crisis and the Long Recovery
From the preface to Lost Decades, published today (9/19) by W.W. Norton:
The United States … lost the first decade of the
twenty-first century to an ill-conceived boom and a subsequent bust.
It is in danger of losing another decade to an incomplete recovery
and economic stagnation.
In order to not lose the decade to come, the United States will
have to bring order to financial disarray, gain control of a burgeoning
burden of debt, and re-create the conditions for sound economic
growth and social progress. None of this will be easy. The tasks are
made more difficult by the fact, which we have learned to our alarm,
that all too many policymakers and observers cling to the failed
notions that got the country into such trouble in the first place. If
Americans do not learn from this painful episode, and from others
like it, they will condemn the nation to another lost decade.. (p. xvi).
What do low government bond yields signify?
Brad DeLong and
Tyler Cowen point to an interesting exchange in the Financial Times.
Waiting for the Fed to act
Economic conditions are deteriorating. Here’s how and when the Fed might intervene.
Not dead yet
We had a couple of pretty scary economic developments last week, but as far as I can tell, we’re still standing.
Losing your AAA
On Friday, Standard & Poor’s, one of the three main credit rating agencies, downgraded U.S. Treasury debt from AAA to AA+, citing doubts about the effectiveness, stability, and predictability of American policymaking and political institutions in being able to deal with the rising debt burden by the middle of the decade. It’s been a wild ride for equity and commodity markets ever since.
When Price Does Not Clear the Market
And other non-Neoclassical tales
Finance and Development has a profile of one of my teachers, Nobel Laureate George Akerlof, written by Prakash Loungani. Akerlof’s views are critical to recall in these times when some individuals think supply and demand are sufficient to answer all policy issues. Akerlof’s research highlighted the role of information asymmetries that prevent prices for setting quantity demanded equal to quantity supplied. From the article
Some Brief Thoughts on Sovereign Defaults
Sovereign default experiences are a staple in international finance. Here are a couple bits of information from a vast literature.
Measuring systemic financial risk
On a recent visit to UCSD, NYU Professor and Nobel Laureate Rob Engle called my attention to the NYU Stern Volatility Laboratory, a great resource that anyone can use to get some very interesting real-time analysis. Here I’d like to describe some of the features available for assessing the systemic risk posed by financial institutions.