We had a couple of pretty scary economic developments last week, but as far as I can tell, we’re still standing.
Category Archives: financial markets
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.
Real Interest Rates and Crowding Out: Reagan Era vs. Now
Recent commentary on whether real interest rates rose during the Reagan era tax cuts — Kling responding to Krugman — impelled me to look at the data…
The Financial Crisis: Foreseeable and Preventable
From the NY Times Room for Debate forum Was the Crisis Avoidable, Jeffry Frieden writes:
The Fed’s new policy tools
We had to throw out our textbook descriptions of how monetary policy is implemented after the fall of 2008, as the Fed turned from its traditional tools to active use of large-scale asset purchases. A number of studies have now been conducted of the potential efficacy of these new policy tools. I surveyed some of the new studies last October. Today I’d like to discuss three new papers that have come out since then.
The Financial Crisis, Interpreted
And some unanswered questions. From Jeffry Frieden, “A Classic Foreign Debt Crisis,” The Political Economist 12 (2) (Fall 2010) [newsletter of the Political Economy section of APSA, not online]:
Much of the popular, and scholarly, analysis of the crisis has focused
on its financial aspects: the breakdown of financial markets, the malfunction
of financial innovations, the failure of financial regulation. …
On Reading “The Financial Crisis Primer”
The Republican members on the FCIC released a Financial Crisis Primer that has been debunked by a number of observers (since so many of the old canards were hauled out, this was easily accomplished). [0] [1] But the refusal to allow the phrase “Wall Street” in the final commission report [2] impelled me to quantify the attempts by Wall Street to influence financial legislation in the years leading up to the financial crisis.