A couple of stories that provide some personal perspective on the scope of the current problems.
Category Archives: financial markets
The Treasury’s Financial Stability Plan
Here’s my two cents on the latest two trillion.
Worth reading
Links to a few items I found interesting on non-residential structure investment, the “bad bank” proposal, and separation of powers.
Bailouts should be no fun
If everybody wants a bailout, that’s a good indication that we’re making some mistakes.
Executive compensation
Is there a problem? And is there a solution? My answers: yes, and yes.
Signs of a thaw
Yes, I saw the discouraging headlines. But I also see signs of hope in last week’s economic news.
ZIRP and the exchange rate…and other macro variables
Several months ago, I discussed the implications of a model of the exchange rate wherein Taylor rule fundamentals — the output [0], inflation and exchange rate gaps — were central (post). In that paper [pdf], I showed that Taylor rule fundamentals outperformed purchasing power parity, interest rate parity, and the monetary model of exchange rates in terms of in-sample fit, at least insofar as the dollar/euro exchange rate is concerned.
Credit Crunch or Not
One of the debates regarding the current financial crisis is whether in fact there is a crisis, or whether in fact the financial system is operating normally. I’ve been skeptical myself of the “times are normal view”, but here is some evidence that the credit crunch is real. The findings also reinforces my view that un-nuanced reliance on highly aggregated volume statistics (e.g., Chari et al. 2008) is likely to result in misleading inferences (See the rejoinder from the Boston Fed’s economists). From the conclusion to Tong and Wei (2008) ungated version of Tong and Wei:
Quantitative easing
Today’s announcement from the Federal Reserve marks the end of the road for Plan A (fighting the recession by lowering interest rates), and the beginning of … what?
Finding the exit
How you think we might get out of our current economic problems has something to do with how you think we got into them in the first place.