There was no recession after Brexit. But a slowdown looks like it’s here now…
Figure 1: Log real GDP for France (blue), UK (bold red), Germany (green), US (bold blackteal), and euro area (tealbold black), all normalized to 2016Q2. Source: OECD, BEA, author’s calculations.
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In this post I showed the negative impact on some US allies from tariffs on Chinese exports to the US, highlighting the importance of distinguishing between gross value and value added. Here is another graphical depiction of how tariffs on Chinese exports to the US are — in part — tariffs on US value added…
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. This is an extended version of a column that appeared at Project Syndicate on April 17th.
From the recent CBO Budget and Economic Outlook, the projected current account and implied cyclically adjusted budget balance.
Figure 1: Structural/cyclically adjusted Federal budget balance (dark blue), and current account balance (dark red), both as a share of GDP. NBER defined recession dates shaded gray. CBO projection period shaded gray. Projection of structural budget balance estimated by author using June 2017 estimate, adding in legislative changes reported in CBO (2018). Source: BEA 2017Q4 3rd release, CBO (2018), and author’s calculations.
Mr. Trump tweeted today:
Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!
— Donald J. Trump (@realDonaldTrump) April 16, 2018
The conventionally reported trade balance (or “net exports”) for the United States from the National Income and Product Accounts (NIPA) is net exports of goods and services, in nominal terms. (There are also trade balance measures on a Census basis and Balance of Payments basis, which differ in coverage and definitions.) The inflation adjusted trade balance is hard to calculate correctly, given the use of chain weighted measures of exports and imports. Here I plot a (Törnqvist) approximation to the real trade balance.
From The Hill:
President Trump’s incoming national security adviser John Bolton said Sunday he hopes impending economic tariffs against China could be “a little shock therapy” for the country.
In a previous post, I documented the fact that the Fama puzzle had transformed post-global financial crisis, so that for most currency pairs, interest rate differentials pointed in the right direction for subsequent exchange rate depreciation, from 2006 through end-2015 (Bussiere, Chinn, Ferrara, Heipertz (2018)). Here I show that the new puzzle persists through the end of 2017, a period when US interest rates were rising.
