Some back-of-the-envelope calculations: If we get what President Elect Trump says he wants — no depreciation of the yuan — what happens to the Treasury 10 year-3 month spread?
Category Archives: international
President Elect Trump Hints at Bretton Woods III
Via Twitter, yesterday afternoon:
Factors in low real interest rates
The real return on long-term government bonds has dropped steadily over the last 30 years, falling from values around 4% to something closer to zero or even negative for many countries today. What accounts for this remarkable development, and what are the prospects for this situation to continue?
Continue reading
Guest Contribution: “Shadow Rates, Forward Guidance, and Unconventional Monetary Policy”
Today we are pleased to present a guest contribution by Yi Zhang, Ph.D. candidate at the University of Wisconsin-Madison. This post draws upon this paper.
The “Deindustrialization of America”, in Pictures
From Donald J. Trump, March 14, 2016:
…under decades of failed leadership, the United States has gone from being the globe’s manufacturing powerhouse — the envy of the world — through a rapid deindustrialization…
Links for 2016-11-13
Three papers of interest on the effects of U.S. trade policy on manufacturing employment, racial discrimination, and the Chinese real estate boom.
Continue reading
“Gaining Currency: The Rise of the Renminbi”
That’s the title of a newly released book written by Eswar Prasad, an authority on the Chinese economy (and international finance).
Guest Contribution: “Is the Renminbi a Safe Haven?”
Today, we are fortunate to present a guest contribution written by Rasmus Fatum, at the University of Alberta. This post is based upon the Dallas Fed working paper by the same title.
The Jordà-Schularick-Taylor Macrohistory Database, Online
One of the problems in conducting cross-country analyses of infrequent macroeconomic episodes (such as financial crises) is absence of a comprehensive historical dataset. That has been partly remedied by the publication of the Macrohistory Database, assembled by Oscar Jordà, Moritz Schularick, and Alan Taylor (see the paper utilizing this database, discussed here by Jim).
Treasury Semiannual Report on International Economic and Exchange Rate Policies Released
On China, from the Report (page 4):
China has a significant bilateral trade surplus with the United States. The country’s current account surplus fell from 3.0 percent of GDP over the full year 2015 to 2.4 percent for the four quarters through June 2016, moving below the established threshold for that criterion. China’s intervention in foreign exchange markets has sought to prevent a rapid RMB depreciation that would have negative consequences for the Chinese and global economies. Treasury estimates that from August 2015 through August 2016, China sold more than $570 billion in foreign currency assets to prevent more rapid RMB depreciation. More transparency over exchange rate management and goals, and strong adherence to G‐20 commitments to refrain from competitive devaluation and not to target exchange rates for competitive purposes, will enhance the credibility of China’s exchange rate regime. At the same time, China has a very large bilateral goods trade surplus with the United States. This underscores the need for further implementation of reforms to rebalance the Chinese economy to household consumption. Fiscal policy can support structural reform and provide consumption‐friendly stimulus to support demand if growth slows more than expected.
Detailed discussion of China on pages 15-18.
Here is the most recent Econbrowser post on the Chinese currency misalignment. See a more general discussion of the Penn effect at VoxEU. And on misalignment generally, see here.
Note that the Peterson Institute’s William Cline has recently taken issue with the Cheung-Chinn-Nong (2016) methodology; however, even there, based on the FEER methodology, they find neither under- nor overvaluation of the RMB.