If the last few days of February is like the rest, then recession probabilities are up. Using a plain-vanilla probit model of recession based on the10yr-3mo spread, the following recession probabilities are obtained.
10yr-3mo Treasury Spread and TIPS 10yr
Figure 1 shows both of these at monthly frequency, with February data through 2/21.
Remembering Representative Ryan’s Legacy
Brian Riedl writes:
I’ve never understood the intense hatred of Paul Ryan. Agree or disagree on policies — he treated people well (even when they didn’t return the favor), avoided demagoguery, good family man, no scandals. Thats what we should want out of elected officials.
Explaining the Administration’s Economic Forecast
The Economic Report of the President, 2020 is out as of today. Chapter 9 presents the underpinnings for the seemingly implausible GDP forecast presented in the Budget last week — a forecast that’s a full percentage point faster than CBO’s.
Pre-Benchmarking Manufacturing Employment in MI, PA, and WI
The pre-benchmarked establishment survey suggests declining employment in key industrial states of Michigan, Pennsylvania and Wisconsin. Using the methodology I used to inferring the national establishment survey, can we anticipate the revision to manufacturing in these states?
“Global Spillovers of a China Hard Landing”
That’s the title of an October 2019 International Finance Discussion Paper (Fed) by Shaghil Ahmed, Ricardo Correa, Daniel A. Dias, Nils Gornemann, Jasper Hoek, Anil Jain, Edith Liu, and Anna Wong, which has taken on heightened relevance given current events. From the abstract:
Air Freight, Global Supply Chains, and Sensitivity to China
Some pictures to envision the impact of covid-19: (1) lots of US int’l trade goes by air, (2) and US sensitivity to disruption to air freight from China, by sector.
Guest Contribution: “Questioning the puzzle: Fiscal policy, exchange rate and inflation”
Today we are fortunate to present a guest contribution written by By Laurent Ferrara (SKEMA Business School, Paris, and Director of International Institute of Forecasters), Luca Metelli (Banca d’Italia), Filippo Natoli (Banca d’Italia) and Daniele Siena (Banque de France). The views presented represent those of the authors, and not necessarily those of the institutions the authors are affilliated with.
How Plausible Is the Administration’s GDP Forecast?
As has been noted, the Administration’s forecast is about a percentage point higher than CBO’s. This seems like a large economic difference; as I’m teaching econometrics this semester, how does this seem in terms of statistical significance. Figure 1 below summarizes.
Malleable and Ductile
Those are two characteristics of gold … and of Judy Shelton’s economics. From Deutsche Bank today (Luzzetti & Hooper):