A picture is worth a thousand words.
Guest Contribution: “RMB reaches 7.0; US names China a manipulator”
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. A shorter version appeared in Project Syndicate on August 9th.
On the Eve of Recession? Five Graphs from Two Courses
I get to teach Public Affairs 854, “Macroeconomic Policy and International Financial Regulation” and Economics 435 “The Financial System” this fall. There’s a cosmic confluence this year, in terms of the subject:
Undervaluation, Misalignment, and China in the 2019 IMF External Sector Report
Donald Trump’s pronouncements can typically be taken as contra-indicators. In other words, what he says is invariably wrong. So, you gotta wonder on China…
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SitRep from the Midwest
No end to “the blip“. From today’s Des Moines Register:
The Journal of Economic Perspectives in the Classroom
A collection of JEP articles readers have cited as useful for instruction, by category:
The Never-Ending Blip
On July 9, 2018, almost exactly a year ago, reader CoRev wrote:
Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end. We are on record saying the prices will be back approaching last year’s harvest season prices.
Prospects for a Resolution to the US-Trade Dispute Inferred from Soybean Futures
Asset price movements around “news” regarding policy can illuminate the market’s assessment of the outlook for trade policy. Looking at a small window (say half hour) around an event can allow one to separate other factors (weather, other demand factors) from other. With that, let’s look at soybean futures (September 2019)…
“Purchasing Power Parity and Real Exchange Rates”
That’s my new entry in the Oxford Research Encyclopedia of Economics and Finance.
The idea that prices and exchange rates adjust so as to equalize the common-currency price of identical bundles of goods—purchasing power parity (PPP)—is a topic of central importance in international finance. If PPP holds continuously, then nominal exchange rate changes do not influence trade flows. If PPP does not hold in the short run, but does in the long run, then monetary factors can affect the real exchange rate only temporarily. Substantial evidence has accumulated—with the advent of new statistical tests, alternative data sets, and longer spans of data—that purchasing power parity does not typically hold in the short run. One reason why PPP doesn’t hold in the short run might be due to sticky prices, in combination with other factors, such as trade barriers. The evidence is mixed for the longer run. Variations in the real exchange rate in the longer run can also be driven by shocks to demand, arising from changes in government spending, the terms of trade, as well as wealth and debt stocks. At time horizon of decades, trend movements in the real exchange rate—that is, systematically trending deviations in PPP—could be due to the presence of nontraded goods, combined with real factors such as differentials in productivity growth. The well-known positive association between the price level and income levels—also known as the “Penn Effect”—is consistent with this channel. Whether PPP holds then depends on the time period, the time horizon, and the currencies examined.
Mass Shootings and the Trump Effect (Part II)
Casualties (killed, wounded) from mass shootings are not continuously distributed; this suggests an alternative approach — given the high variance (shown in Figure 1 below for a subsample of the data) — I estimate a negative binomial regression (quasi-maximum likelihood).