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 April 27th.
Reader Zi Zi writes:
Higher short rate actually precedes better [US GDP] growth (not lower): GBP3M
I … don’t … think…so.
Figure 1: Libor 3 month based on British pound (dark blue, left scale), four quarter growth rate of US real GDP (red, right scale), both in %. NBER defined recession dates. Source: IBA, BEA via FRED, NBER, and author’s calculations.
Granger causality (2 lags) test fails to reject US growth rate causes Libor; rejects Libor causes US growth rate.
One argument against the secular stagnation thesis is that the risk-adjusted real rate is not particularly low. I’m dubious.
Almost exactly 12 years ago, I noted the decline in equipment and software investment and the contemporaneous plateauing of capital goods imports, and repeated my worries in mid-June. At the time, I didn’t dare suggest an impending recession. Jim Hamilton (in July) warns “All of which is a reminder that the latest GDP numbers do not prove that we’re out of the woods yet” as the recession probability indicator rises to 26.2%.
The Bureau of Economic Analysis announced today that U.S. real GDP grew at a 3.2% annual rate in the first quarter of 2019. That’s better than the 2.2% average rate since the recovery from the Great Recession began in 2009:Q3, and even a little better than the average 3.1% growth over the last 70 years.
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I agree with
@realDonaldTrump: We need to keep interest rates low now to keep our economy growing.
The import quota rents that is. From Brian Riley/NTUF:
CEA Chair Kevin Hassett has stated a recession by next summer is impossible. I’m wary of such definitive statements.
That title from an article in FoxBusiness.
It’s easy to forget that thousands of American died in the wake of Hurricane Maria, and more are set to die as the administration opposes further assistance to the Commonwealth. Yet, new estimates confirm earlier estimates, and give detail on the causes.