I’ve recently read some commenters talking about consumption behavior as if it’s a settled matter, particularly with respect to theory. Let me just put that idea to rest.
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Guest Contribution: “Rising US Real Interest Rates Imply Falling Commodity Prices”
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 version appeared earlier on his blog.
The Closed Economy National Income Identity vs. Aggregate Demand
Assume a closed economy, no government spending and no taxes, and no depreciation. National income accounting states unambiguously:
C + I ≡ Y ≡ C + S
Comment policy
Econbrowser has always welcomed a wide range of opinions and spirited discussion from commenters, and will continue to do so. To preserve civility of the discussion, we have two rules. First, comments referring to someone’s racial or ethnic characteristics will not be published. Second, we will block comments that are pure insults with no intellectual arguments.
The Term Spread and Dollar Diverge
With the election, and anticipation of a large fiscal impulse (tax cut, infrastructure spending), the dollar rose and the term spread increased. As expectations of the latter disippated, both the dollar and spread shrank. But recently, the comovement has broken down.
Measuring global economic activity
Measuring the level of global economic activity is of key interest. But the measures we have on variables like industrial production don’t cover all countries and are only available with a significant lag. Michigan Professor Lutz Kilian suggested in an influential paper published in 2009 that we could get a useful timely indicator by looking at average shipping costs. I recently had a chance to look into the details of how that series is constructed and have some suggested improvements.
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The CBO on Trade Policy Uncertainty
The CBO’s Budget and Economic Outlook is a must read. In addition to the widening budget deficit (no supply side miracle here), and the downward revision in projected 2018 growth, there is this commentary in the section blandly titled “Some Uncertainties in the Economic Outlook” (page 14 onward):
A sizable uncertainty in the U.S. trade and inflation forecast stems from recent changes to U.S. import tariffs and the retaliation of the country’s key trading partners.
Treatment of Nations Implementing Measures Not Consistent with the WTO
Statement yesterday, as reported by Washington Examiner:
“[That country] really needs to make up its mind” … “Do they want to be in the community of nations, do they want to be part of the WTO and just behave like everybody else, or don’t they?”
…“And if they don’t, then we, the community of nations, are going to have to think about what are we going to do about that?”… “Are we going to let them stay in the WTO?”
Implications of Pre-Maria Population Decline for Estimated Excess Mortality in Puerto Rico
In this post, I used IMF estimated data for predicting the counterfactual mortality levels, necessary to calculate excess deaths. It is important to note that by not taking into account the recent population decline, one is probably biasing down estimates of excess deaths.
Guest Contribution: “Trump’s Trade Policy Uncertainty Deters Investment”
Today, we are fortunate to be able to present a guest contribution written by Steven J. Davis, William H. Abbot Distinguished Service Professor of International Business and Economics at the University of Chicago Booth School of Business and Senior Fellow at the Hoover Institution.
Donald Trump has upended U.S. trade policy. The particulars include a U.S. pullout from the Trans-Pacific Partnership (TPP), threats to jettison the North American Free Trade Agreement, a refusal to affirm new WTO judges, tariff hikes on steel and other goods, frequent rhetorical attacks on major trading partners, and a wrong-headed obsession with bilateral trade deficits.