And is over 12,000 below April peak. Private nonfarm payroll employment is also declining, with previous months’ data revised down.
Guest Contribution: “EQCHANGE: A Worldwide Database on Actual and Equilibrium Effective Exchange Rates”
Today we are pleased to present a guest contribution written by Cécile Couharde (EconomiX-CNRS, University of Paris Nanterre), Carl Grekou (CEPII), Anne-Laure Delatte (CEPII, EconomiX-CNRS and CEPR), Valérie Mignon (EconomiX-CNRS, University of Paris Nanterre and CEPII) and Florian Morvillier (EconomiX-CNRS, University of Paris Nanterre).
The widening and persistence of current account disequilibria at the international level have refocused real exchange rate distortions at the core of international debates. What are the exchange rate adjustments needed to correct excessive imbalances? How to assess whether a currency is fundamentally misaligned, i.e. under- or over-valued? We introduce a new database, EQCHANGE, which includes nominal and real effective exchange rates, as well as equilibrium real effective exchange rates for more than 180 countries from 1973 onwards. It represents the longest and largest publicly available database on equilibrium exchange rates and corresponding misalignments.
12 Month Global Temperature Anomaly, August July 2017
Corrected Source: NOAA, accessed 9/13/2017.
Update, 9/13, 8:15am Pacific: A common refrain is that it’s been hotter in the distant past. I think it’s important to remember that while there has always been variation in temperatures, a question is whether temperatures have changed so rapidly in such a short period of time in a time (post-dinosaur, e.g.). If adjustment costs are quadratic, well, the first derivative (gradient) matters. To that end, consider the following graph, and the movement over the most recent period.
Source: CC BY-SA 3.0, [link].
Notice the steep ascent up to 2004; the global land/sea anomaly in Figure 1 is nearly 0.4 c higher in 2016 than 2004 (12 month thru December)..
Charlottesville, Eye Contact, and the Fed Chair Post
Is this how we should be choosing the Fed Chair? From WaPo:
Term Spread, September 5, 2017
As I was compiling background notes for the new semester, I found the current level and trend in the term spread of interest.
Figure 1: Ten year minus three month Treasury spread (blue), and ten year minus two year spread (red), %. Observations for September are 9/5. NBER defined recession dates shaded gray. Source: FRED, Bloomberg, NBER and author’s calculations.
Run the probit regression
recessiont+6 = -0.81 -0.474×(GS10-TB3MS)t + 0.065×TB3MSt + ut
over the 1967M01-2017M02 period (McFadden R2 = 0.24); the implied probability of recession is 10% for February 2018.
Using a specification without the level of the short rate included leads to a slightly higher probability, 14% or so.
The detail is also interesting. The spreads are smaller than they were in October 2016.
Figure 2: Ten year minus three month Treasury spread (blue), and ten year minus two year spread (red), %. Observations for September are 9/5. Source: FRED, Bloomberg, and author’s calculations.
Market Expectations Regarding Successful Raising of the Debt Ceiling
The market has apparently taken a dim view of the Administration’s ability to manage the debt ceiling issue. From Deutsche Bank (not online):
Truth be told, I am unsurprised.
US Withdrawal from KORUS Free Trade Agreement?
From Reuters:
President Donald Trump on Saturday said he would discuss the fate of a five-year-old U.S.-South Korean free trade deal with his advisers next week, in a move that could see him pull out of the accord with a key American ally at a time of heightened tensions on the Korean peninsula.
Thoughts on Trade, Growth and Inequality from “Fostering a Dynamic Global Economy”
The Kansas City Fed’s Jackson Hole symposium this year focused on the causes, implications and remedies for the slowdown in economic growth. Major themes revolved around productivity, fiscal policy, and international trade. Here I discuss some of the major points relating to international trade and inequality, encompassing a paper by Nina Pavcnik (Dartmouth), comments by David Dorn (Zurich), and panel remarks by Ann Harrison (UPenn), Catherine Mann (OECD), Peter Schott (Yale), and John Van Reenen (MIT).
Asymmetries in Fiscal Policy, Again
One of the most interesting papers presented at the Jackson Hole conference was written by Alan Auerbach and Yuriy Gorodnichenko, entitled Fiscal Stimulus and Fiscal Sustainability.
How Will the Wall Be Funded?
Donald Trump has reaffirmed: “One way or the other Mexico will pay for the wall.” At the same time, as recently as today, Trump threatened a government shutdown if Congress did not provide funding for the wall. Time to consider how these points are — or are not — internally consistent, even allowing for the possibility that Mexico might “ultimately” pay.