In a previous post, I documented the fact that the Fama puzzle had transformed post-global financial crisis, so that for most currency pairs, interest rate differentials pointed in the right direction for subsequent exchange rate depreciation, from 2006 through end-2015 (Bussiere, Chinn, Ferrara, Heipertz (2018)). Here I show that the new puzzle persists through the end of 2017, a period when US interest rates were rising.
Wisconsin, Trade and Section 232
I was interviewed on the weekly newsmagazine Here and Now today about Mr. Trump’s tariffs on steel and aluminum:
Regarding Wisconsin, cheese was not on the Hit List, but motorcycles and cranberries were.
Some Steel Sector Indicators
which should give you pause for thought about national-security-rationalized tariffs. Output stable, real prices up.
Nearly 35 Years of Daily EPU Data, Plotted
Ed Hanson asserts that by showing a plot of monthly data constructed as an average of daily data, I am changing the message of the data. In order to assure people that the Trilateral Commission/the Illuminati/CigaretteSmokingMan haven’t “gotten to me” to manipulate the data, I’m going to show permutations of the Baker/Bloom/Davis Economic Policy Uncertainty (EPU) data, news based index.
Is Trump “Special”? Economic Policy Uncertainty Levels in Perspective
The answer is “yes”.
Economic Policy Uncertainty and Risk Indices: March 5, 2018
Remember those quaint notions of policy uncertainty holding back growth? Well, what to make of recent moves in uncertainty and risk indices, given all the talk of trade wars?
Figure 1: US daily Economic Policy Uncertainty index from Baker, Bloom and Davis (dark blue), and seven day centered moving average (red). Orange shading denotes Trump Administration. Source: policyuncertainty.com, and author’s calculations.
An Event Study: How Do Equity Markets View National Security-based Trade Protection?
Figure 1: Dow Jones, 15 minute increments. Source: TradingEconomics.
Thanks, Trump: Wisconsin Cheese Edition
Mr. Trump has stated his intention of raising tariffs on steel and aluminum, based on national security grounds. See this post on the specious aspects of this argument, and this recent EconoFact column on the hits to the economy that would result from steel tariffs. The EU has hinted at striking at Wisconsin cheese in retaliation (Wisconsin is the second largest state exporter). This makes perfect sense from a strategic perspective – agriculture is America’s comparative advantage, and Wisconsin’s Representative Paul Ryan is Speaker.
January Goods Trade Balance Dives
Figure 1: Goods trade balance (blue), and trade balance (red), in billions of $, SAAR. Orange shading denotes 2017M01-onward. Source: BEA/Census, author’s calculations.
I think I’ve had enough of “winning so much”.
A skeptical view of the impact of the Fed’s balance sheet
That’s the title of a paper with David Greenlaw, Managing Director of Morgan Stanley, Ethan Harris, head of global economics research at Bank of America Merrill Lynch, and Kenneth West, professor of economics at the University of Wisconsin, which we presented at the U.S. Monetary Policy Forum annual conference in New York on Friday.
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