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.
Guest Contribution: “The Signal/Noise Ratio in US North Korea Policy”
Today, we present part two of 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. An earlier version appeared as “Can Trump Deal with North Korea and China?” in Project Syndicate.
Guest Contribution: “Deal-maker Trump Can’t Deal”
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. An earlier version appeared as “Can Trump Deal with North Korea and China?” in Project Syndicate.
“Fostering a Dynamic Global Economy”
Here at this conference today:
Friday, August 25, 2017
Chair: Susan M. Collins
Former Dean, Gerald R. Ford School of Public PolicyUniversity of Michigan
8 a.m.
Opening RemarksJanet L. Yellen | Speech
Chair
Board of Governors of the Federal Reserve System8:30 a.m.
Fostering Business Dynamism and Ensuring Competitive MarketsAuthors: Chang-Tai Hsieh | Paper
Professor
University of ChicagoPete Klenow | Paper, Remarks
Professor
Stanford UniversityDiscussant: Gita Gopinath | Remarks
Professor
Harvard University9:05 a.m.
General Discussion9:55 a.m.
Income Inequality and the Distribution Aspects of International TradeAuthor: Nina Pavcnik | Paper, Remarks
Professor
Dartmouth CollegeDiscussant: David Dorn | Remarks
Professor
University of Zurich10:30 a.m.
General Discussion10:55 a.m.
Panel on the Changing Landscape of International TradePanelists: Ann E. Harrison | Remarks
Professor
University of PennsylvaniaCatherine L. Mann | Remarks
Chief EconomistOrganisation for Economic Co-operation and Development
Peter K. Schott | Remarks
Professor
Yale UniversityJohn Van Reenen | Paper, Remarks
Professor
Massachusetts Institute of Technology11:55 a.m.
General Discussion1 p.m.
Luncheon AddressMario Draghi | Speech
PresidentEuropean Central Bank
2 p.m.
AdjournmentSaturday, August 26, 2017
Chair: Randall S. Kroszner
ProfessorUniversity of Chicago
8 a.m.
Balancing Short-term Fiscal Stimulus with Longer-term SustainabilityAuthors: Alan J. Auerbach | Paper
ProfessorUniversity of California-Berkeley
Yuriy Gorodnichenko| Paper
Professor
University of California-BerkeleyDiscussant: Jason Furman | Remarks
ProfessorHarvard University
8:35 a.m.
General Discussion9 a.m.
Achieving Balanced Global GrowthAuthor: Menzie Chinn | Paper, Remarks
ProfessorUniversity of Wisconsin
Discussant:
Maurice Obstfeld |RemarksEconomic Counsellor
International Monetary Fund10 a.m.
General Discussion10:25 a.m.
Overview PanelPanelists: Norman Chan | Remarks
Chief Executive
Hong Kong Monetary AuthorityTimothy J. Kehoe | Remarks
Professor
University of MinnesotaCarmen M. Reinhart
Professor
Harvard University11:25 a.m.
General Discussion