Once upon a time, U.S. monetary policy was conducted with its primary target defined in terms of the fed funds rate, which is the interest rate on an overnight loan of Federal Reserve deposits between private banks or other institutions that hold accounts with the Fed. A bank that ended the day with more deposits in its account with the Fed than needed to meet its required balances could lend those funds to another bank that found itself short. The interest rate on these loans was very sensitive to the total level of excess reserves in the system. The Fed’s direct control of available reserves gave it near control of the interest rate on loans of fed funds, which was what made the fed funds rate a credible target for implementation of the FOMC’s policy directives.
Using Chain Weighted Quantities
A cautionary tale for my undergraduate economics students
Reader Steven Kopits wonders why, in order to show the relative prominence of government spending, I don’t merely take the ratio of one real index to another real index. Specifically, he admonishes me:
I find this presentation confusing. … Is it not possible to present this data as a simple percent of GDP?
The Ever-Expanding Government Meme Lives On
I happened to catch Americans for Prosperity‘s Tim Phillips talking about the ever growing government [1], in the context of the recent budget deal. Here’s what the actual data indicate:
Compensation, Productivity and Labor Share
Productivity outpaces real wages, deflated using the output deflator, or using the CPI.
Current economic conditions
The economy is slowly improving.
The Output Gap: Cumulative Losses, 2013Q3
Today, I gave a presentation in the Wisconsin Alumni Association’s Global Hot Spot series, entitled America’s Macroeconomic Policies and the Global Economy. One figure from the presentation bears highlighting.
Coincident Indices for Wisconsin, Minnesota, California and the US
The Philadelphia Fed coincident indices for October are out. Figure 1 presents the log series, normalized to January 2011 = 0.
Trade Financing Use of China’s Yuan
From Reuters:
China’s yuan currency overtook the euro in October, becoming the second-most used currency in trade finance, global transaction services organization SWIFT said on Tuesday.
Some Observations on the Efficacy of Monetary and Fiscal Policy
Japan edition
Inflation and output are up. So too is gross fixed capital investment. The yen is weaker, and the real quantity of net exports is higher.
Presidents and the economy
An interesting new research paper by Princeton Professors Alan Blinder and Mark Watson examines differences in performance of the economy under Democratic versus Republican presidents. The paper begins:
The superiority of economic performance under Democrats rather than Republicans is nearly
ubiquitous; it holds almost regardless of how you define success. By many measures, the
performance gap is startlingly large–so large, in fact, that it strains credulity, given how little
influence over the economy most economists (or the Constitution, for that matter) assign to the
President of the United States.