A new book on China (and Asia) in the global economy, the costs of the Chinese currency regime, the prospects for a Chinese hard landing, and can China save the day if the US and euro area go into recession. Plus, the prospects for the RMB as a key international currency.
A new book — Asia and China in the World Economy, edited by Yin-Wong Cheung (UCSC and HK City U) and Guonan Ma (BIS).
Today we’re pleased to feature a guest contribution from Michael Dueker, chief economist at Russell Investments and formerly an assistant vice president in the Research Department at the Federal Reserve Bank of St. Louis. Dueker is also a member of the Blue Chip forecasting panel. Econbrowser readers may remember that in February 2008 Dueker correctly predicted the onset of the current recession, using a model-based forecast. In a depths-of-recession piece from December 2008, he predicted in this forum that the recession would last until July or August of 2009, but that employment growth would not resume until March of 2010. We asked Mike to share the latest macroeconomic predictions from the Dueker Business Cycle Index model, subject to the disclaimer that the content does not constitute investment advice or projections of the stock market or any specific investment.
A Book Forum on our book, Lost Decades will take place on October 14th, in Washington, DC.
China is in the news; or more accurately, the Chinese currency, is. From Reuters:
A sharp rise in China’s yuan currency might cut the U.S. trade deficit by as much as one third and create enough American jobs to put at least a modest dent in the unemployment rate.
Then again, it may also lead to a destabilizing spike in Chinese unemployment and spark a trade war that drags the global economy back into a deep recession.
The stock market has looked scary. But economic indicators suggest U.S. growth is continuing.
From Reuters, three days ago:
“I still stand by that the science is not settled on man-made global warming,” Perry said while campaigning in the key early primary state of New Hampshire.
By the way of contrast, from the Preface to National Academy of Sciences, Advancing the Science of Climate Change (2010):
…there is a strong, credible body of evidence, based on multiple lines of research, documenting that climate is changing and that these changes are in large part caused by human activities. …
Should presidents of regional Federal Reserve Banks have a vote on the FOMC, the policy-making committee of the Federal Reserve?
In Lost Decades, Jeffry Frieden and I argue that fiscal consolidation is a necessary prerequisite for long term recovery; however, fiscal consolidation too soon can derail the recovery, and plunge us further into debt. In contrast, some commentators have asserted that fiscal consolidation can be accomplished painlessly, or even with immediate benefits (e.g., JEC-Republicans, Rep. Paul Ryan/Heritage Foundation). Recent empirical work which carefully identifies the relevant episodes concludes that such instances of expansionary fiscal contraction are rare, and usually conducted near full employment. Ball, Leigh and Loungani review the effects of fiscal contraction in “Painful Medicine”.
Last Friday and Saturday, the JIMF 4th Annual Conference at UC Santa Cruz took place, organized by Joshua Aizenman (UCSC & NBER), Robert Dekle (USC) & James Lothian (Fordham University & JIMF) and sponsored by JIMF, SCCIE-UCSC, and the FRBs of Atlanta and San Francisco. I didn’t get a chance to go, which was unfortunate as the papers were relevant to thinking about how the international financial system is linked to the events of 2008.
Social anthropologist David Graeber claims that barter economies never operate the way that economists assume.
James Kahn and Robert Rich worry that the U.S. has entered a phase of weak productivity growth.
Matt O’Brien
(hat tip: Mark Thoma) wonders why Republicans have become so hostile towards the Federal Reserve.
Hal Cole and Lee Ohanian debate Paul Krugman on the recovery from the Great Depression.