Professor Casey Mulligan has an interesting post, in which he observes that while retail sales are about 15-20% higher in December than in the previous three months, retail employment is only about 4% higher in December than October, thus proving that fiscal stimulus cannot be very effective at raising employment.
Looking back at the Great Recession
Some people use the end of December as an opportunity for a retrospective on the year. But I decided to take a look back at the last three years, by way of updating some comparisons I made in April 2009 between the Great Recession and the average characteristics of other postwar recessions.
Petroleum Prices and the International Dimension
Paul Krugman observes that there are many real side factors that should drive oil prices higher (in an article that cites Jim’s 2009 paper). I certainly don’t have much to add in terms of thinking about oil prices and domestic macro implications, but Krugman’s note did impel me to examine more closely the international aspects of the underlying demand factors.
Changes in the yield curve
The bond market sees an improving economy.
Consumption, Imports and the Prospects for US External Balances
Most forecasts incorporate a resurgence in the US trade and current account deficits. This projection makes sense to the extent that the US is expected to grow faster than Europe and Japan, and the estimated income elasticity of US imports exceeds that of US exports (the Houthakker-Magee finding [0]). Here’s a summary of forecasts for the current account.
Velocity of money
I wanted to follow up on Menzie’s recent observations about what’s been happening to the supply and demand for money.
Capital Controls on the Agenda?
At the recent conference related to G20 issues (discussed in this post), capital controls as a means of managing capital inflows was high on the agenda. The World Economic Forum’s Financial Development Report has a nice schematic outlining some key types of controls:
What to expect in 2011
I didn’t have time to put together a detailed post for today. But fortunately, I see that Bill McBride has done a much better job than I could of summarizing what to look for in 2011.
Some Lessons from Recent Global Macro Events
I’ve just attended a conference sponsored by the Reinventing Bretton Woods Committee, entitled “The International Monetary System: Old and New Debates”, which took place against the backdrop of France’s chairmanship of the G-20.
Forgetting about Demand, Once Again
Professor Mulligan asserts that the payroll tax cut will have little effect on output, even in sticky price Keynesian, and New Keynesian, models. He writes: