Two of my favorite economists, Bilkent University Professor Refet Gurkaynak and Johns Hopkins University Professor Jonathan Wright, have a nice new paper in which they survey macroeconomic theories of the term structure of interest rates. As an unusual digital supplement to their paper, they put together a movie in which you can watch the arbitrage glue that normally holds markets together start to fail as financial markets literally fell apart at the end of 2008.
Chinn-Ito Capital Account Index up to 2008
Persistent Large Output Gaps, Disinflation and Deflation
Or, what if the Accelerationist hypothesis doesn’t hold. I’m sure this question will drive some apoplectic — but I think it a reasonable question. First, let’s look at the empirical evidence on what happens to inflation in the wake of persistent large output gaps. Fortuitously, Andre Meier has just written on this subject, in Still Minding the Gap:
Ever so slightly less contractionary
What is the significance of yesterday’s statement from the FOMC?
From Disinflation to Deflation?
“Future Recession Risks”
That’s the title of a new FRBSF Economic Letter. From Future Recession Risks, by Travis Berge and Oscar Jorda:
An unstable economic environment has rekindled talk of a double-dip recession. The Conference Board’s Leading Economic Index provides data for predicting the probability of a recession but is limited by the weight assigned to its indicators and the varying efficacy of those indicators over different time horizons. Statistical experiments with LEI data can mitigate these limitations and suggest that a recessionary relapse is a significant possibility sometime in the next two years.
Current economic conditions
Last week’s new economics data were a mixed bag. But on balance I’d have to say I’m more discouraged than when the week began.
Vast Ice ‘Island’ Breaks Free of Greenland Glacier
From NYT, a quote of researcher Jason Box:
Petermann [glacier] is a sleeping giant that is slowly awakening. Removing flow resistance leads to flow acceleration… The coincidence of this area loss and a 30 square kilometer loss in 2008 with abnormal warmth this year, the setting of increasing sea surface temperatures and sea ice decline are all part of a climate warming pattern.
A Sputtering Economy?
The employment situation July release indicated a decrease in overall payroll employment. Does this outcome indicate a sputtering* economy
Contagion, Re-examined
For a while, contagion had dropped off the (research) map. But it’s now back (thanks to Greece et al!), in both research and policy arenas. A new symposium published in Pacific Economic Review covers the topic.