According to news accounts [0], rebalancing is going to be a central topic. Brad Setser, now in his official capacity as NEC/NSC director of international economics, blogs:
We will press the G-20 to agree on a framework for strong, balanced and sustainable growth. As the U.S. starts to act more responsibility, it will borrow less and spend a bit less on the rest of the world’s goods. That means borrowing by U.S. households cannot be the main source of global demand growth in the future.
From today’s chapters 3 and 4 of the IMF World Economic Outlook, released today. From Chapter 4:
“…the results based on the small-scale regressions suggest that economies with larger current account deficits, rising inflation, and a deteriorating fiscal balance before a crisis experienced significantly larger output losses [from financial crises].
Chapters 2 and 3 of the IMF’s Global Financial Stability Report are out.
Last week we received positive readings for some key economic indicators. But I still see plenty to worry about.
These topics are the subject of two special issues, the first in IMF Staff Papers, and the second in the Review of International Economics.
I see a good case for this, but also some big things to worry about.
Deleveraging implies slow growth in total credit, and according to the usual reasoning, slow growth in GDP. Several of Deutsche Bank’s economists, however, focus on what they call the credit impulse. They provide the following provocative graph, which suggests a rapid recovery:
The Cato Institute is hosting a discussion this month of the extent to which monetary policy may have contributed to our current economic problems. In the lead essay that appeared on Monday, Professor Scott Sumner of Bentley University suggested that the Fed erred in allowing nominal GDP to grow as slowly as it did.
My response
appeared this morning. I agree that faster growth of nominal GDP would have been a good thing, but argue that, particularly if you start the clock in the fall of 2008, the Fed lacked the tools to prevent a decline in nominal GDP.
By Simon van Norden
Today, we’re fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), continue as a guest contributor.
In my previous post, I wrote about some of the evidence linking serious banking crises to real estate market collapses. That evidence is far from iron clad; it is simply the observation that many banking crises in mature economies have their origins in a real estate boom and bust cycle. However, the idea is also intuitively appealing.
…and a Rejoinder to Posner.
The CEA Analysis of ARRA’s Impact
Yesterday, the Council of Economic Advisers released the first of its mandated reports on the impact of the ARRA on economic activity. Based upon a variety of approaches (VAR, multiplier based), it concludes:
“…our multiplier analysis and estimates from a wide range of private and public sector forecasters confirm the estimates from the statistical projection analysis. There is broad agreement that the ARRA has added between 2 and 3 percentage points to baseline real GDP growth in the second quarter of 2009 and around 3 percentage points in the third quarter.