The UCSD Economics Department has set up a remembrance page in honor of Clive Granger. Those of you who contributed such moving remarks here at Econbrowser are invited to enter them also on the UCSD remembrance page, as well as to visit the other material collected there.
Guest Blog: The Impact of the Trilemma Configurations on Macroeconomic Performance
By Hiro Ito
Today, we’re fortunate to have Hiro Ito, Associate Professor of Economics at Portland State University as a guest blogger.
In my last posting, I introduced a recent paper coauthored with Menzie Chinn and Joshua Aizenman (UC, Santa Cruz) on the “trilemma,” or “impossible trinity” — a country simultaneously may choose any two, but not all, of the three goals, monetary independence, exchange rate stability and financial integration.
The Dollar as a Reserve Currency: Apres le Deluge
Time to review trends in reserves, against the backdrop of financial crisis, recession, and dollar gyrations. (I’ll try to be original, but Brad Setser has been more diligent than I in covering these issues over the past few months. [0] [1] [2])
A few observations:
- Known dollar reserves as a share of world reserves appear to be falling.
- Total dollar reserves have likely not declined as precipitously.
- Even with the decline in the dollar share, it is probably not as low as it was during the early 1990’s.
- The dollar share is (mechanically) linked to the dollar’s value.
- Known dollar reserves at end-2008 are less than predicted by a historical correlation.
- But this differential is infinitesimal compared to the “unallocated” share of total reserves.
Do you see what I see?
I’m still looking for, and still not seeing, the economic recovery that everybody is talking about.
How to lose on a sure-fire bet
There was a wonderful story in today’s WSJ about how some big banks managed to lose some of their hard-earned TARP money.
How Important Is China to World Growth?
This is a tough question to answer. But I can provide an answer of a mechanical sort. Consider how big the Chinese economy is, compared against the US, the Euro area and Japan.
More on disaggregate bank landing
I’d like to mention two more useful analyses of the disaggregated behavior of bank lending over the last year. The first is from James Kwak at the Baseline Scenario, and the second is a new research paper by Silvio Contessi
and Johanna Francis.
DeGlobalization: Transitory or Persistent?
It’s not news that the US current account, trade balance and trade balance ex.-oil are all moving toward zero percentage points of GDP. As I’ve observed before, time will tell how much of this movement is durable (see Bertaut, Kamin and Thomas for skeptical look; see also Cline-Williamson); this in turn depends on whether the adjustment reflects standard macro effects, including a permanent downshift in US consumption growth [0], and how much reflects perhaps transitory effects like a credit crunch in trade financing (as speculated upon here). Here’s the trade balance situation for the US.
Not a robust recovery
Often after a sharp economic downturn we observe an equally dramatic recovery. But nobody can claim to be seeing that so far in the currently available data.
James Pethokoukis: “An improving job market”
Hmm. I’m not sure about this statement.