Hmm. I’m not sure about this statement.
Relevant and Irrelevant Criticisms of the Stimulus Package
Keith Hennessey critiques the stimulus package. Some points make sense, some points, well, I wonder. For instance, Hennessey argues the stimulus is not timely. As I’ve noted before, it’s not timely only if you think this will be a relatively short recession, characterized by a rapidly dissipating negative output gap. [0] [1] [2].
Output, Employment and Industrial Production in the “1980-82 Recession”
In today’s NYT, Casey Mulligan presents an interesting picture of GDP during the “1980-82 recession” — the conjoining of the two NBER defined recessions in 1980 and 1981-82. Based on the comparison with the current recession, he concludes:
While the job losses, foreclosures, stock declines and other casualties of the current recession have been very painful, substantially more bad economic news is needed to make this recession worse than the downturns of 1980-’82, at least in G.D.P. terms.
More on bank lending data
Further evidence on the decline in bank lending.
High Anxiety (about Interest and Inflation Rates)
In March 2001, I was tasked to follow developments in Japanese macro policy (including monetary, exchange rate, and banking recapitalization issues). Readers will be tempted to ask what this has to do with current events. Well, at the time, Japan was facing rapidly rising net debt-to-GDP ratios (rising from 60.4 ppts of GDP to 84.6 ppts from 2000 to 2005), and was embarking upon a policy of quantitative easing in an attempt to stave off a deep recession. And yet opponents of quantitative easing worried about hyper-inflation, even as y/y inflation at the time remained mired in the negative range. I didn’t understand the fears at the time; and I still don’t. Now flash forward eight years, and move across the Pacific.
Supply, demand, and the price of oil
Do recently rising oil prices signal a resurgence of economic growth?
Guest Blog: Japan’s first trade deficit in 28 years
By Eiji Fujii
Today, we’re fortunate to have Eiji Fujii, Professor of Economics at Tsukuba University as a guest blogger.
Shaken by the world financial crisis, Japan has recorded the first trade deficit (on the April-March fiscal year basis) in 28 years (see Figure 1). The trade balance of the 2008 Japanese fiscal year was about -725 billion yen. The last trade deficit (on the fiscal year basis) was recorded in 1980 when the second oil crisis hit the economy hard.
Clive W. J. Granger, 1934-2009
It is with great sadness that I report that Sir Clive Granger passed away last night. He had been a wonderful colleague and good friend.
More Thoughts on Potential GDP and the Output Gap
In several past posts, I’ve been taken to task for using the CBO measure of the output gap (and the associated measure of potential GDP) [0] [1]. Some criticize the false sense of certainty that is provided by the official measures, since they are known to be revised as data comes in. Some criticize the measures on the basis the fact that the statistical methodologies (Hodrick-Prescott, Band-Pass) are divorced from a formal economic model. Some criticize the concept of potential GDP derived from a production function approach (i.e., thinking about the economy as one big production function associated with one big firm…). Arnold Kling‘s recent critique centers upon the idea that output is not homogenous, and we need different types of capital (and by extension labor) when the desired composition of output changes. Yet another — not entirely unrelated — perspective argues that when relative prices change a lot, potential GDP can drop due to technological frictions; Jim provides a cogent discussion of this approach.
More papers on the credit crunch
Links to some interesting papers that I recently read.