By Joseph E. Gagnon
Today, we’re fortunate to have Joe Gagnon, senior fellow at the Peterson Institute for International Economics, as a guest contributor.
Consequences of the Lehman failure
William Sterling of Trilogy Global Advisors has an interesting new paper on the abrupt changes in financial markets subsequent to Lehman’s bankruptcy on September 15, 2008.
Some Thoughts Elicited by Reading Some Calibration Papers
(Warning: Might be considered “wonky” by some) In many economic analyses, one wants to isolate the “business cycle” component of macroeconomic series. Here is one such series, which has had a detrending technique applied to it. Try to guess what it is.
Current economic conditions
The U.S. recovery is underway. But so far it doesn’t look as strong as we had been hoping.
Prospects for Employment under Differing Econometric Specifications
Most economists are projecting a slow recovery in terms of employment. What do historical correlations imply?
On Revisions and on Conditioning
Both have to be “handled with care”.
Revisions
We’re all tempted to make predictions on the basis of the last data point. And even more difficult to resist is the temptation to make definitive statements on the basis of data that are sure to be revised. For instance, we see this question from Casey Mulligan, “Where’s the GDP Disaster?”.
Last October, when we were told that spending and incomes were about to collapse, I predicted that “real GDP will not drop below $11 trillion (chained 2000 $).”
A welcome GDP report
The Commerce Department reported today that the seasonally adjusted real value of the nation’s production of goods and services grew at a 3.5% annual rate during the third quarter, a little better than the 3.2% average seen since 1947.
The 2009Q3 Advance GDP Release and Stimulus Measures
The 3.5% growth rate was, in my view, in large part attributable to direct measures to stimulate the economy, including direct spending on goods and services by the government (Federal, state and local), as well as tax measures. First, let’s take a look at how each category of final demand accounted for total growth, in the context of a mechanical decomposition, in Figure 1.
Futures As Predictors of Commodity Prices
As commodity prices start rising again — at least some — the question of whether futures are useful indicators seems relevant. Figure 1 shows the IMF commodity price indices, as reported in the October World Economic Outlook:
Improving financial regulation and supervision
There were some other very interesting presentations at the conference hosted by the Federal Reserve Bank of Boston last week. Fed Chair Ben Bernanke spoke on Financial Regulation and Supervision after the Crisis while Princeton Professor Alan Blinder’s message was It’s Broke, Let’s Fix It: Rethinking Financial Regulation. Here I summarize four key reforms these speakers addressed.