Economics & Global Affairs

32 Items

Blog Post - Views on the Economy and the World

Fiscal Education for the G-7

| May 26, 2016
As the G-7 Leaders gather in Ise-Shima, Japan, on May 26-27, the still fragile global economy is on their minds.  They would like a road map to address stagnant growth. Their approach should be to talk less about currency wars and more about fiscal policy.Fiscal policy vs. monetary policyUnder the conditions that have prevailed in most major countries over the last ten years, we have reason to think that fiscal policy is a more powerful tool for affecting the level of economic activity, as compared to monetary policy.

Blog Post - Views on the Economy and the World

The Fed, China and Oil

| Jan. 01, 2016
My answers to three questions at the start of 2016 (from Chosun Ilbo, leading Korean newspaper):1. How do you analyze the recent US interest hike, and how will it influence the global economy in the coming year?The Fed had telegraphed its decision to raise the interest rate so far in advance and (by December) so clearly, that the policy change was already fully reflected in markets.  For example most of the substantial appreciation of the dollar since 2014 can be attributed to anticipation of the Fed tightening.

Blog Post - Views on the Economy and the World

Gas Taxes and Oil Subsidies: Time for Reform

| Aug. 10, 2015
World oil prices have been highly volatile during the last decade.   Over the past year they have fallen more than 50%.Should we root for prices to go up, down, or stay the same?   The economic effects of falling oil prices are negative overall for oil-exporting countries, of course, and positive for oil-importing countries.  The US is now surprisingly close to energy self-sufficiency, so that the macroeconomic effects roughly net out to zero.  But what about effects that are not directly economic?   If we care about environmental and other externalities, should we want oil prices to go up or down?  Up, because that will discourage oil consumption?  Or down because that will discourage oil production?The answer is that countries should seek to do both: lower the price paid to oil producers and raise the price paid by oil consumers.

Blog Post - Views on the Economy and the World

New and Improved Trade Agreements?

| May 11, 2015
WASHINGTON, DC – Trade is high on the agenda in the United States, Europe, and much of Asia this year. In the US, where concern has been heightened by weak recent trade numbers, President Barack Obama is pushing for Congress to give him Trade Promotion Authority (TPA), previously known as fast-track authority, to conclude the mega-regional Trans-Pacific Partnership (TPP) with 11 Asian and Latin American countries. Without TPA, trading partners refrain from offering their best concessions, correctly fearing that Congress would seek to take “another bite of the apple” when asked to ratify any deal.

Blog Post - Views on the Economy and the World

Asia Games: Not Zero-Sum

| Apr. 28, 2015
Two hostesses are rivals in a popularity contest throughout the social season.  When they hold soirees on the same night invitees must choose which one to go to.  The hostesses guard their social ranking jealously, and may even punish a guest who goes to the rival’s party by withholding an invitation next time.To read about the roles of China and the US over the last month, one would think that Asia/Pacific relations are a zero-sum game like that of these two hostesses in some fictional time and place.

Blog Post - Views on the Economy and the World

Devaluations are Often Associated with Changes in Government

| Apr. 16, 2015
The possibility of devaluation is apparently an issue in the upcoming Argentine elections.  (The forward rate for next year is about 13 pesos per dollar, which is close to the informal rate and suggests a big  devaluation relative to the current official exchange rate of 8.)   In this connection, an Argentine newspaper has asked me about “Contractionary Currency Crashes,” a paper that I presented as the 5th Mundell-Fleming Lecture of the  IMF’s Annual Research Conference. 1) Do you think the conclusions about the connections between devaluation and elections are still valid in 2015 even though your article was published in 2005?My most relevant finding was that political leaders had historically been twice as likely to lose office in the six months following a big devaluation as otherwise.

Blog Post - Views on the Economy and the World

Will Fed Tightening Choke Emerging Markets?

| Mar. 23, 2015
CAMBRIDGE – As the Federal Reserve moves closer to initiating one of the most long-awaited and widely predicted periods of rising short-term interest rates in the United States, many are asking how emerging markets will be affected. Indeed, the question has been asked at least since May 2013, when then-Fed Chairman Ben Bernanke famously announced that quantitative easing would be “tapered” later that year, causing long-term US interest rates to rise and prompting a reversal of capital flows to emerging markets.

Blog Post - Views on the Economy and the World

The End of Republican Obstruction

| Jan. 19, 2015
CAMBRIDGE – What a difference two months make. When the Republican Party scored strong gains in last November’s US congressional elections, the universally accepted explanation was that voters were expressing their frustration with disappointing economic performance. Indeed, when Americans went to the polls, a substantial share thought that economic conditions were deteriorating; many held President Barack Obama responsible and voted against his Democratic Party.Now, suddenly, everyone has discovered that the US economy is doing well – so well that Senate Majority Leader Mitch McConnell has switched from blaming Obama for a bad economy to demanding credit for a good one.

Blog Post - Views on the Economy and the World

The World Economy in 2015

| Dec. 28, 2014
I am posting in three parts the results of an interview on the year-end outlook.  (The questions come from Chosun Daily, leading Korean newspaper. The interview is to be published there January 1.)Part 1. The Global Economy in 2015Q: Around this time next year, which countries do you predict will be the winners, and which will be the losers of the year?A: The big gainers will be oil-importing economies, particularly China, India and other Asian countries.Russia will be the big loser. It has now become clear to all how fragile and vulnerable the Russian economy was, especially with respect to world oil prices.

Blog Post - Views on the Economy and the World

8 Policy Recommendations for Newly Elected Members of Congress

| Dec. 11, 2014
On December 3, 2014, I participated in a panel of Harvard University’s Bipartisan  Program  for  Newly Elected Members of Congress.   After establishing that the median US household has not shared in recent strong economic gains, I went on to consider policy remedies.I offered the Congressmen eight policy recommendations.  Some will sound popular, some very unpopular; some associated with “liberals”, some with “conservatives.”   I would claim that they all have in common heavy support from economists, regardless of party – even the very unpopular ones.