Foreign investors and crises: There is no safe haven for all seasons
Habib, Maurizio Michael, Stracca, Livio. At the peak of the Global Crisis, the US dollar appreciated and US Treasury yields fell, suggesting that foreign investors were purchasing US assets in general. Actually, they were fleeing only into short-term Treasury bills. This column discusses recent research showing that there are indeed no securities which are consistently a […]
Changing trade patterns, unchanging European and global governance
O‘Neill, Jim, Terzi, Alessio. The world economy is going through its biggest transformation in a relatively short space time. There have been many explanations for this phenomenon but the unprecedented scale and pace of this change and, most crucially, its implications, still seems little understood. In turn, there has been little preparation for, or adjustment to, this […]
Who Anticipated the Great Depression? Gustav Cassel versus Keynes and Hayek on the Interwar Gold Standard
Douglas, Irwin. The intellectual response to the Great Depression is often portrayed as a battle between the ideas of Friedrich Hayek and John Maynard Keynes. Yet both the Austrian and the Keynesian interpretations of the Depression were incomplete. Austrians could explain how a country might get into a depression (bust following a credit-fueled investment boom) […]
OECD forecasts during and after the financial crisis
OECD. This note discusses OECD forecast performance over the period 2007-12. It focuses on the lessons that can be learned from cross-country differences in growth forecast errors and the changes to forecasting models and procedures that have been prompted by the experience of the crisis. A more detailed statistical evaluation of OECD forecast performance, and […]
Bullard on the ‘Death of a Theory’
Simon Wren-Lewis. Following this post, James Bullard (President of the St. Louis Fed, and member of the FOMC – the US equivalent of the Monetary Policy Committee) kindly sent me his article (pdf) entitled ‘Death of a Theory’. As the theory he is referring to is the idea of fiscal stimulus at the Zero Lower Bound (ZLB), the title tells you that the […]
Cut the Spending, Spare the Poor
Jean Pisani-Ferry. Why do some governments spend more than others? The question is more complicated than it appears, especially in the case of European governments. The answer may look obvious when comparing, say, Denmark (where public spending, excluding interest payments on debt, amounted to 58% of GDP in 2012) and the United States (where the […]
Why hasn’t Japan’s massive government debt wreaked havoc (yet)?
Yuji Horioka, Charles, Nomoto, Takaaki & Terada-Hagiwara, Akiko. Japan’s sovereign debt-to-GDP ratio is higher than any country in Europe and more than twice the OECD average. This column explains why Japan’s massive government debt did not wreak havoc in the past. Robust domestic saving and a temporary inflow of foreign capital caused by the Global Crisis […]
How did the Global Financial Crisis misalign East Asian currencies?
Eiji Ogawa, Zhiqian Wang. Since the East Asian financial crisis of 1997, the emphasis on regional monetary cooperation has grown. This column discusses recent research into intra-regional exchange rate misalignments. In the aftermath of the Global Financial Crisis, investors in the US and Europe withdrew from emerging markets, causing a depreciation of emerging-market currencies against […]
Multilateralising 21st-century regionalism
Baldwin, Richard. The global value chain revolution has changed trade and trade agreements. Trade now matters for making goods as well as selling them. Trade governance has shifted away from the WTO towards megaregional agreements. This column argues that 21st-century regionalism is not fundamentally about discrimination, and that its benefits and costs are best thought […]
Larry Summers’ interest rate conundrum
Mayer, Thomas. Larry Summers has attracted much attention recently for invoking old theories of secular stagnation to explain the persistence of low interest rates in the recent past. The German economist Carl Christian von Weizsäcker has pointed to a retirement savings glut as the cause for low rates. In the view of Thomas Mayer, however, […]