12 Items

Blog Post - Views on the Economy and the World

The Fed and Inequality

| Oct. 28, 2016
Populist politicians, among others, have claimed in recent years that monetary policy is too easy and that it is hurting ordinary workers.   But raising interest rates is not the way to address income inequality.It is a strange claim for anyone to make, but especially for populists.  Low interest rates are good for debtors, of course, and bad for creditors. Throughout most of US history, populists have supported easy monetary policy and low interest rates, to help the little guy, against bankers, who had hard hearts and believed in hard money.

Blog Post - Views on the Economy and the World

Addressing Commodity Price Volatility in Algeria & Morocco

| June 11, 2016
I recently visited Algeria and Morocco.  Like so many other developing countries, they are dealing with the sharp decline in global commodity prices that has taken place over the last few years.  In meetings in Algiers and Casablanca, I offered four concrete ideas for policies to help commodity-exporting countries deal with global price volatility.  The four proposals, very briefly, are: (1) hedging with options (as Mexico does), (2) commodity bonds, (3) countercyclical fiscal institutions (like Chile’s), and (4) central bank targeting of a currency-plus-commodity basket.

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

Talk on trade: TPP & Trump

| May 20, 2016
The ITC Wednesday released its mandated report on the economic effects estimated to result from the TransPacific Partnership.  As is usual in standard trade models, the estimated welfare gains may sound small: on the order of ¼ % of income.  But that would still be way worth doing.    Furthermore the ITC study, by design, leaves out a lot.  For example, the Petri-Plummer study from the Peterson Institute estimates income gains from TPP that are twice as large, in part because it takes into account Melitz-style opportunities for  more productive firms to expand.

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

Modi, Sisi & Jokowi: Three New Leaders Face the Challenge of Food & Fuel Subsidies

| Aug. 23, 2014
In few policy areas does good economics seem to conflict so dramatically with good politics as in the practice of subsidies to food and energy.  Economics textbooks explain that these subsidies are lose-lose policies. In the political world that can sound like an ivory tower abstraction.   But the issue of unaffordable subsidies happens to be front and center politically now, in a number of places around the world.   Three major new leaders in particular are facing this challenge:  Sisi in Egypt, Jokowi in Indonesia, and Modi in India.

Blog Post - Views on the Economy and the World

More Black Swans?

| Aug. 23, 2012
I have arguedthat the best way to think of “black swan” events is as developments that, even though low-probability, can in fact be contemplated ahead of time.  Even if they are the sort of thing that has never happened before within an analyst’s memory, similar things may have happened before in the distant past or in other countries.What current possible shocks have probabilities that, even if fairly low, are high enough to warrant thinking about now?  Some have been discussed ad infinitum, others hardly at all.

Blog Post - Views on the Economy and the World

Escaping The Oil Curse

| Dec. 15, 2011
Libyans have a new lease on life, a feeling that, at long last, they are the masters of their own fate. Perhaps Iraqis, after a decade of warfare, feel the same way. Both countries are oil producers, and there is widespread expectation among their citizens that that wealth will be a big advantage in rebuilding their societies.Meanwhile, in Africa, Ghana has begun pumping oil for the first time, and Uganda is about to do so as well. Indeed, from West Africa to Mongolia, countries are experiencing windfalls from new sources of oil and mineral wealth.

Blog Post - Views on the Economy and the World

Escaping the Oil Curse

| Dec. 15, 2011
Libyans have a new lease on life, a feeling that, at long last, they are the masters of their own fate. Perhaps Iraqis, after a decade of warfare, feel the same way. Both countries are oil producers, and there is widespread expectation among their citizens that that wealth will be a big advantage in rebuilding their societies.Meanwhile, in Africa, Ghana has begun pumping oil for the first time, and Uganda is about to do so as well. Indeed, from West Africa to Mongolia, countries are experiencing windfalls from new sources of oil and mineral wealth.

Blog Post - Views on the Economy and the World

Barrels, Bushels & Bonds: How Commodity-Exporters Can Hedge Volatility

| Oct. 20, 2011
The prices of minerals, hydrocarbons, and agricultural commodities have been on a veritable roller coaster. Although commodity prices are always more variable than those for manufactured goods and services, commodity markets over the last five years have seen extraordinary volatility.Countries that specialize in the export of oil, copper, iron ore, wheat, coffee, or other commodities have boomed. But they are highly vulnerable. Dollar commodity prices could plunge at any time, as a result of a new global recession, a hard landing in China, an increase in real interest rates in the United States, fluctuations in climate, or random sector-specific factors.