51 Items

Blog Post - Views on the Economy and the World

How China Compares Internationally in New GDP Figures

| May 31, 2020

The World Bank on May 19, as it does every six years, released the results of the most recent International Comparison Program (ICP), which measures price levels and GDPs across 176 countries.  The new results are striking.  It is surprising that they have received almost no attention so far, perhaps overshadowed by all things coronavirus.

For the first time, the ICP shows China’s total real income as slightly larger than the US.  It reports that China’s GDP was $19,617 billion in 2017, in Purchasing Power Parity (PPP) terms, while the United States’ GDP stood at $19,519 billion.

Blog Post - Views on the Economy and the World

It’s Finally Time for German Fiscal Stimulus

| Oct. 21, 2019

As long as the German economy was doing well, as it was during the recovery from the 2008 global financial crisis, there existed a coherent rationale for German fiscal austerity.  The national commitment to budget discipline was enshrined in the 2009 “debt brake,” which limits the federal structural deficit to 0.35% of GDP, and by the 2011 “schwarze Null” (that is, “black zero”) policy of fully balancing the budget.  Indeed Angela Merkel’s government proudly achieved a balanced budget in 2012 and surpluses in 2014-18.

With unemployment low and growth relatively strong, fear of overheating the domestic economy was a legitimate counter-argument against the other countries that were always urging Germany to undertake fiscal stimulus.  They wanted more German spending, which would reduce its current account surplus (a huge 8-9% of GDP in recent years) and spill over into demand that would help other euro members, especially those to the south.

Blog Post - Views on the Economy and the World

Outlook for 2017

| Jan. 03, 2017
Five journalist’s questions about the economic outlook in the New Year and my answers: In the first year of Trump’s presidency, what do you predict for the US economy in 2017?The US economy is currently at or near full employment, for the first time in 9 years.  So there is limited capacity for an acceleration of growth in the medium term.  Mr. Trump is fairly likely to follow through with his proposals for massive tax cuts and spending increases (which the economy needed 5 years ago, but were blocked by Republicans).

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

Brexit, Trump, and Workers Left Behind

| July 19, 2016
Observers have pointed out many parallels between the June referendum on Brexit in the United Kingdom and Donald Trump’s presidential campaign in the US.  One parallel is that both the British movement to leave the EU and the Trump campaign for the American Republican nomination achieved success that few had expected, particularly not the various elites.  In both cases, the general interpretation is that the elites underestimated the anger of working class voters who feel they have been left behind by economic forces in a fast-changing world, and in particular by globalization.

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 Domestic Threat to US Leadership

| Apr. 13, 2016
US President Barack Obama has racked up a series of foreign-policy triumphs over the last 12 months. But one that has gained less attention than others was the passage last December of legislation to reform the International Monetary Fund, after five years of obstruction by the US Congress. As the IMF convenes in Washington, DC, for its annual spring meetings on April 15-17, we should pause to savor the importance of this achievement. After all, if the United States had let yet another year go by without ratifying the IMF quota reform, it would have essentially handed over the keys of global economic leadership to China.

Blog Post - Views on the Economy and the World

No, Japan Does Not Intervene in FX These Days

| Apr. 10, 2016
There has been recent speculation that the Japanese authorities might intervene to push down the yen.  One can see the reasoning.  The yen has appreciated against the dollar by about 9 per cent this year, even though the fundamentals have gone the other way: weak growth and renewed easing of monetary policy.Saturday’s Financial Times even cites BNY Mellon as saying of the Bank of Japan, “Since mid-1993, they have on average intervened once every 20 trading days in dollar-yen.”   But this is misleading.