Economics & Global Affairs

56 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

Will the Coronavirus Lead to Global Recession?

| Feb. 27, 2020

At the start of the year, the economic mood was tending toward the optimistic.  True, growth had slowed a bit in 2019. US GDP grew 2.3 % in 2019, down from 2.9 % in 2018.  World growth was weak in 2019 as well: 2.9% according to IMF estimates, down from 3.6 % the year before.  Still, there had been no recession.  And forecasts as recently as January called for world growth to rebound in 2020.

Blog Post - Views on the Economy and the World

Let’s Go Back to Good Old Tariff-Cutting

| Dec. 02, 2019

The “bicycle theory” used to be a metaphor for international trade policy.  Just as standing still on a bicycle is not an option — one has to keep moving forward or else the bike will fall over – so it was said that international trade negotiators must continue to engage in successive rounds of liberalization, or else the open global trading system would be pulled down by protectionist interests.  I don’t know if the theory was ever right.  (And, to be honest, I don’t entirely understand why forward movement keeps a bicycle from falling over.)  But if we had stood still on trade policy over the last three years we would be a lot better off than where we are now.

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

Year-End Perspectives on the US & Global Economies

| Dec. 20, 2016

A year-end summing up of where we stand is harder than usual this time!I have recently spoken: on “Global Economic Challenges for Donald Trump,” (outline; slides: Ppt, pdf) on a panel at the American Enterprise Institute, Washington, DC, Dec. 5, 2016. Summary & video. And on “An Economy That Works for All Americans” (slides: ppt, pdf)  to the Bipartisan Program for Newly Elected Members of Congress, Institute of Politics, December 7, 2016. And  on “Trade and Inequality,” (slides: Ppt, pdf) at the  Providence Committee on Foreign Relations, Dec.

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.