Monday , May 22 2017
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David Beckworth

David Beckworth

I am an associate professor of economics at Western Kentucky University, an adjunct scholar at the Cato Institute, and a former economist at the U.S. Department of Treasury.

Articles by David Beckworth

Bad Optics: the Fed’s Balance Sheet Edition

3 days ago

Despite the all Fed talk about shrinking its balance sheets, many observers are hoping the Fed keeps it large.  They want the Fed to maintain a large balance sheet for various reasons: it earns a positive return for the government; it provides a financial stability tool via provisions of safe assets; it needs to remain big and accommodative until the economy really starts roaring. There are also complications to shrinking the Fed balance sheet.

Whatever you make of these arguments they all ignore an important political-economy consideration: a large Fed balance sheet makes for bad optics because of interest paid on excess reserve (IOER). 

The figure below explains why. Using data from the Federal Reserve’s H8 report, the figure shows the cash assets of "large

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Talking Monetary Policy with Paul Krugman

6 days ago

Paul Krugman joined me for the latest Macro Musings podcast. It was a fun show and we covered a lot of ground from liquidity traps to secular stagnation to fighting the last war over inflation. Paul and I have had conversations in the blogosphere since the 2008 so it was real treat to finally chat with him in person.In our conversation there were two issues brought up that deserved, in my view, more time than we could give on the show. So I want to address them in this post.

The first one is the important distinction between temporary and permanent monetary base injections. This distinction came up up in our discussion on what it takes to reflate an economy in a zero lower bound (ZLB) environment. Krugman’s 1998 paper showed that to do so requires a permanent increase in the monetary

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Dollar Domination, Robot Monetary Overloads, and Closing the AD Gap

10 days ago

Some assorted musings:

1. From this week’s podcast with Ethan Ilzetzki comes this amazing figure. It shows that approximately 70% of world GDP is tied to the dollar. The implication is staggering: the FOMC is setting monetary conditions for much of the world.

Source

2.  Greg Ip argues our robot fears are misplaced. If anything, we do not have enough robots destroying jobs:

From Silicon Valley to Davos, pundits have been warning that millions of individuals will be thrown out of work by the rapid advance of automation and artificial intelligence. As economic forecasts go, this idea of a robot apocalypse is certainly chilling. It’s also baffling and misguided.

Baffling because it’s starkly at odds with the evidence, and misguided because it completely misses the problem:

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Remembering All of Allan Meltzer’s Work

11 days ago

Allan Meltzer passed away this week. He is probably best known for his multi-volume history of the Federal Reserve, the ‘Meltzer Commission’ that aimed to reform the IMF, and most recently his critique of Fed policy since the Great Recession. There was, however, much more to Allan Meltzer than just these developments.

One of the most important contributions, in my view, was his work with Karl Brunner during the ‘Monetarist Counterrevolution’. This counterrevolution took place in the 1960s and 1970s and pushed backed against the dominant view of the time that monetary policy did not matter. Milton Friedman and Anna J. Schwartz spearheaded this movement, but it was Meltzer and Brunner who did the most to show why money mattered. They worked hard to show the mechanism through which

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Macro Musings Podcast: Josh Zumbrum

24 days ago

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My latest Macro Musing podcast is with Josh Zumbrum. Josh is a national economics correspondent for the Wall Street Journal. He joined me to talk about the angst facing the economics profession in this current environment. We also talked about the future of economic journalism, economic facts, and what really drives inflation.

It was fascinating conversation throughout. You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.
Related Links
Josh Zumbrum’s web page at the Wall Street Journal
Josh Zumbrum’s twitter account

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Macro Musings Podcast: James Bullard

April 21, 2017

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My latest Macro Musings podcast is with James Bullard. James is the President of the St. Louis Federal Reserve Bank and an accomplished economic scholar. He joined me for a great conversation on macroeconomics that covered everything from the determinants of inflation to the Fed’s balance to the future path of monetary policy. We also discussed Jame’s work on imperfect credit markets and how it provides a another justification for NGDP level targeting. 

This was a fascinating conversation throughout and the transcripts for the show are here. You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

Related Links

James Bullard’s page at the St.

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Macro Musings Podcast: Tyler Cowen

April 14, 2017

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My latest Macro Musings podcast is with Tyler Cowen. Tyler is a professor of economics at George Mason University. He joined me to discuss his new book, The Complacent Class: The Self-Defeating Quest for the American Dream. In it, Tyler argues that the restlessness and willingness to take risks have been key traits throughout American history has been waning. In the last few decades, American society has become more risk-averse and this has led to less innovation and dynamism in the economy. 

Tyler notes that this risk aversion has bled over into macroeconomic policy and may be a contributor to the slow recovery following the 2008 crisis.

This was a fun and fascinating conversation throughout. You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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Macro Musings Podcast: George Selgin

April 11, 2017

[embedded content]My latest Macro Musings podcast is with George Selgin. George the director of the Cato’s Institute for Monetary and Financial Alternatives and is a former professor of economics at the University of Georgia. 

 George joined me to talk about the normalization of Fed policy and his new proposal to reform open market operations.  It was interesting conversation throughout. 

You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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A Challenge to the Fed’s Normalization Plans: the IOER-Treasury Yield Spread

April 4, 2017

Over at U.S. News and World Report, I have a new article up on the next big challenge facing the Fed: normalizing its balance sheet. Some excerpts:
This path to monetary policy normalization…. may be fraught with surprises and setbacks. Not only must the Fed avoid getting ahead of the recovery with its interest rate hikes, but it must delicately navigate the shrinking of a balance sheet that has grown fourfold since 2008.

This latter task may prove to be especially daunting since it puts the Fed in unchartered waters. Never before has the Fed had to shrink its balance sheet…
I go on to discuss some of the many challenges the Fed may face in attempting to shrink its balance sheet. One of them is dealing with the potential stresses caused by the new regulatory demands of the liquidity coverage ratio running up against the spread between IOER and treasury bills:
The second reason the scaling back of the Fed’s balance sheet may be challenging is that post-2008 regulation now requires banks to hold more liquid assets. Specifically, banks now have to hold enough high-quality liquid assets to withstand 30 days of cash outflow. This liquidity coverage ratio has increased demand for such assets of which bank reserves and treasury securities are considered the safest.

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Macro Musings Podcast: Steve Hanke

March 31, 2017

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My latest Macro Musings podcast is with Steve Hanke. Steve is s a professor of applied economics at the Johns Hopkins University in Baltimore. He has advised many governments on economic policy, including helping the establishment of new currency regimes in Argentina, Estonia, Bulgaria, Bosnia-Herzegovina, Ecuador, Lithuania, and Montenegro.

Steve also is the director of the troubled currency project at the Cato Institute and is the author of the  Hanke-Bushnell hyperinflation table.

Steve joined me to talk about his work on hyperinflation. It was interesting conversation throughout. You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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Macro Musings Podcasts: Jeffrey Frankel

March 27, 2017

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My latest Macro Musings podcast is with Jeffrey Frankel. Jeff is a professor and economist at Harvard University and directs the program on international finance and macroeconomics at the National Bureau of Economic Research.

Jeff joined me to talk about the future of globalization, the dollar, the Plaza Accord, and more. It was a fascinating conversation throughout. 

You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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Macro Musings Podcast: Jason Furman

March 17, 2017

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My latest Macro Musings podcast is with Jason Furman. Jason is currently a Senior Fellow at the Peterson Institute for International Economics. Previously, Jason spent eight years serving on President Obama’s Council of Economic Advisers, including the chair position from 2013-2017. Jason also worked on the Council of Economic Advisers under President Clinton.

Jason joined me to talk about his time at the CEA. Among other things, we talk about fiscal policy, the fiscal multiplier, monetary policy offset, and the platinum coin. This was a super fun talk throughout. 

You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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Monetary Policy Analysis is Hard: Inflation Edition

March 17, 2017

I have a new article at The Hill that responds to some of the buzz created  by the Cecchetti et al. (2017) paper that was delivered at the U.S. Monetary Policy Forum:

What causes inflation? Most people believe inflation is caused by central banks adjusting monetary conditions… But is this right? A recent study by some top economists has raised questions about this conventional wisdom.  

The study found that the standard indicators… [like] economic slack, inflation expectations, and money growth were, in fact, unrelated to inflation. These findings caused quite a stir and even led the Wall Street Journal to declare that “everything markets think they know about inflation might be wrong”. 

This understanding misses, in my view, the deeper and more important point of the Cecchetti et al. paper. As the authors note in a separate blog post, the lack of a relationship between the standard indicators and inflation is actually an indication that the Fed has done a good job in managing inflation:

While the USMPF report is titled Deflating Inflation Expectations, we do not conclude that expectations are unimportant. In fact, quite the opposite: the failure of measured inflation expectations to help forecast changes in inflation is probably a side effect of monetary policy’s success in stabilizing them.

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Macro Musings Podcast: Larry White

March 10, 2017

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My latest Macro Musings podcast is with Larry White. Larry is a professor of economics at George Mason University where he specializes in monetary economics and monetary history.

Larry joined me to talk about India’s demonetization’s efforts and Austrian macroeconomics. This was fun and fascinating conversation throughout.You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

Related Links

Larry White’s Homepage

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Macro Musings Podcast: Tim Duy

March 3, 2017

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My latest Macro Musing podcast is with Tim Duy. Tim is a professor of economics at the University of Oregon, a columnist for Bloomberg, and a former economist at the U.S. Department of Treasury. 

Tim is also a widely read Fed-watcher and he joined me to talk about Fed watching and the future of U.S. monetary policy. If you want to get into Fed watching this podcast is just for you. Tim shares his approach and what defines a successful Fed watcher. 

We also discussed some of Tim’s recent comments about the normalization of Fed monetary policy. The FOMC plans to return to normal monetary policy by first raising it interest rate target and then by reducing the size of its balance sheet. Tim thinks this is a bad idea, as he has written in several Bloomberg articles. He would like to see a simultaneous raising of interest rates and shrinking of the Fed balance sheet as the Fed returns to normalcy. We discuss why he favors this approach.

This was a fascinating conversation throughout. You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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Macro Musings Podcast: Hester Peirce

February 24, 2017

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My latest Macro Musings podcast is with Hester Peirce. Hestor is a Senior Research Fellow and director of the Financial Markets Working Group at the Mercatus Center. She previously served on Senator Richard Shelby’s staff on the Senate Committee on Banking, Housing, and Urban Affairs. In that position, she worked on financial regulatory reform following the financial crisis of 2008 as well as oversight of the regulatory implementation of the Dodd-Frank Act. Hester also served at the Securities and Exchange Commission as a staff attorney and as counsel to Commissioner Paul S. Atkins.  Hester was also nominated by President Obama to be an SEC Commisioner.

Hester joined me to discuss a new book she co-edited with Ben Klutsey titled “Reframing Financial Regulation: Enhancing Stability and Protecting Consumers” This book covers a lot of topics on how to better regulate the financial system. 

We spent most of our time talking about how to improve the stability of the financial system. The laws and regulations emanating from Dodd-Frank (DF) were supposed to make the financial system safer, but a number of recent papers–Nissim and Calormiris (2014), Sarin and Summers (2016), Chousaks and Gorton (2017)–find the banking system weaker now and not meaningfully safer than pre-2008.

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Macro Musings Podcast: Sebastian Mallaby

February 17, 2017

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My latest Macro Musings podcast is with Sebastian Mallaby.
Sebastian is a senior fellow at the Council on Foreign Relations and a contributing columnist to the Washington Post. Previously, he worked with the Financial Times and the Economist magazine and is the author of several books. He joined me to talk about his latest book “The Man Who Knew: The Life and Times of Alan Greenspan”.

This was a fascinating conversation throughout. You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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The Monetary Superpower: As Strong As Ever

February 14, 2017

In a forthcoming paper, Chris Crowe and I argue the Fed is a monetary superpower:

[A] defining feature of the US financial system is that its central bank, the Federal Reserve, has inordinate influence over global monetary conditions. Because of this influence, it shapes the growth path of global aggregate demand more than any other central bank does. This global reach of the Federal Reserve arises for three reasons. 

First, many emerging and some advanced economies either explicitly or implicitly peg their currency to the US dollar given its reserve currency status. Doing so, as first noted by Mundell (1963), implies these countries have delegated their monetary policy to the Federal Reserve as they have moved towards open capital markets over the past few decades. 

These “dollar bloc” countries, in other words, have effectively set their monetary policies on autopilot, exposed to the machinations of US monetary policy. Consequently, when the Federal Reserve adjusts its target interest rate or engages in quantitative easing, the periphery economies pegging to the dollar mostly follow suit with similar adjustments to their own monetary conditions.  

[…] 

The second reason for the global reach of US monetary policy is that a large and growing share of global credit is denominated in dollars.

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Macro Musings Podcast: Eswar Prasad

February 10, 2017

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My latest Macro Musings podcast is with Eswar Prasad. Eswar is a professor of economics at Cornell University and a senior fellow at Brookings Institution. He joined me to talk about his new book, Gaining Currency: the Rise of the Renminbi. 

We began by reviewing the history of money in China. Many people know that China had the first paper currency, but few appreciate that China had the first debates over monetary theory and role of the state in money creation. China also had the first currency war–literally a physical war between two competing central banks in China–as well as its own interesting monetary history during the Great Depression of the 1930s. 

We then moved to China’s exchange rate regime and the thorny question of whether China’s currency being undervalued in the past and whether it was now overvalued. We also discussed how consequential was the past undervaluation of China’s currency to the huge trade surplus it ran with the United States. Our conversation also covered the role the Fed played in setting monetary conditions in China via its currency peg to the dollar. 

The interview wrapped up by considering the prospects of the Renminbi becoming a truly important currency. This was a fascinating conversation throughout.

You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app.

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Macro Musings Podcast: Jesus Fernandez-Villaverde

February 3, 2017

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My latest Macro Musing podcast is with Jesus Fernandez-Villaverde.  Jesus is a professor of economics the University of Pennsylvania, a research associate with the National Bureau of Economic Research, and a research affiliate with the Centre for Economic Policy Research. 

Jesus does theoretical macroeconomic modeling, econometrics, and economic history. He has several books coming out on those topics and recently coauthored a chapter in the Handbook of Macroeconomics titled "Solution and Estimation Methods for DSGE Models". He joined me to talk about European economic history and macroeconomic modeling on the show. 

Most of our conversation focused on German monetary history in the 20th century since it has been so consequential for the rest of the Europe. We began by discussing the Weimar hyperinflation of the early-to-mid 1920s and the Great Depression of the late 1920s-early 1930s. It is hard to appreciate the fact that Germany went from hyperinflation to painful deflation in a decade. Several interesting questions come out this experience. First, which is worse: hyperinflation or depression? Second, why do the Germans seem to remember the former more than the later? Third, is it true that the Great Depression brought the Nazis to power? Jesus provides good answers to these in the interview.

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Macro Musings Podcast: Gauti Eggertsson

January 24, 2017

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My latest Macro Musings is with Gauti Eggertson. Gauti is a professor of economics at Brown University and formerly worked in the research departments of the International Monetary Fund and the Federal Reserve Bank of New York. He has written widely on liquidity traps, deflation, and the zero lower bound (ZLB) and joined me to talk about these issues.

This was a fun conversation and a good look back at the challenges and shortcomings of macroeconomic policy since the crisis in 2008. One of the big takeaways from our conversation, at least for me, is that central banks during this time ignored many of the key findings in the literature when it comes to best practices at the ZLB.

Before getting to these missed opportunities, it is worth recalling the nature of the ZLB problem. It emerges when there has been a severe recession that forces down the ‘natural’ or market-clearing level of short-term interest rates to a level well below 0%. The Fed’s normal response, lowering interest rates to the level of the natural interest rate, does not work here because the Fed will run up against a lower bound where people would rather hold cash than earn a negative interest rate on their deposits. This lower bound is effectively a price floor that prevents the economy from properly healing and quickly returning to full employment.

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Note to President Trump: It’s Policy Divergence, Not China, Driving the Dollar

January 23, 2017

President Trump is worried about the strong dollar:
In his interview with the Journal on Friday, Mr. Trump said the U.S. dollar was already “too strong” in part because China holds down its currency, the yuan. “Our companies can’t compete with them now because our currency is too strong. And it’s killing us.”

The real issue is not China but the diverging of the current and expected paths of monetary policy among the major advanced economies, particularly the United States and Europe. The Fed has been tightening and is expected to continue do so with further rate hikes in 2017. The ECB, on the other hand, is still running its QE program and is keeping it short-term policy rates pegged close to zero. 

This policy divergence can be seen in the figure below. It shows the 6-month interest rate, 6 months ahead for the United States minus the same measure for the Eurozone (blue line).1 Ever since mid-2014 this spread has been rising–with a brief plateauing in 2016–and the trade weighted dollar (red line) has closely followed it.

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Part of the divergence between the expected paths of monetary policy comes from the belief that Trump’s policies will spur robust growth. This belief may prove premature, but if it does come to fruition it will only reinforce the policy divergence by pushing interest rates higher.

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Macro Musings Podcast: Anat Admati

January 20, 2017

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My latest Macro Musing podcast is with Anat Admati. Anat is a professor of finance and economics at Stanford University. Since the crisis in 2008, she has also been a fervent advocate of banks using more equity and less debt to fund their investments. As part of this effort, Anat coauthored the book "Bankers’ New Clothes: What’s Wrong with Banking and What to Do About it". She joined me to talk about these and other issues related to the stability of the U.S. banking system.

It was a fun and interesting conversation throughout. We covered everything from the distortions created by the Basel bank regulations to the still inordinate amount of bank leverage to the prospects for a safer financial system. One of the more sobering implications of our discussion is that the U.S. banking system is not much safer today than it was in 2008. This is a point also made by Larry Summers in a recent Brookings Paper. 

You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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Macro Musings Podcast: Allan Meltzer

January 13, 2017

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My latest Macro Musing podcast is with Allan Meltzer. Allan is a professor of economics at Carnegie Mellon University and a visiting fellow at the Hoover Institution. He is also a well-known monetarist and author of the authoritative multi-volume history of the Fed. 

We had a wide-ranging conversation on everything from Allan’s role in the Monetarist’s Counterrevolution to his reinterpretation of Keyne’s General Theory to his take on current Fed policies. Among other things, I learned that Allan formerly worked under Paul Volker in the Kennedy Administration.  

This was a fun interview and Allan showed he still has a lot of spunk in him. The interview taped live in front of audience at the Southern Economic Association meetings last November. 

You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more episodes are coming.

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Macro Musings Podcast: Ylan Mui

January 6, 2017

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My latest Macro Musings podcast is with Ylan Muy of the Washington Post. She was the Fed beat reporter for several years and now covers economic policy at the White House. She joined me to discuss what it was like covering the Fed and what we might expect going forward from President Trump’s economic policies.

This was a fascinating conversation throughout and we covered everything from the tight security of FOMC press meetings to the future of the Fed’s balance sheet to whether the Fed will ever have a truly symmetric 2% inflation target. We also considered whether Trump’s economic policies will truly live up to the market’s expectations for them. One thing we do know for sure is that 2017 will be an interesting year for U.S. economic policy and Ylan will have much to cover for the Washington Post.

Ylan also shared that she is working with the Brookings Institute on a book about negative interest rates as a tool for monetary policy. It sounds interesting and I look forward to reading it.

Finally, Ylan and I discussed the lack of women in macroeconomics. A recent article in the Journal of Economic Perspectives reminded us that a disproportionately small share of women are in the economics profession. This problem seems to be even more pronounced in macroeconomics.

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Macro Musings Podcast: Xmas Economics

December 23, 2016

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My latest Macro Musings podcast is a special holiday edition on the economics of Christmas.Two special guests joined me all the way from Germany to discuss this topic. My first guest was Anna Goeddeke, a professor of economics at ESB Business School in Reutlingen, Germany. My second guest was Laura Birg, a postdoctoral researcher at the Center for European, Governance, and Economic Development Research, University of Göttingen 

Together they coauthored an article in Economic Inquiry titled “Christmas Economics—a Sleigh Ride” that surveys and summarizes the economics literature on Christmas. It is a great read for this time of the year and was the basis of our conversation. We touched on a number of interesting topics like the seasonal business cycle, the deadweight loss of Christmas, and charitable giving during the holidays.

The seasonal business cycle discussion was particularly fascinating for me. There is a literature that starts with Barksy and Miron (1989) (ungated version) that shows most of the variation in aggregate economic measures like GDP comes from seasonal fluctuations. Yet most macroeconomists, myself included, typically start our analysis with seasonally-adjusted data.

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The Trump Shock and Global Interest Rates

December 20, 2016

One more quick note on the Trump shock and interest rates. For some time I have been following the global safe asset shortage problem and how it has created a downward march of safe assets interest rates. This can be seen in the figure below:

The latest development in this story is that the safe asset interest rates have all started heading up, as seen in the above figure. Even Japan’s which is supposed to be targeted at 0 percent but has climbed to 0.8 percent. Now these yields have a long ways to go before reaching normal levels and they started rising before Trump’s election. But since the election the ascension of these interest rates has accelerated in many cases. This is a bit puzzling. It is one thing to think the Trump shock has changed the growth and inflation outlook in the United States so that treasury yields are now going up, but why the other advanced economies?

As you may recall, the safe asset shortage story says there has been a price floor (ceiling) on safe asset interest rates (bond prices) that has kept the market for safe assets from properly clearing. (See this pre-2008 figure and post-2008 figure for a graphical representation of this story.) The shortage was a big deal because these securities functioned as transaction assets for institutional investors.

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The Trump Shock and Interest Rates

December 16, 2016

I have a new piece in The Hill where I argue markets are increasingly seeing the Trump shock as an inflection point for the U.S. economy:

It seems the U.S. economy is finally poised for robust economic growth, something that has been missing for the past eight years. Such strong economic growth is expected to cause the demand for credit to increase and the supply of savings to decline 

Together, these forces are naturally pushing interest rates higher. The Fed’s interest rate hike today is simply piggybacking on this new reality. 

Here are some charts that document this upbeat economic outlook as seen from the treasury market. The first one shows the treasury market’s implicit inflation forecast (or "breakeven inflation") and real interest rate at the 10-year horizon. These come from TIPs and have their flaws, but they provide a good first approximation to knowing what the bond market is thinking. In this case, both the real interest rate and expected inflation rate are rising. This implies the market expects both higher real economic growth and higher inflation. The two may be related–the higher expected inflation may be a reflection of higher expected nominal demand growth causing real growth. The higher real growth expectations are also probably being fueled by Trump’s supply-side reforms.

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Macro Musings Podcasts: The Macroeconomics of Star Wars and Star Trek

December 16, 2016

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My latest  Macro Musings podcast is special one where we look at the macroeconomics of Star Wars and Star Trek. We do so with the help of two guests who are experts on the economics of these two scifi franchises. [Update: sound quality starts out poor, but gets better a few minutes into the show.]

Our first guest is Zachary Feinstein. Zach is an assistant professor at Washington University in St. Louis and  the author of a study titled "It’s a Trap: Emperor Palpatine’s Poison Pill" where he provides a fascinating look at the financial consequences of the destruction of the second death star. This article received a lot of media coverage last year when Star Wars: the Force Awakens came out. For example, below is a screen shot from a Bloomberg interview discussing the financial burden of building the two death stars. Now with the release of Star Wars: Rogue One upon us it was only fitting to have him join the show and share with us his knowledge of the economics of Star Wars.

Our second guest is Manu Saadia. Manu is a writer based in Los Angeles and a lifelong Trekkie. He published this year titled Trekonomics: the Economics of Star Trek which is a must read for any serious Trekkie. The book was hailed by Nobel Laureate Paul Krugman as "the book on the topic". This book too has received a lot of media attention.

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Macro Musings Podcast: Peter Conti-Brown

December 5, 2016

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My latest Macro Musings podcast is with Peter Conti-Brown. Peter is a financial historian and legal scholar at the University of Pennsylvania. He is also the author of a new book The Power and Independence of the Federal Reserve and joined me on the show to discuss it.

Our conversation begins with what Peter calls the three foundings of the Fed: 1913, 1935, and 1951. These were the pivotal dates where major changes were made in the legal structure of the Fed. These changes, however, only changed the legal infrastructure to the Fed. Important personalities continued to transform the institution. Peter points specifically to three Fed chairs for making the Fed what it is today: William McChesney Martin, Paul Volker, and Allan Greenspan.

We also cover the important role the staff plays at the Fed. In particular, the discuss the inordinate influence the head of the international finance division and the general counsel play in shaping international and domestic policy. That they have so much power, but are not appointed creates legal issues according to Peter. Similarly, regional bank presidents are FOMC members who set national policy but not appointed by the President. Peter believes a reexamination of how they are appointed is warranted too.

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