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Jeffrey Frankel

Jeffrey Frankel

Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

Articles by Jeffrey Frankel

The US Recovery Turns Ten

2 days ago

The best explanation for the current ten-year US economic expansion – tied for the longest since 1854 – is disappointingly simple: the Great Recession was the worst downturn since the 1930s. And if the dates of American business cycles were determined by the rule that most other countries apply, the current expansion would be far from beating the record.

CAMBRIDGE – This month marks the tenth full year of the US economic recovery that began in June 2009. Back then, a “trough” in business activity signified the end of the Great Recession that followed the 2007-08 global financial crisis. The current expansion has continued, uninterrupted, ever since.
The Growing Risk of a

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Remembering Martin Feldstein

2 days ago

TweetJune 13, 2019 — Here in Cambridge, we are reeling from the passing of Martin Feldstein on Tuesday. He was tremendously influential both as scholar and teacher.  He was also a  policy-maker:  Below, the last section of this remembrance offers some recollections of his time as Chairman of Ronald Reagan’s Council of Economic Advisers.
In addition, remembrances at his funeral service today appropriately emphasized some qualities not known to those who knew of him only as a conservative economist: his generosity and humanity.  He was greatly interested in other people, especially young people.  A personal anecdote.  Once, leaving a conference at Stockbridge, VT, I discovered that somebody else had taken my taxi, leaving me in danger of missing my plane from the airport in Lebanon, NH.

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The Trade War Resumes

20 days ago

TweetDonald Trump on May 5 suddenly revealed that a trade agreement with China was not imminent after all.  To the contrary, the Administration on May 10 raised its earlier 10 percent tariff on $200 billion of Chinese goods to 25%, and threatened to extend 25% tariffs to the remainder of imports from China by late June (roughly $300 billion of goods).  China, of course, retaliated against US exports [announcing reciprocal 25% tariffs on $60 billion of US goods, to start June 1.  Surprised stock markets fell in response, with the S&P 500 down 4 per cent over the first week of the renewed trade war.
The mystery is why market investors or anyone else had up until May put faith in White House statements that a deal with China would be forthcoming any day. Why believe this Administration

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The Real Cost of Trump’s Tariffs

24 days ago

Whereas winners tend to outnumber losers when trade is liberalized, raising tariffs normally has the opposite result. US President Donald Trump appears to have engineered a spectacular example of this: his trade war with China has hurt almost every segment of the US economy, and created very few winners.

WASHINGTON, DC – Earlier this month, US President Donald Trump suddenly revealed that a trade agreement between the United States and China was not imminent after all. On the contrary, on May 10, the Trump administration raised its previous 10% tariff on $200 billion worth of Chinese goods to 25%, and threatened to apply the same rate to the remaining $300 billion or so of US imports from

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Moore on Gold and Commodities

May 1, 2019

TweetApril 30, 2019 —   A century ago, the gold standard was considered a guarantor of monetary stability.  That golden era is long-gone.  (If it ever really existed at all.  The general price level fell 53% in US and 45% in the UK during 1873-1896 due to a dearth of gold deposit discoveries.)
Continuing my thoughts on the Fed candidacy of Stephen Moore: he has said several times that he favors a return to gold.  In true Trumpian fashion, he recently denied having said it despite the clear video evidence.
Commodity-basket proposals
In any case, he now says he favors having monetary policy focus on a basket of commodities, not just gold alone.  This has brought him some ridicule.  It is true, however, that a price index based on a variety of commodities would attenuate the volatility of

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Moore Troubles for the Fed

April 30, 2019

TweetApril 30, 2019 — Of the two men whom Donald Trump had intended to nominate to empty seats on the Federal Reserve Board, Herman Cain has now withdrawn his name.  This leaves the other one, Stephen Moore.
The Senate would have to decide whether to confirm Moore. He has some problems roughly analogous to Cain’s:  he is considered to be under an ethical cloud and he often gets his economic facts wrong.  Cynics might respond that he would thereby fit right in with the roster of Trump nominees throughout the government.  But Trump’s earlier appointments to the Fed have been people of ability and integrity and have been doing a good job, Chair Jerome Powell in particular. Perhaps Trump did not start paying attention to Fed appointments until recently.
That Moore does not have an

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Moore Problems for the Fed?

April 27, 2019

US President Donald Trump’s intended nominee for the US Federal Reserve Board, Stephen Moore, may end up doing whatever Trump wants, instead of what is best for the economy. Moore’s views on the Fed’s interest-rate policy, and his support for returning America to a gold standard, are disturbing.

CAMBRIDGE – One of US President Donald Trump’s two intended nominees to fill vacancies on the US Federal Reserve Board of Governors – Herman Cain – has now withdrawn. Trump’s other potential pick, Stephen Moore, is also under an ethical cloud, and often gets his economic facts wrong. By contrast, Trump’s earlier appointments to the Fed have been sound choices, in particular Jerome Powell, the current chair.

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Xi & Trump Miss a Chance to Expand Markets

March 24, 2019

March 24, 2019 — Donald Trump has postponed until
April the supposed deadline for a conclusion to China-US trade
negotiations.  A good outcome for both
sides would have China agree to better protect private property rights and to reduce
the role of the state in its economy; the US agree to strengthen national saving and public investment;
and both sides agree to reverse their recent tariff increases and the resulting
shrinkage of international markets. 
Unfortunately this deal is not likely to happen.

What does the US want?

Trump fixates on the bilateral US merchandise trade deficit with China. Beijing could probably deliver on the verifiable – but worthless – step of reducing the bilateral balance by committing to buy more soybeans, natural gas and other commodities from

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Xi and Trump Miss Their Chance

March 21, 2019

A successful US-Japan agreement on structural reforms three decades ago could potentially serve as a useful model for the current China-US trade negotiations. But Chinese President Xi Jinping appears to care only about maintaining political control, while US President Donald Trump seems to care only about himself.

CAMBRIDGE – President Donald Trump has postponed until at least April the supposed deadline for concluding the United States’ current trade negotiations with China. A good outcome for both sides would be reached if China agreed to protect property rights better and reduce the state’s role in its economy; the US agreed to strengthen national saving and public investment; and both sides agreed to reverse their recent

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Bold Ideas are Not Always Better than Old Ideas

February 28, 2019

February 28 — US Democrats are moving to the left, we are told.  It is not yet clear that the median voter is in fact moving left, nor the median congressman who was elected last November.  But it is clear that many of the candidates for the 2020 Democratic presidential nomination are experimenting with “bold new ideas”, or at least bold rhetorical formulations.  They are receiving what seems a disproportionate amount of attention for doing so.  Many of the policy proposals, if interpreted literally, are not entirely practical, either economically or politically. 

Fortunately, few of the Democrats — the announced candidates or those considered likely — have yet committed irrevocably to extreme policies.  Any of them could build a campaign on solid practical proposals to

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Should Bold Ideas Drown Out Old Ideas?

February 25, 2019

Radical ideas are not unusual in the early stages of a US presidential election campaign, but many of the Democratic candidates for 2020 are advocating unrealistic policies. Just because a new idea seems more exciting does not make it better than an established, more practical one.

CAMBRIDGE – America’s Democratic Party is moving to the left, we are told. It is not yet clear whether this applies to the median American voter, or the median member of Congress who was elected last November. But it is clear that many of the candidates for the 2020 Democratic presidential nomination are experimenting with “bold new ideas.” They seem to receive a disproportionate amount of attention for doing so. If interpreted literally, many of

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The euro’s first 20 years

January 28, 2019

January 28, 2019 —   In Europe, twenty years ago this month, 11 long-standing national currencies disappeared and were replaced by the new single currency, the euro.  Since then, the euro has had its successes and failures.
Let us review the experience of the euro’s first two decades.  Where there were failures, to what extent were they the result of avoidable technical mistakes?  Of warnings not heeded?  Or were they the inevitable result of a determination to go ahead with monetary union in the absence of a political willingness to support fundamental changes necessary to make it work?
Three early successes
Three early successes are insufficiently remembered.  First, the transition from individual currencies to the euro in January 1999 went very smoothly.   It was not obvious ahead

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The Euro’s First 20 Years

January 25, 2019

According to public opinion polls, 20 years after its introduction, the euro is highly popular, with 64% of eurozone citizens supporting the common currency. This offers hope that, if the eurozone’s leaders can learn from past mistakes, the monetary union will survive and even thrive in the future.

CAMBRIDGE – Since its introduction two decades ago, the euro has faced serious challenges. So far, it has survived intact. Yet, on the common currency’s 20th anniversary, it is worth identifying problems that have been encountered and, one hopes, to learn from past mistakes.

Fred Dufour – Pool/Getty Images


A first critical problem was inherent in the

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New Year questions about the economic outlook

January 1, 2019

January 1, 2019 – Five questions about the international economic outlook, from Chosun Ilbo (the leading Korean newspaper), and my replies:
US president Trump and China’s president Xi agreed to a temporary ceasefire, in which the US suspended to impose higher tariffs on Chinese imports next year. How do you see the Trade War is going? How would it affect the global economy next year?
The trade war is not going well, for either the United States or its trading partners. It is good that President Trump, in his December 1 dinner meeting with President Xi in Buenos Aires, decided he would stop making things worse for the moment.  But the substantive outcome, at best, was that Trump postponed by 90 days the decision to raise to 25% his 10% tariffs on $200 billion of Chinese goods (and with

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Six right predictions in 2018

December 30, 2018

December 30, 2018 –– I realize that compiling a list of one’s own past forecasts is self-indulgent.  But perhaps there are readers who will indulge me too, as I run through six predictions that – it seems to me – were mostly proven right this past year.
Volatility, as measured by the VIX, had been too low and would rise.
The stock market was too high and would fall.
Trump would switch from attacking the Fed for low interest rates, as he had during 2010-2016, to attacking it for raising interest rates.
Prices of oil, minerals, and other commodities would fall.
The December 2017 tax cuts would raise the US budget deficit and national debt (contrary to partisan predictions that they would pay for themselves);
and in turn would raise the trade and current account deficits (contrary to

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3 Book Recommendations: Openness & Progress

December 25, 2018

December 25, 2018 — I was asked for 2 or 3 end-of-year book recommendations.  My choices are Pinker, Irwin & Clausing.
Recommendation 1
Steven Pinker, Enlightenment Now: The Case for Reason, Science, Humanism, and Progress (Viking Press, 2018).
The assertion is hard to believe, and Pinker (Psychology Department, Harvard) knows that.  But the trends in various aspects of human welfare are upward and onward: “life, health, prosperity, safety, peace, knowledge, and happiness are on the rise, not just in the West, but worldwide.”  The English homicide rate is down by a factor of about 50 since the Middle Ages.  Worldwide – including poor countries — average life expectancy is now 71 years, up from 30. The number of people in extreme poverty globally is down about 1 billion just since 1990

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The Lesson from George H.W. Bush’s Tax Reversal

December 13, 2018

Dec. 13, 2018 —  When President George H.W. Bush was laid to rest earlier this month, the remembrances appropriately remarked on his general decency and competence.  In public commentary, the encomiums tend to be followed by a “but.”  For journalists and historians, it is “but he was only a one-term president.”  He lost the election of 1992, in part because of the recession of 1990-91.  For members of his own political party, the “but” is, “but he broke with the legacy of Ronald Reagan and with his own ‘no new taxes’ pledge.”  They have always blamed his failure to win re-election on that perceived betrayal.
But President Bush’s mistake was making the anti-tax pledge in 1988 in the first place and sticking to it in the first part of his presidency. The 1990 reversal on fiscal policy

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Gopinath follows Obstfeld at the IMF, in a great tradition

December 10, 2018

Dec. 10, 2018 — Maury Obstfeld this month completes his exemplary term as Chief Economist at the International Monetary Fund. His departing economic outlook foresees slowing growth in the world economy in 2019 and 2020.
Gita Gopinath, my Harvard colleague, will take up the position in the new year.  (Technically the title is Economic Counsellor and Director of the Research Department.)

In the last three decades there have been 8 Economic Counsellors of the IMF.  As it happens, every one of them has been a Research Associate of the NBER, specifically the NBER Program in International Finance and Macroeconomics:
Jacob Frenkel  1987-1991Michael Mussa August 1991 – 29 June 2001Kenneth Rogoff August 2001 – September 2003Raghuram Rajan September 2003 – January 2007Simon Johnson March 2007 –

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Re-Reading George H.W. Bush’s Lips

December 10, 2018

The late president showed a “profile in courage” in 1990, when he met the Democrats halfway to achieve fiscal responsibility. Unfortunately, his presidency was the last time any Republican has tried to live up to the label of fiscal conservative.

CAMBRIDGE – When President George H.W. Bush was laid to rest last week, the encomiums appropriately remarked on his general decency and competence, which tended to be followed by a “but.” For journalists and historians, it is “but he was only a one-term president.” He lost the 1992 election, in part because of the recession of 1990-1991. For his fellow Republicans, however, it is “but he broke with the legacy of Ronald Reagan by repudiating his ‘no new taxes’ pledge.” Bush’s electoral

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A Trade War is No Reason to Ease Monetary Policy

November 26, 2018

A trade war is a negative supply shock, and central banks cannot counteract the negative effects of current policies on real incomes in the United States, the United Kingdom, and many other countries. Only voters can do that.

CAMBRIDGE – The world is in a trade war, and there is no sign of peace breaking out anytime soon. By now, the disruption to trade appears extensive enough to factor negatively into forecasts for economic growth. Does that mean the Federal Reserve should stop gradually raising interest rates?

Jabin Botsford/The Washington Post via Getty Images

Oliver Contreras-Pool/Getty Images


The answer is no. Monetary policy

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China’s Q3 GDP Reportedly Slowed to 6.5%. Or is it 6.4%?

October 19, 2018

October 19, 2018 —  Headlines today note a further slowdown in China’s growth. Newly announced GDP data give a preliminary estimate of 6.5 % in the 3rd quarter of 2018, relative to Q3 of 2017. The growth rate had been 6.7% previously.
The change is part of the long-term slowdown that, perhaps inevitably, followed the spectacular 10% average growth rate achieved by China from 1980 to 2010.
One thing that interests me in the reports is a particular (very wonkish) detail.  For the US and most other countries, the quarter’s GDP is routinely reported relative to the preceding quarter, not relative to four quarters ago.  Why do the media and markets routinely focus on the 1-quarter growth rate for the US but focus on the 4-quarter growth rate for China?
It is not because China’s National

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October 12, 2018

Oct. 12, 2018 —  Donald Trump thinks he once again pulled off a smashing victory on October 1, delivering on his oft-repeated campaign promise to terminate NAFTA, “the worst trade deal ever,“ and replace it with something much newer and better.  One is tempted to say to oneself, “Let him think that.”  The US-Mexico-Canada Agreement may not be an improvement over the status quo, but at least it is an improvement over the end to free trade in North America which he had threatened.
By now, a Trump modus operandi has come into view.  First you threaten to blow up the world, and then everybody is grateful when the eventual outcome turns out to be only modestly worse than where we were.
As Trump sees his genius, he starts the game by playing very rough.  In the case of North Korea’s nuclear

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The New and Not Improved NAFTA

October 9, 2018

US President Donald Trump has called the United States-Mexico-Canada Agreement, which succeeds NAFTA, “the single greatest agreement ever signed." In reality, it is not as good as the Trans-Pacific Partnership, from which Trump withdrew the US upon taking office, nor is it particularly better than the agreement it replaced.

CAMBRIDGE – US President Donald Trump acts as if he has pulled off a smashing victory by replacing the North American Free Trade Agreement (NAFTA) – supposedly “the worst trade deal ever” – with the new United States-Mexico-Canada Agreement. But the truth is that, while this outcome is better than an end to free trade in North America, the USMCA is no improvement over the status quo.


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Bill Nordhaus & Paul Romer, Nobel Prize winners

October 8, 2018

October 8, 2018 — Congratulations to Bill Nordhaus and Paul Romer on winning the ultimate prize in Economics.  When I first heard, I wondered what the two have in common, beyond both doing path-breaking Nobel-worthy research.  Then I remembered:  they are originally from neighboring Rocky Mountain states, New Mexico and Colorado (but then went to elite New England prep schools).
Actually, I think the Nobel Committee might have had in mind a symmetric pairing, as it has occasionally done in the past:
* Myrdal and Hayek (1974) had different views on socialism;
* Lewis and Schultz (1979) differed on whether peasants optimized;
* Fama and Shiller (2013) differed on whether financial markets were rational.
How do Romer and Nordhaus fit the pattern? Whereas traditional growth theory assumed

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Fall in US Trade Balance Led by Ag. Exports

September 27, 2018

September 27, 2018 — As of July, the US trade deficit had widened relative to  a year ago, despite temporary improvement earlier in 2018.  A new Census report today suggests: (1) further deterioration of the merchandise trade balance in August, and (2) a particular role for exports of food & feeds which, after rising in the spring, have apparently fallen sharply since June: -6.3 % in July and -9.5 % in August.  [Advance Economic Indicators, Sept. 27, 2018, Table 1. U.S. Intl. Trade by End-Use Category].  This is consistent with the story that retaliatory Chinese tariffs against US exports of soybeans and other farm products caused shipments to be moved forward to beat the July 1 deadline.
But the overall trend in the US trade balance since the advent of Trump appears to be negative.

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Trump Renews Charges of Chinese Currency Manipulation

September 23, 2018

September 23, 2018 — The US Treasury is due in October to submit its biannual report to Congress on what countries, if any, are manipulating their currencies to gain unfair trade advantage.   President Trump has recently resumed the accusation against China  that he made during the election campaign.   “I think China’s manipulating their currency, absolutely. And I think the euro is being manipulated also,” he told Reuters.  He is apparently pressuring the Treasury directly in its deliberations.
What has changed since April?
What has changed since the last Treasury foreign exchange report in April?  That document did not find China else guilty of manipulation.  Nor did its predecessors in the previous two administrations.  The last time the Treasury report pronounced China or anyone

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Trump’s Currency Confusion Continues

September 20, 2018

Ever since the 2016 US presidential campaign, Donald Trump has falsely accused the Chinese of keeping the renminbi artificially weak. But the fact is that Trump’s own economic policies are driving up the value of dollar – an outcome that would have been foreseen by anyone with a basic understanding of economics.

CAMBRIDGE – Next month, the US Department of the Treasury is due to submit to Congress its biannual report detailing which countries, if any, are manipulating their currencies to gain an unfair trade advantage. For his part, President Donald Trump is already accusing China of doing so, as he did throughout the 2016 election campaign. And he is reportedly trying to influence the Treasury Department’s deliberations.


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Reply to an MMT critique of my column on pro-cyclical policy

August 30, 2018

Aug. 30, 2018 — I received an invitation from Paul Fagan to respond to a critique by Bill Mitchell of my column at Project Syndicate and the Guardian, “US will lack fiscal space to respond when next recession comes”.   (My subsequent blogpost, “The next recession could be a bad one” is a slightly extended version.)  I am happy to respond to the critique.

As my column made clear, I don’t know when the next recession will come or what will cause it. I take as given that someday there will be another recession.  Does anyone disagree with that?  I mentioned the high stock market among the possible triggers for a new downturn.  But it could be anything.
Next, he asks “What is a pro-cyclical policy? Does counter-cyclical policy require  fiscal deficits/low interest rate in a downturn and

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The Next Recession Could Be a Bad One

August 30, 2018

August 30, 2018 —  US economic statistics are currently good.  But the next recession could be bad.  
This American expansion has been long-lived. If it continues another year it will equal the record 10-year expansion in the 1990s. Unemployment is low: 3.9% in July, as low as in 2000, during the Clinton Administration.  GDP growth has been relatively strong: the BEA yesterday estimated 2nd-quarter 2018 growth at 4.2%, the highest quarter since 5.1% and 4.9% in 2014, during the Obama Administration.
But sooner or later there will be a new recession.  There always is.  When it comes, it could be more severe than the typical downturn.
The next recession
What could set off a recession in the coming years?   Here is one possibility. Because the US stock market is high — as indicated, for

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The Depth of the Next US Recession

August 27, 2018

Whatever the immediate trigger of the next US recession, the consequences are likely to be severe. With the US government committed to pro-cyclical fiscal, macro-prudential, and even monetary policies, the authorities are in a weak position to manage the next inevitable shock.

ASPEN, COLORADO – The United States economy is doing well. But the next recession – and there is always another recession – could be very bad.

Sean Gallup/Getty Images

Justin Sullivan/Getty Images


The US Bureau of Economic Analysis estimates that GDP growth in the second quarter of 2018 reached 4.1% – the highest since the 4.9% seen under President Barack

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