Saturday , January 19 2019
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Econbrowser – James Hamilton

“Agent Orange: Trump, Soft Power, and Exports”

That’s the title of a new paper by Andy Rose: A country’s exports rise when its leadership is approved by other countries. I show this using a standard gravity model of bilateral exports, a panel of data from 2006 through 2017, and an annual Gallup survey which asks people in up to 157 countries whether they approve of the job performance of the leadership of China, Germany, Russia, the United Kingdom and the United States. Holding other things constant, a country’s exports are higher if...

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Adding Insult to Injury

Mr. Trump considers redirecting funds committed to rebuilding Puerto Rico toward the building of the Wall. From WaPo: Trump has urged the Army Corps to determine how fast contracts could be signed and whether construction could begin within 45 days… The list includes dozens of flood control projects in areas affected by recent natural disasters, including the Texas coastline inundated by Hurricane Harvey and parts of Puerto Rico battered by Hurricane Maria. The military construction budget...

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“International Spillovers of Monetary Policy: Conventional Policy vs. Quantitative Easing”

That’s the title of a fascinating new paper with important policy implications. This paper evaluates the popular view that quantitative easing exerts greater international spillovers than conventional monetary policies. We employ a novel approach to compare the international spillovers of conventional and balance sheet policies undertaken by the Federal Reserve. In principle, conventional monetary policy affects bond yields and financial conditions by affecting the expected path of short...

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“A Third of a Century of Currency Expectations Data: The Carry Trade and the Risk Premium”

That’s the title of a new paper, coauthored with Jeffrey Frankel, using data extending back to August 1986. For four decades economists have been finding that the forward discount is a very biased forecast of future changes in the exchange rate. The carry trade makes money, on average. For just as long, they have been debating the appropriate interpretation of the bias. Is it evidence of an exchange risk premium? Under that interpretation, a currency that sells at a forward discount does...

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Jindal-nomics Illustrated

In response to my graph of Louisiana GDP, Manfred asks: …we have to define what Jindalnomics is or was. I don’t know for sure, but as shown in this graph, it seems to include large corporate tax breaks. And if Jindal had had his way, income tax breaks as well. For completeness’s sake, here is Louisiana GDP, again. Figure 1: Log real GDP, 2008Q1=0 for US (dark blue), and for Louisiana (chartreuse). Light orange shading denotes Jindal administrations. Source: BEA and author’s...

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We Can Make Mexico Pay for the Wall

Just declare an International Emergency. From US Treasury, U.S.C. annotated, Title 50. War and National Defense Chapter 35. International Emergency Economic Powers : § 1701. Unusual and extraordinary threat; declaration of national emergency; exercise of Presidential authorities (a)(1) At the times and to the extent specified in section 1701 of this title, the President may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise– (A) investigate,...

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