Monday , November 18 2019
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Econbrowser – James Hamilton

“New Foreign Direct Investment in the United States”

Some people think that foreign direct investment into the United States has surged as confidence in the American economy has risen under Mr. Trump’s administration. The data do not support such a supposition. From BEA: It is useful to make distinctions between stocks (particularly at market value) and flows. The flow into the US has decreased relative to 2016. The stock can deviate from the cumulation of flows due to valuation changes and movements in the dollar. And in 2017, the inflow of...

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Making America Great Again (in Indebtedness): Net International Investment Position

NIIP is the difference between US holdings of assets abroad, minus foreign holdings of US assets. Shown below is the ratio of NIIP to GDP. Figure 1: US Net International Investment Position ratio to GDP (blue). NBER defined recession dates shaded gray. Light orange shading denotes Trump administration, orange dashed line denotes election. Source: BEA via FRED, NBER, and author’s calculations.

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Business Cycle Indicators, Mid-November

With industrial production continuing its dive in October, we have a mixed picture of economic activity. Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink), all log normalized to 2019M01=0.  Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (10/28 release), and author’s calculations.

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More on What Trump Could Have Meant

As I noted in yesterday’s post, in Mr. Trump’s speech at the Economic Club of New York Tuesday, he made a mysterious claim: …we’ve added nearly $10 trillion of new value to our economy. That’s in a short period of time. Remember, I only use numbers from the time of the election because I can’t go to January 20th. It’s not fair. We picked up tremendous stock market and economic numbers. They actually went wild the day after I won. I puzzled over the $10 trillion figure. Reader Joseph has...

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What Could Trump Have Possibly Meant?

From Mr. Trump’s speech at the Economic Club of New York yesterday: …we’ve added nearly $10 trillion of new value to our economy. That’s in a short period of time. Remember, I only use numbers from the time of the election because I can’t go to January 20th. It’s not fair. We picked up tremendous stock market and economic numbers. They actually went wild the day after I won. Where does this number come from? I downloaded household holdings of corporate equities, from the Fed’s Flow of Funds...

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Neel Kashkari at Madison: “Kashkari says he takes comfort from yield curve shape”

Should he? FRB Minneapolis Fed President was at UW Madison today, and stated: “The fact that the yield curve is now uninverted gives me some indication that we have taken the brakes off the economy,” Should we rest easy? In some sense, the answer is “yes”. Take the plain vanilla term spread model;  run a probit regression of recession 12 months ahead on the simple 10yr-3mo spread, and one obtains an 50% probability of recession in August 2020, declining to 39% by October. This point...

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The Trumpian World as Natural Experiment

The Trump economic policy regime (if it can be called that) has provided several “natural experiments”. Do corporate tax rate reductions “pay for themselves”? Does expansionary fiscal policy at full employment lead to large increases in output? Does increasing trade protection necessarily lead to an increase in the trade balance? Does a bellicose and confused trade negotiating stance accelerate fixed investment? I think the answers are No, No, No, and No. On this last point, see Altig et al....

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“CBO’s Economic Forecasting Record: 2019 Update”

From the Highlights of a new CBO study: Comparison With Other Forecasts. For the most part, CBO’s and the Administration’s forecasts exhibit similar degrees of centeredness, but CBO’s forecasts are slightly more accurate and have smaller two-thirds  spreads. For all three quality measures, CBO’s forecasts are roughly comparable to the Blue Chip consensus forecasts. Sources of Forecast Errors. All forecasters failed to anticipate  certain key economic developments, resulting in significant...

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If the Administration Is So Concerned about Corruption…

shouldn’t it be doing something about the Russian Federation as well? Figure 1: Corruptions Perception Index for 2016. Darker denotes higher perceived corruption. Source: Transparency International. The indices for Ukraine as well as Russia are at 29, tied ranking 131/176 countries. US index at 74, ranked 18th. Addendum: The Inter Country Risk Guide (ICRG) says Russia is worse than Ukraine… Source: Goel, Saunoris, Public Choice (1984).

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