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Jeffrey Frankel’s Blog

Black Swans Like COVID-19 are Predictable

TweetMarch 30, 2020 —   Events like the COVID-19 pandemic of 2020, the US housing crash of 2007-09, and the terrorist attack of September 11, 2001, are called “black swans”: in each case, few people were able to predict them reliably, at least not with precision.  But they were known unknowns, not unknown unknowns.  That is, in each case, knowledgeable analysts were fully aware that such a thing could happen, even that it was likely to happen eventually.  They could not predict that the...

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Interview on the Coronavirus Recession

TweetInterview by Economychosun, South Korea, March 24, 2020 Q: I’d like to know your opinion on the global economic impact of the Covid-19 crisis.  Do you think the recession is a fait accompli? JF: We are already in a global recession, even though it will take a bit longer for the most relevant economic statistics to confirm that. It is exceedingly rare that economists can make such a pronouncement in real time with any degree of confidence. But it is clear enough in this case. Q: How...

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Will the Coronavirus Lead to Global Recession?

TweetFebruary 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. Global recession? Now, just since January, there is new reason for...

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Carbon Prices, not Monetary Policies, Are the Tools to Fight Climate Change

TweetJanuary 23, 2020 —  Everyone agrees that Climate Change is at the top of the list of most important policy issues that we face – everyone, with a few exceptions such as Trump supporters who call it a hoax.  Identifying the problem, however, is not much use unless we also identify the appropriate tools to address the problem. Financial institutions In my own field of specialization, central bankers have caught Climate Change fever.  Perhaps the first was Governor Mark Carney —...

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Most important event of 2020? The US election

TweetAn interview question from Chosun Ilbo (the #1 Korean newspaper) for the New Year:   Which political event of 2020 should concern us the most? (E.g., the U.S. presidential election, the geopolitical crisis on the Korean Peninsula, Brexit…?) My response: Perhaps I am too US-centric.  But out of all events in 2020, I see November’s presidential election in the United States as warranting the greatest concern, not just for my home country but for the world. To recap briefly a familiar...

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Six Practical Proposals for Progressive Tax Policy

TweetDecember 20, 2019 —  It was quite a surprise, three years ago, when Donald Trump won a majority in the US Electoral College, thus becoming the 45th president.  In the search for explanations, one immediately dominated:  Democrats had not been sufficiently aware of the problem of income inequality or had neglected to propose good solutions to it. This is presumably the logic behind radical proposals coming from some of the leading contenders for the Democratic nomination in the 2020...

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Let’s Go Back to Good Old Tariff-Cutting

TweetNov. 30, 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...

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Weaponization of the Dollar May Backfire Yet

TweetOctober 26, 2019 —  This is a good time to gauge the rankings of the dollar and its rivals as major international currencies.  The Bank for International Settlements came out in September with its triennial survey of turnover in the world’s foreign exchange markets.  The IMF’s statistics on central bank holdings of foreign exchange reserves have gotten much more reliable lately, because China has joined in on reporting its holdings to the IMF (as Eswar Prasad explains).  And SWIFT...

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It’s Finally Time for German Fiscal Stimulus

TweetSeptember 30, 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...

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Median income flattens

TweetSept. 10, 2019 —    Median real household income is the most useful single measure of the extent to which the typical American family has shared in GDP gains.  The latest annual number, released today by the Census Bureau, confirms the answer that many had suspected: the typical family has not experienced a statistically significant rise in income.  The gains have, rather, gone to those at the top of the income distribution.  Median household income did rise during 1993-2000 (during...

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