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Stumbling Blocks for Brazil’s Economic Recovery as Election Looms

Against all odds, the Brazilian economy is gradually recovering. Despite the country’s hapless regime, the enormous corruption scandal, and the substantial fiscal challenges ahead, Brazil has emerged from its worst-ever economic recession, responsible for a GDP per capita drop of more than 10 percent. Authorities and markets have been celebrating these recent trends, as they expect greater economic traction into 2018 will help elect a reformist president next October. The recent recovery and...

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The Economic Cost of Weakening Capital Requirements for Large Banks

The policy response to the financial crisis of 2007–09 brought new regulations on bank capital and stress tests that have strengthened the ability of the major US financial institutions to withstand future shocks. However, recent proposals by the US Treasury Department could weaken capital requirements, undermining the improvement in financial stability that has been achieved. The consequence would likely be a major cost to the economy, because the increased probability of a banking crisis...

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Yes, the German election has created a problem for euro area reform.

Angela Merkel will carry on as German chancellor, but has emerged weakened from the September 24 German parliamentary election. Has this outcome undermined the prospect for deepening Europe's economic and monetary union (EMU)? Compromises on euro area reform have clearly become more difficult, and the political opportunity created by the election of Emmanuel Macron to the French presidency may have been squandered. But there is a possible solution. Macron's election had created hope for a...

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The Fed Buys into Secular Stagnation

As was widely expected, the Federal Open Market Committee (FOMC) held its short-term interest rate steady on September 20 and announced that starting next month the Fed will gradually shrink its $4.5 trillion balance sheet, which it built up in response to the Great Recession to support the economy. The unexpected development was a further reduction in the median view of FOMC participants about where the short-term interest rate will settle in the long run. The Fed apparently endorses the...

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Brexit Readiness Score

If you believe Prime Minister Theresa May, the United Kingdom will be ready to exit the European Union in April 2019. If you believe UK businesses, Britain is falling behind in its preparations. The next round of Brexit negotiations, and the first since the summer recess, was delayed by a week to September 25, 2017, suggesting that businesses may be right. Two other announcements in September have questioned Brexit readiness. First, the head of the UK’s Revenue and Customs service warned that...

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The Economics Job Market Rumors Site Needs to Clean Up Its Act

The following are Blanchard's comments in response to Justin Wolfers's review in the New York Times of new research from graduate student Alice H. Wu that finds evidence of sexism on the online anonymous message board, Economics Job Market Rumors (EJMR). The facts established in the recent paper by Alice H. Wu, and the deserved attention brought to them in the column by Justin Wolfers (University of Michigan), forces each of us to think about where they stand vis-à-vis the Economics Job...

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Initial Coin Offerings: Crowdfunding in a regulatory vacuum

What began as a curiosity with the introduction of bitcoins less than a decade ago has now become a global phenomenon offering both promise and peril in the world of international finance.[1] Bitcoin was the first innovation in digital currency to take advantage of the latest developments in financial technology enabling many types of financial transactions to take place on a peer-to-peer basis without intermediaries like banks or clearinghouses.[2] Issued by an unincorporated software...

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Are Stock Valuations Overstretched?

With stock indices close to all-time highs and unprecedented monetary stimulus in recent years, it is reasonable to ask whether the US economy has reached a potentially dangerous phase of excessive financial exuberance and of overvaluation in the stock market in particular. In February Yale economist Robert J. Shiller, author of the book Irrational Exuberance, advised investors to reduce their equity exposure, arguing that stock valuations were higher than at any earlier period except in 1929...

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Make in India: Tax Reform as Job Creation

By 2050, at least 280 million young people will enter the job market in India. Yet India is losing 550 manufacturing and service jobs per day as it adopts new technologies. A new countrywide value-added tax that supersedes India's numerous indirect taxes may deliver over 10 million new jobs and temporarily alleviate pressure on the labor market. India is frequently cited among the countries that stand to lose the largest number of jobs due to new technologies. A 2016 World Bank study, for...

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Tempered Ambitions on US Tax Reform

At 35 percent, the United States has the highest statutory corporate income tax rate among advanced economies. Reform of the widely criticized corporate tax is among the top agenda items of the Trump administration and the Republican leadership of Congress, and even many Democrats say the time has come to revamp the tax to make US-based multinational corporations more competitive in the global economy. Yet after seven months in power, Trump administration officials are signaling tempered...

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