Saturday , August 19 2017
Home / Peterson Institute

Peterson Institute

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...

Read More »

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...

Read More »

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...

Read More »

The Fed Takes a Summer Vacation

The Federal Open Market Committee (FOMC) met today and decided to keep policy on hold. This decision was largely expected. The statement was nearly identical to that issued in June. The Fed is happy with the pace of economic growth and job creation but is mildly concerned about an inflation rate that continues to be a bit below its target of 2 percent. In one of the few changes to the statement, the FOMC said that it expects to begin a gradual reduction in the size of its balance sheet...

Read More »

An Aging Population Explains Most—But Not All—of the Decline in the US Labor Force Participation Rate Since 2007

The US labor force participation rate—the share of the civilian population ages 16 and older working or actively seeking work—has fallen from 66.0 percent in the fourth quarter of 2007 (the peak of the business cycle prior to the Great Recession, according to the National Bureau of Economic Research) to 62.8 percent in the second quarter of 2017, a 3.1 percentage-point decline.[1] In total, 2.5 percentage points of this decline—or 79 percent—is attributable to the aging of the US population,...

Read More »

The IMF’s New Role in Greece Proves Its Value for Europe and the United States

Greece’s economic problems are far from solved, but the International Monetary Fund (IMF) deserves part of the credit for the glimmers of progress on official debt relief in the Eurogroup announcement on June 15. The IMF is expected to issue its “approval in principle” for Greek policy commitments under the European Stability Mechanism (ESM) program, but it will not contribute money until it gets more comfort on debt relief from European governments and institutions. On balance, this makes...

Read More »

Forget About Brexit, Focus on the Euro Area Future

The Anglophone financial press is still giving prime coverage to the negotiations over Britain’s exit from the European Union. But Brexit has become a sideshow. The real economic news in Europe is being made in France and Germany, and it is of the good, potentially very good, type. The Brexit reality has finally caught up with David Davis, the UK Secretary of State for Exiting the European Union, who quickly capitulated to all EU-27 demands on the scope and sequencing of the negotiations on...

Read More »

The Eurogroup on Greece: Debt Relief with a Fiscal Straitjacket

Greece’s latest deal with the Eurogroup—the group of eurozone finance ministers—is bigger news than you might think from the press reactions so far. As expected, Greece got its next disbursement of funds to avoid default, the International Monetary Fund (IMF) gave a symbolic stamp of approval, no actual debt relief will transpire until the end of Greece’s EU-supported reform program, and the IMF will not be prepared to disburse until that happens (if at all). This feels like business as...

Read More »

Higher Education Is Increasingly Valuable in the United States, Less So in France

How much of an economic advantage is there to having a higher education in the United States versus France? A study of the latest data demonstrates that people with more education are better off in both countries, but in the last 20 years, higher education has become even more valuable in the United States, and less so in France. That conclusion is reached via a comparison of the evolution of relative average wages by education level over the period going from 1990 to 2012 in the two...

Read More »