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Nowcasting with OMB Director Mick Mulvaney

Summary:
Since Mr. Mulvaney has been criticizing the numbers produced by the BLS [1], and scoring by CBO [2], I thought it of interest to see Mr. Mulvaney’s record on predictions. To make things easy on Mr. Mulvaney, I thought it would be more fair to evaluate his “nowcasting” abilities. In July 2016, Mr. Mulvaney gave a speech to the John Birch Society in which he observed: the Fed’s actions have “effectively devalued the dollar” and harmed economic growth. It is difficult to assess the economic growth assessment without a counterfactual. However, we can easily observe what has happened to the dollar, as of July 2016, when Mr. Mulvaney provided his nowcast. First, the dollar in nominal terms (shown so “up” means a stronger dollar). Figure 1: Log nominal EUR/USD exchange rate (blue), value of

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Since Mr. Mulvaney has been criticizing the numbers produced by the BLS [1], and scoring by CBO [2], I thought it of interest to see Mr. Mulvaney’s record on predictions. To make things easy on Mr. Mulvaney, I thought it would be more fair to evaluate his “nowcasting” abilities.

In July 2016, Mr. Mulvaney gave a speech to the John Birch Society in which he observed:

the Fed’s actions have “effectively devalued the dollar” and harmed economic growth.

It is difficult to assess the economic growth assessment without a counterfactual. However, we can easily observe what has happened to the dollar, as of July 2016, when Mr. Mulvaney provided his nowcast. First, the dollar in nominal terms (shown so “up” means a stronger dollar).

Nowcasting with OMB Director Mick Mulvaney

Figure 1: Log nominal EUR/USD exchange rate (blue), value of USD against basket of major currencies (red), and against broad basket of currencies (teal), all normalized to 2007M12=0 (up is stronger dollar). NBER defined recession dates shaded gray. Dashed line at time of Mulvaney’s statement on dollar devalued. Source: Federal Reserve Board via FRED, NBER, and author’s calculations.

And here is the same picture in inflation adjusted (“real”) terms:

Nowcasting with OMB Director Mick Mulvaney

Figure 2: Log real EUR/USD exchange rate (blue), value of USD against basket of major currencies (red), and against broad basket of currencies (teal), all normalized to 2007M12=0 (up is stronger dollar). Adjustment using CPI’s. NBER defined recession dates shaded gray. Dashed line at time of Mulvaney’s statement on dollar devalued. Source: Federal Reserve Board via FRED, NBER, and author’s calculations.

Note that at the time of Mr. Mulvaney’s “dollar devalued” statement, the dollar was actually fairly strong, as compared against the previous decade. So, if Mr. Mulvaney is not even aware of how the dollar fares at a given instant, in a world of readily available data, how are we to take his assessments of data validity (e.g., from BLS), or scoring (from CBO)?

On a separate note, is this statement a Freudian slip of some sort on the part of Mr. Mulvaney?

“I don’t believe the facts are correct”

You can’t make up this stuff.

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Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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