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Links (6/10/19)

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This time might not be different ~ Antonio Fatas Estimating the probability of a recession over a short horizon has so far proven to be a challenging task for economists. Each cycle looks slightly different from the previous one and trying to come up with precise indicators of crises leads to either overpredicting them or missing their timing as some risks are underestimated. As the US enters its longest expansion ever, we are back to a discussion on whether there are any reliable indicators that can help us forecast the next turning point. Without providing an exhaustive list of all candidates, let me highlight the interaction between three statistical patterns and how they inform us (or not) about the risks ahead: ... Mar-a-Lago Comes for British Health - Paul Krugman ...last year he

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  • This time might not be different ~ Antonio Fatas Estimating the probability of a recession over a short horizon has so far proven to be a challenging task for economists. Each cycle looks slightly different from the previous one and trying to come up with precise indicators of crises leads to either overpredicting them or missing their timing as some risks are underestimated. As the US enters its longest expansion ever, we are back to a discussion on whether there are any reliable indicators that can help us forecast the next turning point. Without providing an exhaustive list of all candidates, let me highlight the interaction between three statistical patterns and how they inform us (or not) about the risks ahead: ...
  • Mar-a-Lago Comes for British Health - Paul Krugman ...last year he tweeted that Britons were marching in the streets to protest a health system that was “going broke and not working.” Actually, the demonstrations were in favor of the N.H.S., calling for more government funding. But never mind what was going on in Trump’s mind. Let’s focus instead on the fact that no American politician, Trump least of all, has any business giving other countries advice on health care. For we have the worst-performing health care system in the advanced world — and Trump is doing all he can to degrade it further. ...
  • Are Markets Becoming Less Competitive? - FRB Richmond National markets in many U.S. industries seem to be increasingly dominated by large companies. Some policymakers have argued that this growing market concentration is a sign of weakening competition, but concentration by itself does not necessarily translate into market power. It may be too soon to reach a decisive conclusion about whether market power, not simply market concentration, is on the rise.
  • Yes, Taxing the Rich Is Possible - The New York Times ... The long history of American policymaking actually shows that raising taxes on the wealthiest taxpayers is entirely possible. Nonetheless, I expect you’ll hear the cynical “taxing the rich is impossible” case a lot in coming years, especially if a future president does try to enact a major tax increase on the wealthy. Lobbyists who represent the wealthy like the argument because it lets them claim that there’s no point in trying. And journalists find the argument alluring because it has a ring of tough skepticism, and we journalists love to present ourselves as tough skeptics. In this case, though, it’s important to be skeptical about the skepticism. ...
  • The Persistent Ghost of Ayn Rand, the Forebear of Zombie Neoliberalism - The New Yorker In a dark corner of my house, where a built-in bookshelf curves out of sight and out of reach, near the ceiling, I keep a couple dozen books that I haven’t brought myself to get rid of but don’t want anyone to see. It’s a connoisseur’s collection of the writing of Ayn Rand and her disciples, assembled by teen-age me a long, long time ago. My first girlfriend, an older woman in her early twenties, introduced me to Rand. I had recently immigrated to the United States from Russia, come out, and dropped out of high school, and somehow Rand’s writing spoke to me, made the world appear simple and conquerable. My Rand phase was relatively brief, but, before it ended, I bluffed my way into my first job in publishing by talking Rand with my future boss, a trailblazing gay publisher who was similarly obsessed with her. ...
  • Europe Must Fix Its Fiscal Rules - Olivier Blanchard In an environment of persistently low interest rates and below-potential output, economic policymakers must rethink the prevailing approach to public debt. For the eurozone, this means creating a common budget, or at least overhauling the fiscal rules that have tied member-state governments' hands for no good reason.
  • Unconventional Thinking about Unconventional Monetary Policies - Barry Eichengreen Defenders of central-bank independence argue that quantitative easing should have been avoided last time and is best avoided in the future, because it opens the door to political interference with the conduct of monetary policy. But political interference is even likelier if central banks shun QE in the next recession.
  • Job and Wage Growth Slow Sharply in May - Dean Baker The Bureau of Labor Statistics (BLS) reported that the economy added just 75,000 jobs in May. In addition, the prior two months growth numbers were revised down by 75,000, leaving the three month average at 151,000. The unemployment rate was unchanged at 3.6 percent, and the employment-to-population rate (EPOP) was also unchanged at 60.6 percent. The EPOP for prime age workers (ages 25 to 54) was also unchanged at 79.7 percent. While the slower job growth reported for May is discouraging, probably the most disconcerting aspect of the report is the evidence that wage growth is actually slowing in spite of the 3.6 percent unemployment rate. ...
  • If We Fail to Prepare, We Prepare to Fail - John Williams ... The good news is that, for the most part, monetary policy did its job. Advanced economies have seen steady growth and significant declines in unemployment. But the recovery has been slow. And despite low unemployment, inflation rates have been running persistently below central banks’ goals. The Federal Reserve, like many central banks, has a goal of keeping inflation at 2 percent. In the pre-2008 era, inflation was a major concern for the public and central banks alike. And, while I will always be vigilant about inflation that’s too high, inflation that’s too low is now a more pressing problem. The experience of a slow recovery and persistently low inflation is a symptom of deeper problems afflicting advanced economies. ...
  • Clive Granger Special Issue - Dave Giles The recently published Volume 10, No. 1 issue of the European Journal of Pure and Applied Mathematics takes the form of a memorial issue for Clive Granger. You can find the Table of Contents here, and all of the articles can be downloaded freely. This memorial issue is co-edited by Jennifer Castle and David Hendry. The contributed papers include ones that deal with Forecasting, Cointegration, Nonlinear Time Series, and Model Selection. This is a fantastic collection of important survey-type papers that simply must read!
  • The Effects of Concentration in the Asset Management Industry on Stock Prices - ProMarket The asset management industry has become increasingly concentrated in recent decades. Regulators are concerned about the systemic risks this may pose. Using data from the US, this column suggests that the increased concentration has led to more volatile prices of stocks held by large institutional investors. This poses challenges for regulators trying to weigh price efficiency and economies of scale.
  • Say’s (and Walras’s) Law Revisited - Uneasy Money ... My thinking about Say’s Law goes back to my first paper on classical monetary theory, and I have previously written blog-posts about Say’s Law (here and here). And more recently I realized that in a temporary-equilibrium framework, both Say’s Law and Walras’s Law, however understood, may be violated. ...
  • The Federal Reserve's Review of Its Monetary Policy Strategy, Tools, and Communication Practices - Richard Clarida ... Yesterday Professors Eberly, Stock, and Wright provided us with a thorough and thoughtful evaluation of the Federal Reserve's monetary policy strategy, tools, and communications since 2009. They conclude that the policy tools that the Federal Open Market Committee (FOMC) relied on—"level policy" and "slope policy," to use their terminology—helped restore the U.S. economy to health and bring it close to the statutory goals of maximum employment and price stability assigned to us by the Congress. As was noted several times yesterday, in recent years forecasters and policymakers have been surprised by the decline in the unemployment rate and the size of the sustained ongoing gains in payroll employment. ...
  • Has U.S. Monetary Policy Gone Off Track? - Dallasfed.org No, monetary policy hasn’t gone off track. The same simple rule that describes U.S. monetary policy from 1987 to 2008 also nicely describes policy from 2014 to the present. Over both periods, the actions of the Federal Open Market Committee (FOMC) can be explained by the committee’s pursuit of full employment and price stability.
  • Fed Prepared to Adjust Policy As Needed - Tim Duy ... The missing piece in the rate cut story is seemingly the most important – a consistent pattern of data soft enough to make the Fed fear there is a threat to the employment and inflation outlooks. I anticipate the data will soften enough in the next few months to prompt the Fed to act in September. How much softer? Given the rising risks to the outlook, the Fed seems to have set a fairly low bar for a rate cut. That means the data flow doesn’t have to be too much softer.
Mark Thoma
Mark Allen Thoma (born December 15, 1956) is a macroeconomist and econometrician and a Professor of Economics at the Department of Economics of the University of Oregon. Thoma is best known as a regular columnist for The Fiscal Times through his blog "Economist's View", which Paul Krugman called "the best place by far to keep up with the latest in economic discourse", and as an analyst at CBS MoneyWatch. He is also a regular contributor to EconoMonitor.

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