Blog Mash-Up of the Week

Everyday the blogosphere offers an enormous amount of in-depth analysis on any imaginable topic. The world of macroeconomics and economic forecasting is no exception. To keep themselves updated on the latest information, our in-house team of economists scan the world wide web and gather what they consider the most interesting, appealing, informative or just curious blog posts from experts in the field of global economics. Here’s the list of the Top 4 posts from this week. Check it out!

  1. MacroMania – David Andolfatto: ‘U.S. Inflation Expectations: Low, But Rising’

    Recently, a great deal of analyst expressed their concern about the increasing threat of global deflation. In this post, David Andolfatto argues that although inflation has been consistently below the Fed’s target, what we have to analyze is inflation expectations. According to the TIPS (Treasury Inflation-Protected Securities) spread, inflation expectations declined sharply in June, following the Fed’s announcement that it would begin a modest reduction of bond purchases soon. After the announcement, however, inflation expectations recovered and, what is even more interesting, they did not fall when the taper was effectively implemented in December, suggesting that fears of deflation were, probably, exaggerated. – Ricard Torné

  2. Mainly Macro – Simon Wren-Lewis: ‘Will the financial crisis lead to another revolution in macroeconomics?’

    Simon Wren-Lewis, economics professor at Oxford University, analyzes whether we can expect a  major shift in the field of macro-economics as a result of the recent global financial crisis. He points out that Keynesian economics emerged as a response to the troubles caused by the Great Depression. He also explains that the great inflation of the 1970s was followed by a counter revolution or evolution “inspired by theory” in which Neo-Classical ideology became the standard. Wren then proposes three ways that the recent financial crisis could lead to evolutionary changes in macroeconomics going forward. First, it “may end of the tyranny of the Euler equation”; second, it could drive the incorporation of financial frictions in models, and third, the inclusion of behavioral attitudes to risk. Wren thinks that the financial crisis has exposed some “fundamental gaps” in macroeconomics and is even more convinced about the exposure of the “failure of neoliberalism as an ideology” which idealizes the market. Wren’s overall interpretation is that the excessive rewards generated in the financial sector did not come from innovation or market dynamism but from risky rent seeking behavior made possible by government deregulation and weak oversight. Wren states that “while the political forces that benefited from neoliberalism are strong, the bankruptcy of that ideology, and the harm done by the inequality it generated, are too great a truth to be resisted for long.” Wren recognizes that he may be guilty of wishful thinking but he still believes that some sort of shifts or developments in macroeconomics are due to happen. – Carl Kelly

  3. THE BLOG (Huffington Post) – James Plunkett: ‘At last, the minimum wage debate is growing up’

    The past week, British Chancellor of the Exchequer George Osborne announced that the British economy “can afford” an above-inflation minimum wage increase. This article claims that the debate that has spurred in the UK in the last days should consider the new economic reality of the country. Plunkett argues that minimum wage has no single-sided effects over employment, as different outcomes apply to different economies. It is definitely an interesting article to understand the debate that is taking place between the Labor party and the Government in the UK. – Enrique Jorge

  4. On The Economy – Jared Bernstein: Isn’t the Unemployment Rate Just an Inadequate Measure of Slack?’

    In his latest blog, Jared Bernstein talks about the effectiveness of the unemployment rate in measuring the weakness of the labor market. The official joblessness rate measures the unemployed people who are unsuccessfully looking for a job. But is this the best measure we can get? Bernstein compares the main measure with a more inclusive measure, the so-called “U-6” unemployment rate. The U-6 measure includes those who are not looking for a job due to discouragement, as well as the part-time workers. By comparing data on these two measures he finds that in the U.S, U-6 has fallen faster than the official rate. However, Bernstein argues that the official measure has historically done a good job in capturing the slack in the labor market. – Dirina Mancellari

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