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. Antonio Fatas on the Global Economy – Antonio Fatas: ‘The permanent scars of economic pessimism

    In this blog post Antonio Fatas talks about the Central Banks’ growing pessimistic view on potential growth of the economies. Lately, the Central Banks of UK, Euro area and UK are reducing their estimates of the output gap. This is because they think that some part of the output loss is permanent rather than cyclical. Fatas argues that measuring the slack in the economy has always been a challenging issue. However, some narrow measures of idle capacity do signal a permanent reduction in output. For example, falling unemployment rate in the US comes on the back of falling participation rate rather than improving labor market conditions. Business cycles can leave permanent scars in the economy. However, it is important to notice that the permanent effects are the consequence of the recession itself. Thus, by minimizing the effects of the recession we can “control” the permanent effects. – Dirina Mancellari

  2. The Slog – John Ward : ‘UKRAINE: Four reasons why it’s going to end in tears’

    The ongoing political unrest and Russia’s aggressive push into Ukraine’s Crimea have dominated the headlines in recent weeks. In this post, John Ward argues that the opposition victory, along with the EU management of the crisis, will likely represent a fiscal catastrophe for Ukraine. Although the country’s debt is much lower than its European peers, a sizeable portion of these financial obligations are due by 2015. Up to now, bond yields have remained largely low because Russia has been purchasing a great deal of Ukrainian debt. However, once the political turmoil started, Russia stopped its financial aid, this paving the way for Ukraine’s bankruptcy and sovereign default. – Ricard Torné

  3. Econbrowser – James Hamilton : ‘A bull’s-eye for Fed accountability’

    James Hamilton provides a simple analysis of the Federal Reserve’s dual mandate to maintain price stability and maximum employment. He borrows a framework presented by Federal Reserve Bank of Chicago President Charles Evans. The framework is based on a simple loss function that reflects how far off the Fed is from meeting a hypothetical dual target of 2.0% inflation and 5.5% unemployment. This function shows how there can be tradeoffs involved with any particular change in these variables, such that a reduction in the employment rate at the cost of higher inflation leads to a situation that is no better than before.  All the points with an equal outcome are displayed as a circle. However, in an ideal situation there would be an improvement in both categories, and the economy would be on a smaller concentric circle. Hamilton points out that there are some flaws to the framework but argues that this graphical presentation is very useful for understanding the how the Fed operates. – Carl Kelly 

  4. Why Nations Fail – Daron Acemoglu & James Robinson: ‘What’s the Problem with (Spanish) Catalunya?

    Daron Acemoglu and James Robinson write this interesting post in which they recall some of last research made on the state’s role: the ability to raise taxes as the key dimension of whether a state is weak or strong or the creation of a monopoly of violence. However, the authors point out that all of this research ignores one of the most fundamental things that modern states do: to create a national identity eliminating alternative identities. Acemoglu and Robinson quote the research made by Laia Balcells, a political science professor at Duke University, who has investigated the differences between Catalans south of the French border and those north. According to Balcells, Catalans had a distinct history with their own language yet the extent to which people identify as Catalan today differs greatly north and south of the border. So,she rises a question, which is: why is there this divergence with Catalans in Spain currently demanding a referendum on becoming an independent country while nothing of the sort is taking place in France. – Ricardo Aceves 

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