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. House of Debt – Atif Mian & Amir Sufi : ‘Depressing Chart of the Day

    University of Chicago professors Atif Mian and Amir Sufi share a simple chart which paints a rather bleak picture for the U.S. economy. The chart plots real GDP between 1970 and 2013, comparing the growth trend that the economy was on before the Great Recession and the deviation from that path since then. The chart shows that the U.S. economy moved back to trend fairly quickly after other recessions. However, the recent crisis “has taken what looks like a permanent toll on the U.S. economy. We went way off trend. We are not catching up. And if anything, it looks like we are getting further away from trend.  – Carl Kelly

  2. Antonio Fatas on the Global Economy – Antonio Fatas: ‘Secular stagnation or secular boom?’

     In this blog post, Antonio Fatas explains the notion of secular stagnation. He looks at world’s growth data from 1980 until today and distinguishes two groups of economies–advanced and emerging. It is noticeble that in the 80s both groups grew at quite similar rates; however, in the last 13 years, annual growth rates in emerging markets have been three times higher than those of advanced economies. A similar patern is observed if we exploit investment growth data. Fatas argues that the explosion in investment rates in emerging markets came in with larger increases in saving rates and (financial) capital flew away from these countries. This makes the performance of advanced economies even more surprising. Dirina Mançellari

  3. Marginal Revolution – Tyler Cowen : ‘John Cochrane on taxing debt, or toward a run-free financial system’

    In his blogpost, Tyler Cowen comments on an idea from John Cochrane’s to avoid systemic runs by applying Pigouvian taxes to control debt to capital ratios and by requiring that banks should be funded to 100% by equity. John Cochrane depicts that these measures are more adequate than the currently applied ones (guarantess of certain bank liabilitities and regulation of assets and their values) to reduce the probability of runs to occur. Tyler Cowen argues that this idea does not addres the underlying causes of the financial crisis as they would mainly improve banks’ liquidity  only while insolvent banks were the major problem during the crisis. Further, the author argues that during the crisis, neither a lack if liquidity nor bank runs contributed essentially to the insolvencys of banks. Additionally, he states that an all-equity capital structure would increase the transparency of insolvencies, which might even add on to market volatility and thus increase existing risks. – Teresa Kersting

  4. Bruegel Blog- Silvia Merler: ‘Shrinking times

    Silvia Merler is associate fellow at Brussels think tank Bruegel. She contributes to Bruegel’s blog this time by explaining us how the European Central Bank (ECB), faced with an almost frozen interbank market in 2008, has created an environment in which excess liquidity becomes a norm. She provides a definition of excess liquidity as “deposits at the deposit facility net of the recourse to the marginal lending facility, plus current holdings in excess of those contributing to the minimum reserve requirements.” She continues to elaborate that, “in normal conditions” banks would deposit the excess liquidity into the ECB’s deposit facility, which before the crisis was remunerated at a positive interest rate. Conversely, in order to lend the excess liquidity on the interbank market banks ask for interest rate higher than the Central Bank’s benchmark rate. According to Merler, all this logic broke down during the financial crisis, when uncertainty and risk aversion became the most relevant drivers of banks liquidity policy. Ricardo Aceves

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s