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. Mainly Macro –  Simon Wren-Lewis : ‘Recovery rhetoric and reality

    In this blog post, Simon Wren-Lewis argues on the effectiveness of the austerity measures in achieving economic recovery especially in the Eurozone and UK. In addition, he continues the post by explaining the sustainability of the economic recovery. According to Wren-Lewis, in the Eurozone, austerity helped to create a second recession since evidence suggest that Eurozone’s GDP was around 4% lower in 2013 as a result of fiscal consolidation. In the UK, in 2013 the economy was boosted by higher consumer spending triggered by both Funding for Lending and Help to Buy schemes and supported by a suspension in austerity measures in 2012 and 2013. However, the recovery and its developments tell us little about how useful the austerity is. Looking ahead, what will happened to the inflation rate especially in the US and UK should be the big question. Inflation should become a better indicator of just how fast the recovery could potentially be.  – Dirina Mançellari

  2. Noahpinion – Noah Smith: ‘The Neo-Fisherite Rebellion’

     Higher monetary policy rates can actually spur inflation, rather than counter it. This sort of counterintuitive statement is at the base of an ongoing “rebellion” in macroeconomic circles described by Noah Smith in this blog post. An increasing number of economists are starting to believe that real interest rates are “fixed” at an equilibrium value, independent of the decision by the monetary authorities; if this is the case, according to the Fisher equation (an identity which states that nominal interest rates are the sum of real interest rates and inflation), the only thing a central bank has to do to prop up inflation is to raise nominal interest rates. According to Smith: “This is exactly the opposite of the “monetarist” conclusion that if the Fed holds R very low for long enough, inflation will trend upward.”  Armando Ciccarelli

  3. The Undercover Economist – Tim Harford : ‘Have living standards really stopped rising?’

    Unemployment increased in the Western Hemisphere during the financial crisis; in particular, it soared among the long-term unemployed people. With the ongoing economic recovery, we should see a strong jobs recovery, but we do not. In this post, Tim Harford suggest that people who have been out of work for more than six months are marginalized. He mentions a Rand Ghayad’s experiment that shows how employers are more willing to contact applicants with recent but irrelevant work experience. According to Tim Harford, long-term unemployment tangles workers in a vicious cycle of demotivation and unhappiness.  – Ricard Torné

  4. Bruegel Blog- Guonan Ma: ‘The changing fortunes of the Chinese renminbi – is the latest round of RMB weakness policy or market induced?

    Guonan Ma, visiting research fellow at Brussels’s think tank Bruegel, writes about the Chinese renminbi (RMB) recent depreciation and asks if this was policy or market induced? Is the People’s Bank of China (PBC) primarily aiming for a weak currency policy or two-way currency volatility? Does the latest surprise PBC move achieve its policy objectives? Ma continues to elaborate that there are two competing explanations for the latest RMB movements. According to the author, first, the PBC wanted to break the “one-way” appreciation expectations of the Chinese currency and “flush out the rampant RMB carry trade by introducing two-sided exchange rate volatility.” In this case, the author argues, the weakness is “policy induced.” Alternatively, concerns about the recent signs of a deceleration in the Chinese economy as well as the Federal Reserve tapering dampen market sentiment and prompt capital outflows from China, and thus weaken the currency. The authors then suggests that if this is the case, it was simply a market-induced depreciation. Nonetheless, the author also suggest that the two possibilities could be complimentary and then the question arises on how to weigh these policy and market factors. – Ricardo Aceves

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