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. Macro and Other Market Musings – David Beckworth: ‘Tinkering on the Margins: ECB Edition

    Among the several sides to the debate regarding monetary policy effectiveness, there has been an upsurge in arguments for the effectiveness of negative interest rates. The ECB introduced negative interest rates to deposits of commercial banks in its latest monetary policy decision. However, this article argues that the ECB has stopped a step before what would have made its policy successful. Beckworth argues that in the current environment of low inflation (and fears of deflation), the ECB should have also changed its inflation target and not reaffirm its below-but-close to 2% target, because this limits the intended effects of the policy in the near term.” –  Enrique Jorge

  2.  House of Debt – Atif Mian & Amir Sufi: ‘Terrible Recovery’

    While some analysts contend that weak economic performance in the first quarter is just a hiccup on the way to recovery, others point out that overall recovery since the recent great recession has been terrible. Professors Mian and Sufi of the University of Chicago provide a simple chart which compares growth rates after every recession since 1950, and in their words, “it looks pretty bad.” The recovery since the 2007 recession looks much worse compared to previous recoveries to begin with, and the significant contraction in Q1 of this year bends down the relatively weak upward trajectory. – Carl Kelly 

  3.  Money and Banking – Cecchetti & Schoenholtz : ‘Monetary Policy Target Regimes: Inflation, Price Level, Nominal GDP, etc.’

    Cecchetti and Schoenholtz shed light on the economic implications of price level targeting as compared to nominal GDP targeting. To give an example, they depict how price level and nominal GDP developed as compared to the performance of the U.S. economy. According to the authors’ analysis, before the 2009 financial crisis both monetary policy target regimes were consistent with the economic development. However, since 2009 the price level is 2.7% below the pre-crisis trend and nominal GDP even 15.6%, which means that the trend rate of real GDP has changed. The authors point out that a return to the pre-crisis nominal GDP trend would require an increase in the inflation objective and raise the questions whether this would be desirable given the uncertainties that changing inflation objectives mean for future inflation and price level expectations.” –  Teresa Kersting

  4. The Growth Economics Blog – Dietz Vollrath: ‘Does Culture Matter for Economic Growth? Part Deux.

    In this blog post, Dietz Vollrath talks about culture and its effect on economic growth. In order to explain his point, Vollrath takes the example of a country that has a cultural norm that says to distrust strangers. This might lead to a bad equilibirum since everybody will constantly try to deviate. On the other hand, in a country where the distrust norm doesn’t exist, everybody will cooperate which allows for greater economic specialization. Later on, Vollrath points out that these cultural reforms affect the utility funcitions of the indivituals in different countries. However, one can show that different countries could share a common utility function, eventhough they have different cultures . In that case it would be meaningful to talk about the effect on the culture on GDP, since it is capturing some kind of historical path dependence. – Dirina Mançellari

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