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. Money and Banking – Steve Cecchetti and Kim Schoenholtz: ‘GDP: Seasons and Revisions

    In Q1, U.S. GDP contracted at a seasonally adjusted annualized rate (SAAR) of 2.9% according to the third estimate released by the Bureau of Economic Analysis (BEA) on 25 June. The print marked a significant downward revision to the 1.0% decline reported in the second estimate and greatly contrasted the 0.1% growth initially reported. Steve Cecchetti and Kim Schoenholtz acknowledge that these revisions are much larger than average but argue that “these headline growth numbers simply don’t contain all that much information for real-time business cycle analysis.” They warn about the use of GDP figures for drawing conclusions about the state of an economy because, among other things, seasonality factors and ongoing revisions make it hard to draw meaningful conclusions.” –  Carl Kelly

  2.  Value Walk –   John Mauldin: ‘BIS: The Opening Riposte, Yellen’s Counter-Riposte’

    John Mauldin takes a look at the reasons for a notably wide intellectual rift between the Bank for International Settlements (BIS) and Janet Yellen’s Federal Reserve. In their annual report released last week, the BIS, sometimes referred to as the “bank for central banks”, argues that ultralow monetary policies being pursued around the world are becoming less effective in boosting growth, but are inflating asset prices and leading to excessive debt. Moreover, the BIS emphasizes that postponing exit from accommodative policies poses a significant threat to the global economy. In contrast, while Yellen and other mainstream central bankers may acknowledge the potential for low rates to encourage excessive risk-taking, they contend that this can be controlled with macro-prudential regulation, and have declared that full employment and price stability remain the top priority.   Carl Kelly

  3.  Organization and Markets – Peter Klein : ‘Knowledge Elites, Inequality, and Economic Growth’

    Peter Klein writes this interesting post about a paper published by  Mara P. Squicciarini and Nico Voigtländer, which examines the role of “knowledge elites” — individuals at the upper tail of the human capital distribution — in French economic growth around the time of the Industrial Revolution. He refers to a key part of the paper: To measure the historical presence of knowledge elites, we use city-level subscriptions to the famous Encyclopédie in mid-18th century France. We show that subscriber density is a strong predictor of city growth after 1750, but not before the onset of French industrialization. Alternative measures of development confirm this pattern: soldier height and industrial activity are strongly associated with subscriber density after, but not before, 1750. Literacy, on the other hand, does not predict growth. Finally, by joining data on British patents with a large French firm survey from 1837, we provide evidence for the mechanism: upper tail knowledge raised the productivity in innovative industrial technology.” – Ricardo Aceves

  4. Centre for European Reform  – Simon Tilford: ‘The Eurozone is No Place for Poor Countries’

    Did the poorer Eurozone members converge or diverge relative to the richer countries since adopting the common currency? Simon Tilford points out that the poorer Eurozone member do not follow a uniform pattern, as some, such as Spain and Portugal, diverged while others, such as Poland and Slovakia, converged.  He provides a detailed argumentation to depict that the divergence of the latter is caused neither by a lack of willingness or capability of the poorer states to push trough economic reforms nor by solely cyclical patterns. Instead, he claims that the diverging countries are trapped in a mix of low competitiveness relative to the core, little possibility to lower inflation relative to the core as inflation among the Eurozone already is at record-lows, and high public debt. Moreover, the intent to increase competitiveness by lowering inflation is inducing deflation, which increases the real value of debts and makes it more difficult to reduce leverage ratios. Thus according to Simon Tilford, the divergence of some countries is rather driven by inadequate macroeconomic policies, a misalignment of real exchange rates and high levels of indebtedness. – Teresa Kersting

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