BLOG MASH-UP OF THE WEEK

Everyday the blogosphere offers an enormous amount of in-depth analysis on any imaginable topic. The world ofmacroeconomics 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. Conversable economist  – Timothy Taylor: ‘Leveraged Loans: A Danger Spot?

    Timothy Taylor recalls how collateralized debt obligations were a central ingredient in the financial crisis that broke out in 2008. Taylor points out that CDOs were a particular problem because financial regulators and the Fed did not pay enough attention to the dangers posed by these packaged financial securities. Moreover, he now questions whether warning lights regarding leveraged loans will be heeded to avoid a similar buildup of economic risk. Leveraged loans are described as, “large, variable-rate loans originated by a group of banks (sometimes called a syndicate) for a corporate borrower who is perceived to be riskier than most.” Taylor argues that supervisory guidance of this type of loans and other similar niche markets is required. – Carl Kelly

  2. On the Economy – Jared Bernstein: Full employment, trade deficits, and the dollar as reserve currency. What are the connections?

    In his blogpost, Jared Bernstein shares some interesting thoughts on the connection between full employment, the trade deficit and the dollar as reserve currency. He points out that the United States’ persistent trade deficit holds back full employment as countries that run trade deficits export jobs to the countries that they incur deficits with. The fact that the U.S. runs trade deficits however is not so much dependent on the behavior of U.S. consumers. In Bernstein’s view it rather depends on other countries that systematically under-consume and export excess-savings in order to accumulate U.S. dollar reserves to increase the competitiveness of exports in international markets. The key of Bernstein’s idea is that as long as the U.S. dollar remains the reserve currency, the U.S. trade deficit is largely affected by other countries’ decisions as they determine the relative value of the U.S. dollar even though the U.S. would not directly engage in trade. Teresa Kersting

  3. A Fistful of Euros – Edward Hugh: ‘The Japanisation of Europe’

    Edward Hugh argues that the Eurozone might be becoming another Japan. He argues that in Japan and the Euro area the objective of monetary policy is to end deflationary pressures and correct liquidity traps, as opposed to the quantitative easing has happened in the US and UK.  Further, he points out that Europe’s population in the second oldest in the world, after Japan’s and that inflation dynamics are similar. Finally, he concludes by rebutting Draghi’s argument that Europe is not Japan. Arguing that underlying structural factors, such as liquidity trap and low fertility, are negatively affecting both the European and Japanese economies. – Angela Bouzanis

  4. VOX – Susan Schadler:‘Ukraine: A stress test of IMF credibility

    Susan Schadler comments on how the IMF prepares to revise the economic programme on which the third tranche of its funding for Ukraine will be based. She argues that, after having approved a two-year USD 17 billion loan in April based on excessively sanguine assumptions about the macroeconomy, the IMF revised its projections modestly in August when it released the second of eight funding tranches. A snapshot of the August review assessing divergences of developments from the original programme helps define the magnitude of the task the IMF faces. The author points that IMF faces three interconnected problems in the preparation of its economic programme revision, on which the third tranche of its funding will be based:1-how to salvage the credibility of the programme;
    2-how to maximise pressure on the government and vested interests to deliver long-elusive structural reforms; and 3-how to handle a sizeable financing gap that will characterise a credible set of macro projections.   
    Cecilia Simkievich

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