TODAY'S recommended economics writing:
• No benefit to financial stability from tighter policy (Real Time Economics)
• A recovery for the rest of us (Modeled Behavior)
• The persistent supply-side constraints in US housing (Alphaville)
• The design of worker insurance is critically important (Vox)
• Busy data day (Tim Duy)
A recent Free exchange column discusses the European Central Bank's troubles in providing support to peripheral economies (summary here). We are inviting experts in the field to comment on the piece and related research. Michael McMahon, a macroeconomist at the University of Warwick commented here. Gilles Moec, co-head of European economic research at Deutsche Bank, added thoughts here. Luis Garicano, professor of economics at the London School of Economics, contributed here. Christopher Bowdler, a fellow in economics at Oriel College, University of Oxford, commented here. Next up is William Porter, head of European credit strategy at Credit Suisse.
A recent Free exchange column discusses the European Central Bank's troubles in providing support to peripheral economies (summary here). We are inviting experts in the field to comment on the piece and related research. Michael McMahon, a macroeconomist at the University of Warwick commented here. Gilles Moec, co-head of European economic research at Deutsche Bank, added thoughts here. Luis Garicano, professor of economics at the London School of Economics, contributed here. Next up is Christopher Bowdler, a fellow in economics at Oriel College, University of Oxford.
A recent Free exchange column discusses the European Central Bank's troubles in providing support to peripheral economies (summary here). We are inviting experts in the field to comment on the piece and related research. Michael McMahon, a macroeconomist at the University of Warwick commented here. Gilles Moec, co-head of European economic research at Deutsche Bank, added thoughts here. Next up is Luis Garicano, professor of economics at the London School of Economics.
SINCE the start of the crisis, the link between banks and their sovereigns has only been strengthening with dire consequences for the periphery’s economies.
A recent Free exchange column discusses the European Central Bank's troubles in providing support to peripheral economies (summary here). We are inviting experts in the field to comment on the piece and related research. Michael McMahon, a macroeconomist at the University of Warwick commented here. Next up is Gilles Moec, co-head of European economic research at Deutsche Bank.
THERE is now strong statistical evidence that banks in the periphery are discriminating against small and medium-size enterprises (SMEs), imposing higher interest rates or simply rejecting loan applications in a higher proportion than for larger corporates.
A recent Free exchange column discusses the European Central Bank's troubles in providing support to peripheral economies (summary here). We are inviting experts in the field to comment on the piece and related research. First up is Michael McMahon, a macroeconomist at the University of Warwick (and one-time recipient of The Economist's Marjorie Deane journalism studentship).
THE Free Exchange column makes a strong case in support of view that there is something wrong with provision of credit to small and medium enterprises (SMEs) in the euro area. I agree.
NEW figures from Europe reveal that both GDP and inflation in the euro area are falling, while unemployment is steadily rising. The mix of pain calls for monetary easing, and at its last policy meeting the European Central Bank did indeed reduce its main interest rate to 0.75%, a record low for the single-currency area. Yet as a recent Free exchange column explained, low ECB rates aren't having the desired effect around the struggling periphery:
In 2008, as the euro zone started to contract, the ECB slashed its main rate from 4.25% to 1%. But because investors were worried about the state of the banks, the returns that banks had to offer on their own bonds rose.
BESPECTACLED and rather owlish, Sir Mervyn King is not your stereotypical sports fan. But, as devotees of his quarterly press conferences know, the governor of the Bank of England is keen on cricket. Today he played his last innings – an uninterrupted knock of 82 since the first Inflation Report back in 1993 (and 89 including earlier ones). The next session, in August, will be presented by Mark Carney, currently the governor of the Bank of Canada, who takes over in July.
Since the financial crisis started in 2007, Sir Mervyn has been inclined to look on the gloomy side of things, sometimes contradicting rosier visions set out by the bank’s forecasters.
ACCORDING to Eurostat's first estimate, output in the euro area shrank 0.2% from the fourth quarter of 2012 to the first of 2013 and fell 1% year-on-year. The euro zone has been in recession since the third quarter of 2011. Today's Daily chart is an updated interactive graphic on the European economy. For a bit more context, I thought I'd add two charts of my own. Here is real GDP for a selection of economies:
And here is real per capita GDP for the same countries:
The charts show the whole of the euro era, and it has not been a particularly glorious time.
TODAY'S recommended economics writing:
• Exhuming Lehman (Pawel Morski)
• Latvia sticks to January euro target, despite skepticism (Wall Street Journal)
• It takes a regime shift (Christina Romer)
• "Yes I would, Kent" (Alphaville)
• Inequality in the robot future (Modeled Behavior)
THE Congressional Budget Office released an updated budget outlook today. Here's the big news:
If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642 billion, the Congressional Budget Office (CBO) estimates, the smallest shortfall since 2008. Relative to the size of the economy, the deficit this year—at 4.0 percent of gross domestic product (GDP)—will be less than half as large as the shortfall in 2009, which was 10.1 percent of GDP.
The 4% of GDP deficit forecast for 2013 is even more remarkable when one notes that the figure for 2012 was 7%. That's a breathtaking pace of fiscal consolidation.
PAUL MURPHY posts an interesting chart from Capital Economics, showing a divergence between the prices of equities and commodities:
EnlargeMr Murphy comments:
The moves are logical. Stocks are up because of rampant QE, which is squeezing investor flows out of bond markets and into equities. And the reason we’ve got rampant QE is the continued lack of near-term economic recovery globally, which is manifestly bad for industrial commodities.
I don't think that quite does it. During the crisis era there were "risk on" assets and "risk off" assets, and when one went up the other went down. Equities and commodities were both risk on and rose and fell together.
TODAY'S recommended economics writing:
• Who are the leading Fed contenders? (Real Time Economics)
• Estimating the effect of the TPP on Japan's growth (Vox)
• The Washington Super-Whale (Brad DeLong)
• How about a universal basic income? (Wongblog)
WITHOUT technical standards, life would be a lot more complicated. They make it possible, for example, for computers of all sorts to connect to the internet via Wi-Fi in homes, offices and coffee shops, and for mobile phones of different makes on different networks to communicate with one another.
A standard often relies on intellectual property created by many different companies. Disputes over what this intellectual property is worth have been surprisingly rare. Usually, companies agree to license their “standard-essential patents” (SEPs) on “reasonable and non-discriminatory”, or RAND, terms.
ECONOMIC historian (and former professor of mine) Nick Crafts has written a very nice piece at Vox on historical lessons on escaping a liquidity trap. Expansionary "Abenomics" in Japan seems to be working, and seems to mirror Britain's successful policy experience from 1933 to 1936. Then Britain's Treasury first slashed interest rates to near zero. Next:
[A] price-level target was announced by Chamberlain in July 1932 which aimed to end price deflation and return prices to the 1929 level...
Third, the Treasury adopted a policy of exchange-rate targets that entailed a large devaluation first pegging the pound against the dollar at 3.40 and then against the French franc at 77...
Our economics correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts
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