Economics
Book notes: The power of a single number, by Philipp Lepenies
Lepenies offers a brief but very readable treatment of GDP's political history, drawing out some important lessons in the process
Mervyn King on Brexit, crisis supervision, economic rebalancing and reforming the IMF
The former Bank of England governor discusses Brexit, radical regulatory reform, the difficulties rebalancing the European and global economies and an overhaul of the International Monetary Fund
Canadian working paper examines effect of downward nominal wage rigidity on wage growth
Average wage growth higher due to DNWR after recession, authors note; signs of heterogeneity in DNWR effects
Economists add to theory and empirics of economy’s non-linear dynamics
Paper by Bank of England economists finds “strong evidence” of non-linearity in UK data, while Markus Brunnermeier and Yuliy Sannikov expand theory of financial amplification mechanisms
Book notes: The euro and the battle of ideas, by Markus K Brunnermeier, Harold James and Jean-Pierre Landau
The authors have produced a fascinating and informative book that offers suggestions on how differences in beliefs can be overcome
More work needed to make case for GDP-linked bonds – BoE paper
The design of GDP-linked bonds needs to align macroeconomic need with investor demand, according to a paper authored for the G20 summit; clearer guidelines and principles could aid adoption
US inflation target within ‘hailing distance’, says Fischer
The Fed is “close” to its targets says vice-chair; despite recent weak GDP figures, Fischer expects investment to recover in coming months
Fiscal stimulus works even in debt-driven recessions – Cleveland Fed paper
Study uses defence spending to estimate fiscal multiplier, finding it is higher in areas with larger debt burdens, contrary to the fears of some economists
RBNZ better at forecasting growth and inflation than exchange rate, notes study
Economists compare judgement-based forecasts with benchmark set by suite of statistical models, finding judgement tends to work well, but both types of forecast struggle with exchange rates
Bullard backs new approach to forecasting
Idea of economy converging to a single steady state has “likely outlived its usefulness”, St Louis Fed president says; instead reserve bank will now focus on regime-based forecasts
UK inflation climbs in first post-Brexit data
Prices rose 0.6% in the year to July, the highest inflation number for nearly two years, with signs the effect of the UK’s Brexit vote may be starting to feed through
BoE paper finds fault with empirical methods for studying contagion
Review of spillover and contagion literature finds methods plagued by bias and heteroskedasticity, concluding no single technique is flawless, but some offer a partial solution
Okun’s law is empirically robust but presents modelling problems, researchers say
Economists need to find more sophisticated methods to model the relationship between financial and labour markets, say the authors of an occasional paper published by the ECB
Credit contractions are significant cause of unemployment, researcher says
Data from 20 OECD countries shows that contractions in credit affect total, youth and long-term unemployment measures, a working paper from the Bank of Austria argues
Climbing ‘Mount Economy’
The BIS’s quest for financial stability-oriented monetary policy throws up questions not only about decision-making but also how one should think about economics, as Claudio Borio explains
BoE research finds support for Phillips curve in micro data
Authors turn to direct measures of firms’ expectations and employ new instrumental variables in search of empirical support for the Phillips curve
Blanchard sees reformed DSGE as ‘central’ to future of macroeconomics
Former IMF chief economist says DSGE models are “seriously flawed” but “eminently improvable”, and will have a leading role to play in the future
Icelandic paper finds ‘striking’ ties between financial cycle and real economy
Authors identify strong financial cycle linked to global factors, which impacts macro variables including consumption and government spending; paper suggests range of policy responses
Croatian National Bank sees inflation recovering this year and next
Annual CPI inflation fell to –1.8% in May, but the central bank expects it to pick up in the coming months, eventually rising to 1.2% in 2017
IMF paper examines drivers of India’s disinflation
‘Backward-looking’ expectations and domestic institutional structures amplified shocks, paper says; only 15% of India’s deflation is attributed to a decline in oil price
Argentinian central bank removes $5m dollar conversion cap
New measures aim to make it easier for businesses to acquire dollars; bank removes cap on dollar conversion and reduces paperwork involved
Money market interactions can explain behaviour of interest rate spreads, researchers argue
Paper analyses the interplay of unsecured and collateralised money markets; information obtained “can explain behaviour of interest rate spreads”, authors say
IMF paper explores link between imports and pro-cyclicality of productivity
Research finds firm-level import decisions explain “non-trivial” fraction of fluctuations in aggregate productivity in South Korean manufacturing sector between 2006 and 2012
BoJ research uses ‘global game’ to explain zero inflation
Model of monopolistic competition implies co-ordination between firms may lead to zero inflation