Things to Read on the Evening of October 16, 2014
Must- and Shall-Reads: (MOVE UP TO BELOW “PLUS” AND BEFORE “AND OVER HERE”)
- New Evidence on the Impact of Financial Crises in Advanced Countries
- Revisiting the Impacts of Teachers
- Introduction to Agent-Based Models with respect to the Future of Macroeconomics
- Economist’s View: Jean Tirole Wins Nobel Prize in Economic Sciences
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Markets Pricing in Kocherlakota-Like Interest Rates: “Minneapolis Fed President Narayana Kocherlakota may be the biggest dove on the Federal Reserve, but his interest-rate projections would make him just an ordinary trader on Wall Street. The current Fed funds futures contract is pricing in interest rates of 2% at the end of the third quarter of 2017. The lowest “dot” on the Fed’s dot plot of interest rates is for rates of 2% at the end of 2017. And the next lowest dot is at 2.63%. It’s not known for certain that the 2% dot for 2017 comes from Kocherlakota, but his speeches are consistent with such a view. For example, unlike his colleagues, he doesn’t think any rate hike would be appropriate next year. He doesn’t expect inflation as measured by the PCE price index to get back to 2% until 2018. And he doesn’t want any reduction in accommodation unless the outlook is for inflation to be at 2% in two years time…”
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More QE Might Be Appropriate If U.S. Economy Faltered: “If we really get a sustained, disinflationary forecast… I think moving back to additional asset purchases in a situation like that should be something we should seriously consider…. The concern is the next steps that [the ECB] may need. That worries me a little bit. Will their policy response be as timely and aggressive as needed?… The markets are pricing in a lot of other things that might happen and a lot of those are negative. The cross currents are really the story.”
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Notes on Cutler’s The Quality Cure: “I thought one of the best aspects of the book was the expression of optimism and realism throughout—evidence-based and without overbearing cheer leading. Too many health policy books take a grumpy ‘it’s all terrible’ tone. Too many also suggest solutions that are politically unrealistic. Cutler’s is decidedly different. He’s neither grumpy nor naive about what’s possible. I also liked that the book didn’t belabor any points. At 171 pages (of main text), given what it covers, it is laudably efficient. Few books are.”
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A Distant Mirror of Debt, Default, and Relief: “We take a first pass at quantifying the magnitudes of debt relief achieved through default and restructuring in two distinct samples: 1979-2010, focusing on credit events in emerging markets, and 1920-1939, documenting the official debt hangover in advanced economies that was created by World War I and its aftermath. We examine the economic performance of debtor countries during and after these overhang episodes, by tracing the evolution of real per capita GDP (levels and growth rates); sovereign credit ratings; debt servicing burdens relative to GDP, fiscal revenues, and exports; as well as the level of government debt (external and total). Across 45 crisis episodes for which data is available we find that debt relief averaged 21 percent of GDP for advanced economies (1932-1939) and 16 percent of GDP for emerging markets (1979-2010), respectively. The economic landscape after a final debt reduction is characterized by higher income levels and growth, lower debt servicing burdens and lower government debt. Also ratings recover markedly, albeit only in the modern period.”
Should Be Aware of:
- “Leon Panetta has served three presidents, and one thing has been constant each time — putting numero uno first”
- “Just a Website” (Update: McConnell proposes increasing KY taxes by $700M/year!) | ACASignups.net
- Private Companies Are Driving China’s Growth
- Of Gamers, Gates, and Disco Demolition: The Roots of Reactionary Rage
- Abortion Green Lanternism: “Atrios is making sense: ‘What was especially maddening about Saletan-esque arguments over the years, aside from their clear wrongness, was that he seemed to truly believe that if only pro-choice people would admit it was all so icky and horrible then anti-abortion people would just surrender and go home. It was the position that only a High Priest Of Punditry could take, that the discourse was more important than the policy.’ There were a lot of pathologies in the general pundit discourse about abortion in the preceding decade (which, thankfully, seem to be a little less common now.) But one of the strangest is the idea that there was some rhetorical strategy that could end the underlying conflict. And it’s particularly odd in the context of abortion, where public opinion has been remarkably stable since the issue became politically salient in the mid-60s, all the clever rhetorical strategies of both sides aside. Framing and messaging are overrated in general, and abortion is a particularly strong case in point even though it’s an issue where people seem to be particularly obsessed with it.”