Macroeconomic policy

Roger Backhouse, Mauro Boianovsky, 19 May 2015

The notion of secular stagnation – a state of negligible or zero economic growth – is back in the headlines. Questions naturally arise about its intellectual antecedents. This column discusses how the concept rose and fell with the economic fortunes of advanced industrialised nations. Political trends and trends in economic theory played a part in its trajectory, with the notion closely connected to the idea that the level of government debt should be allowed to rise.

Nicolas Magud, Sebastián Sosa, 13 May 2015

Emerging markets are not the hot investment prospect they used to be. This column estimates that weaker private investment in these nations is a slowdown after a period of boom rather than an outright slump. Prospects for a recovery of business investment, however, are not promising. Commodity prices are expected to remain weak and external financial conditions are set to become tighter. 

Alan J Auerbach, Yuriy Gorodnichenko, 10 May 2015

The impact of fiscal policy on exchange rates is of key interest to policymakers. This column argues that unexpected government spending instantly affects exchange rates. The finding, based on daily data reporting of the US Defence Department, may suggest that unexpected government spending has broader macroeconomic effects as well. The results, however, do not hold is low-frequency data are used instead.

Olivier Blanchard, 01 May 2015

Complex forces are shaping macroeconomic evolutions around the world. In this column, IMF’s Chief Economist Olivier Blanchard describes some of these forces and provides an overview of the state of the world economy. Putting the forces together, the baseline forecasts are that advanced countries will do better this year than last, and emerging countries will slow down. Overall, the global growth will be roughly the same as last year, with the macroeconomic risks having slightly decreased.  

Fatih Guvenen, Fatih Karahan, Serdar Ozkan, Jae Song, 29 April 2015

Many policy design issues depend crucially on the nature of the idiosyncratic risks to labour income. The earning dynamics literature has typically relied on an implicit or explicit assumption that earnings shocks are log-normally distributed. This column challenges conventional knowledge by bringing in new evidence from a very large administrative dataset on US workers. It presents evidence suggesting income shocks exhibit substantial deviations from log-normality, and that shock persistence depends on income levels as well as the size and sign of the shock.

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