Finance Basic To Advance Level Knowledge

My latest Macro Musings podcast is with David Andolfatto. David is a vice president of the St. Louis Federal Reserve Bank and a professor of economics at Simon Fraser University. He has published widely in the area of monetary economics and has done so in many top journals. David is also one of the few Fed economists that engages in broader economic conversations via blogging and tweeting. So it was a real treat to have him on the show. David joined me to discuss a number of interesting topics. We  begin by covering what it is like to work at the Federal Reserve and, in particularly, at the St. Louis Federal Reserve Bank. We then mull over the issue of whether banks should be increasingly financed by equity rather than short-term debt as a means to stem financial panics. The conversation then moved to the importance of looking at the consolidated balance sheet of the government when considering how macroeconomic policy actually influences aggregate nominal spending. Finally,...

The Wall Street Journal reports Fed officials are once again signaling their desire to raise interest rates:  Federal Reserve officials are looking more confidently toward an interest-rate increase before year-end, possibly as early as September, now that financial markets have stabilized after Britain’s vote to leave the European Union and the economy shows signs of picking up.  This narrative should sound familiar. Since mid-2014 the Fed has been talking up interest rate hikes-- as seen by the movements in fed fund futures rate --but only has a 25 basis point rate increase to show for it. This is because the Fed's plans often bump up against unexpected economic developments. And lately, this seems to be happening in a cycle that goes as follows: the Fed talks up interest rate hikes → bad economic news emerges → the Fed dials down its rate hike talk → good economic news emerges → repeat cycle. To see this cycle, recall what has happened this year. After the FOMC did i...

My latest Macro Musings podcast is with Robert Hall. Bob is a professor of economics at Stanford University. He is the former president of the American Economic Association, a member of the National Academy of Sciences, a fellow of the Econometric Society, and a fellow of the Society of Labor Economists. He has published widely in many areas of economics including labor, public finance, international finance, and macroeconomics. Bob is also chair of the National Bureau of Economic Research’s recession dating committee.  Bob joined me to discuss how his recession dating committee determines the official turning points in the business cycle. We also cover his recent work on the the post-2009 slump and the causes behind it. Along way, we touch on the importance of the ZLB, secular stagnation, the global decline safe asset yields, and more. We close by discussing his preferred approach for monetary policy. It was a fascinating conversation throughout. You can listen to the...

My latest Macro Musings podcast is with Mark Thoma of the University of Oregon, the Fiscal Times, and CBS Money. Mark is also the author of Economist's View , one of the original and premier blogs covering macroeconomic issues.  Mark sat down with me to discuss a number of interesting questions. First, we covered the impact blogging has had on academic economists. Is blogging now required to be a successful academic economist? Will tenure one day be granted, in part, based on one's blogging efforts? Is blogging good PR for a university's department of economics? Finally, does blogging influence policy making?  Second, we discussed recent macroeconomic issues. What caused the Great Recession? Was monetary and fiscal policy responsive enough to the crisis?  Could macroeconomic policy have done more? Is secular stagnation real and have we truly exhausted technical innovations? Is there a safe asset problem? Finally, Mark discusses his work on the political b...

My latest Macro Musings podcast is with Joe Gagnon of the Peterson Institute for International Economics. Joe is a senior fellow at the Peterson Institute of International Economics and formerly worked for the Federal Reserve Board of Governors as an associate director for both the Division of International Affairs and the Division of Monetary Affairs. Joe joined me for a fascinating discussion on the Fed's large scale asset programs, also known as quantitative easing (QE). Drawing upon his experience at the Board of Governors as well as the literature on large scale asset purchase, Joe explains the theory and consequences of the Fed's QE programs. We also discuss the QE programs implemented by the Bank of Japan and the European Central Bank and consider whether central banks can "run out of ammunition." Finally, we also cover the outlook for the global economy and the implications of Brexit. It was a great conversation throughout. You can listen to the p...

Okay, so Brexit did not cause the biggest money demand shock since 2008. Global equity markets, as noted by Kelly Evans, have regained much of their losses since the Brexit vote. Also, the initial surge in the trade-weighted dollar that had me worried appears to have peaked with just over 2 percent growth. This is good news that I did not expect. This is not to say, however, that Brexit has had no lasting negative effect on financial markets. One of the concerns I initially raised was that Brexit would accelerate the global race to the bottom for safe asset yields. The 10-year treasury yield is now drifting around 1.45 percent--an almost 30 basis point decline since the Brexit vote. The decline is almost 40 basis points if we look back to early June when polling first showed Brexit pulling ahead in the polls. A similar pattern occurs for the 10-year German bond yield as seen in the figure below. This sustained decline in safe yields is a non-trivial matter. As I have note...