economics 442 macroeconomic policymchinn/e442_lecture1_f20.pdf · 2020. 8. 31. · economics 442...
TRANSCRIPT
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Economics 442Macroeconomic Policy
Lecture 19/2/2020
Instructor: Prof. Menzie ChinnUW Madison
Fall 2020
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Administrative Issues• Course website:
http://www.ssc.wisc.edu/~mchinn/web442_f20.htmland Canvas (BBCollaborate)
• OH: TBA• Textbook: Blanchard, Macroeconomics• Additional Readings: from IMF, CBO, web,
Econbrowser• NYT, FT, WSJ, Economist
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Administrative Issues
• Grading: 30% PS, 40% 2×MT, 30% paper• Dates:
- MT on 10/18, 11/19- Paper due on Thursday, 12/10
• Make-ups: None. Points are re-allocated if you have a legitimate excuse. No late assignments accepted
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Background• Course with policy orientation • Theoretical background consistent with
New Keynesian approach- sticky prices & information based frictions
in short run- Neoclassical (flex-price) in the long run
• Focus on interpretation of data, response to shocks
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Background
• Senior economist, White House Council ofEconomic Advisers
• Covered open economy macro, tradebalance, foreign economies (China, Japan, euro area)
• Consultant to International Monetary Fund (IMF), Congressional Budget Office (CBO), Bank of France
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Schedule and Readings
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A Deep, Deep Recession22,000
20,000
18,000
16,000
14,000
12,00000 02 04 06 08 10 12 14 16 18 20 22
Administration(Feb)
CBO(Jul)
SPF(Aug)
GDPbn.Ch.12$SAAR
econbrowser.com
PotentialGDP
Administration(Feb)
CBO(Jul)
SPF(Aug)
GDPbn.Ch.12$SAAR
econbrowser.com
PotentialGDP
-
Also an Atypical Recession
-.12
-.10
-.08
-.06
-.04
-.02
.00
.02
.04
.06
50 55 60 65 70 75 80 85 90 95 00 05 10 15 20
Real GDPgrowth rate(not annualized)
CBOf'cast
Real GDPgrowth rate(not annualized)
CBOf'cast
-
Big Sectoral Shock to Services
-.20
-.16
-.12
-.08
-.04
.00
I II III IV I II III IV2019 2020
Goods producing
Private services
Employment, in logs, 2020M02=0
econbrowser.com
Goods producing
Private services
Employment, in logs, 2020M02=0
econbrowser.com
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Big Sectoral Shock to Services
-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
I II III IV I II III IV2019 2020
Goods producing
Private servicesChange in employment, 000's, s.a.
econbrowser.com
Goods producing
Private servicesChange in employment, 000's, s.a.
econbrowser.com
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A Stop & Go Recession?
155,000
150,000
145,000
140,000
135,000
130,000
20,000
2,000
200
20
2 III IV I II III IV
2019 2020
Nonfarm payrollemployment, 000's[left scale]
Monthly Covid-19fatalities[right scale]
Nonfarm payrollemployment, 000's[left scale]
Monthly Covid-19fatalities[right scale]
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How Big Are Multipliers
9.52
9.56
9.60
9.64
9.68
9.72
2007 2008 2009 2010 2011 2012 2013
Actual
high multipliers
low multipliers \ \
Midpoint multipliers
Log GDPbn. Ch.09$,SAAR
www.econbrowser.com
PotentialGDP
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Crowding Out?
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
-2
0
2
4
6
8
10
12
14
16
70 75 80 85 90 95 00 05 10 15 20
Debt to GDP share[left scale]
10 yrTreasury, %[right scale]
10 yrTIPS, %
Debt to GDP share[left scale]
10 yrTreasury, %[right scale]
10 yrTIPS, %
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Monetary Policy & Taylor Rule
-
The Taylor Rule Falls Short
-
Unconventional Monetary Policy (I)(Credit Easing/Quantitative Easing)
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Unconventional Monetary Policy (II)a.k.a Forward Guidance
b
-
The New Monetary Framework
21,00020,00019,00018,00017,000
16,000
15,000
14,000
13,000
12,00000 02 04 06 08 10 12 14 16 18 20
Potential GDP (CBO)
Summers-Delong
Surveyof Prof.F'casters
GDP, SAARbn. Ch.2012$
econbrowser.com
Potential GDP (CBO)
Summers-Delong
Surveyof Prof.F'casters
GDP, SAARbn. Ch.2012$
econbrowser.com
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The Dollar’s Rise in Perspective
140
130
120
110
100
90
8075 80 85 90 95 00 05 10 15 20
Real value ofUS dollarReal value ofUS dollar
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The Dollar and Net Exports
140
130
120
110
100
90
80
-.06
-.04
-.02
.00
.02
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Value of US dollar[left scale]
Net Exportsto GDP[right scale]
Net Exportsex-oil to GDP
Value of US dollar[left scale]
Net Exportsto GDP[right scale]
Net Exportsex-oil to GDP
-
Dollar As Safe-Haven102
100
98
96
94
92
90
88
86 0
40
80
120
160
200
240
280
I II III IV I II III IV I II III IV2007 2008 2009
Lehman
Real valueof US dollar[left scale]
Economic PolicyUncertainty index[right scale]
Lehman
Real valueof US dollar[left scale]
Economic PolicyUncertainty index[right scale]
-
Dollar As Safe-Haven
114113112
111
110
109
108
107
106
105 0
100
200
300
400
500
600
I II III IV I II III2019 2020
Trump onbleach
Real valueof US dollar[left scale]
Economic PolicyUncertainty index[right scale]
Trump onbleach
Real valueof US dollar[left scale]
Economic PolicyUncertainty index[right scale]
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So Maybe Growing US Indebtedness Can Continue
-.6
-.5
-.4
-.3
-.2
-.1
.0
.1
.2
75 80 85 90 95 00 05 10 15 20
US Net InternationalInvestment Positionto GDP ratio
US Net InternationalInvestment Positionto GDP ratio
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Is the Phillips Curve Dead?
-.16
-.12
-.08
-.04
.00
.04
.08
1990 1995 2000 2005 2010 2015 2020
Outputgap
Shortfall
PCE y/yinflation
Outputgap
Shortfall
PCE y/yinflation
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Phillips Curve
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Which Measure Is the Right One?
-.02
-.01
.00
.01
.02
.03
.04
.05
-.12 -.10 -.08 -.06 -.04 -.02 .00 .02 .04
LOG(GDP12/GDP12_POT_CBOJUL20)
LOG(
PCON
S/PC
ONS(
-4))
m = 0.10R2 = 0.03
LOG(GDP12/GDP12_POT_CBOJUL20)
LOG(
PCON
S/PC
ONS(
-4))
m = 0.10R2 = 0.03
-.02
-.01
.00
.01
.02
.03
.04
.05
-.14 -.12 -.10 -.08 -.06 -.04 -.02 .00 .02
LOG(GDP12)-LGDP12_DELONGSUMLO
G(PC
ONS/
PCON
S(-4
))
m = 0.21R2 = 0.20
LOG(GDP12)-LGDP12_DELONGSUMLO
G(PC
ONS/
PCON
S(-4
))
m = 0.21R2 = 0.20