Consider the travails of the euro-area in terms of the macroeconomic policy trilemma (1/). Here is the framework: i. Balance of payments trouble when external credit dries up (sudden stop) ==> solvency threat via banking system and sovereign debt via lender-of-last-resort / contingent debt. ii. Maintenance of the existing monetary order (the system of irrevocably […]
Monthly Archives: March 2011
Framework for understanding the euro-area crisis
As a macro framework for analysis, consider the travails of the euro-area in terms of the macroeconomic policy trilemma (1/). Here is the framework: i. Balance of payments trouble when external credit dries up (sudden stop) ==> solvency threat via banking system and sovereign debt via lender-of-last-resort / contingent debt. ii. Maintenance of the existing […]
Intelligence squared debate: On the role of government in a recession.
The website is http://intelligencesquaredus.org/. Nouriel Roubini comes out very well in this. Thank God he is on this panel. Laura Tyson engages with the supply-siders on their own terms — “the government must balance its books, just like households do” (I am paraphrasing). The job of a well-trained and well-historied economist is to explain exactly the falsity […]
Update on euro-area periphery adjustment
Greece Ireland Italy Portugal Spain Inflation (HICP)Feb 2011 4.2 0.9 2.1 3.5 3.4 Labour costs2010q4 -6.6 -3.1 1.8 4.2* -0.8 REER (BIS)Jan 2011 -0.8 -5.9 -4.5 -1.5 -2.6 sources: Eurostat; national authorities. all figures are percent y/y* 2011q1. Note:euro (vs usd) change Jan2011/Jan2010 is -4.0%.euro (NEER; BIS) change Jan2011/Jan2010 is -7.8%. Since this issue is […]
USA risk: Alert – Fed could surprise markets with further easing in 2011
My article on the prospect of an unexpected Fed easing in 2011H2 is now available on the EIU ViewsWire.