Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)
December 30
The Burden of the Debt
Paul Krugman argues that the Federal debt is not much of a problem. Laurence Ball and Greg Mankiw argue that the debt has distributional effects and that too much debt might trigger a collapse in demand for government bonds.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
Pages 704-706 “Government Budget Deficits”
Pages 823-827 “Should the Government Balance Its Budget?”
December 5
Eichengreen on U.S. Fiscal Policy
Barry Eichengreen argues that if the U.S. fails to bring its deficits under control, then investors will no longer want to buy or hold U.S. debt. When that happens, the consequences could be severe.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Pages 704-706 “Government Budget Deficits”
Pages 709-711 “Political Instability and Capital Flight”
September 29
Fred Bergsten on Net Exports
Fred Bergsten may have forgotten the connection between trade flows and capital flows.
Textbook References:
Pages 698-701 “The Market for Foreign-Currency Exchange”May 27
Feldstein on Greece
Greece needs to devalue its currency to regain competitiveness, but as long as it is part of the Eurozone, it cannot devalue.
Textbook References:
Page 704 “The Euros”Pages 718-721 “The Market for Foreign-Currency Exchange”
May 23
Strong Dollar = Strong Economy?
Christina Romer explains why the country's obsession with a strong dollar is misplaced.
Textbook References:
Page 706 “How a Weak Dollar Boosts Exports”
July 9
Prices Adjust When the Exchange Rate Can't
The crisis in Greece is affecting prices because Greece is part of the Euro area and can't devalue its currency.
Textbook References:
Pages 703-705 “The Prices for International Transactions: Real and Nominal Exchange Rates”
Page 704 “The Euro”
Pages 724-728 “Government Budget Deficits”
May 18
Is A VAT Good for Exports?
Alan Viard explains the fallacy in former President Clinton's assertion that a VAT would be good for exports.
Textbook References:
Page 251 “Income or Consumption Be Taxed? ”Pages 728-730 “Trade Policy”
October 20
More Shots in the Trade War
China imposes a new tariff on nylon in a tit for tat trade war with the U.S.
Textbook References:
Page 8 “Principal 5: Trade Can Make Everyone Better Off”
Chapter 3 “Interdependence and the Gains from Trade”
Pages 183-185 “The Effects of a Tariff”
Pages 728-730 “Trade Policy”
October 18
China's Dollar Problem
Kenneth Rogoff explains why the Chinese are worried about the value of the dollar.
Textbook References:
Pages 692-702 “The International Flows of Goods and Capital”Pages 718-721 “The Market for Foreign-Currency Exchange”
Pages 732-733 “Capital Flows from China”
October 5
A Victory for Mundell-Fleming
The size of the fiscal multiplier depends heavily on whether exchange rates are fixed or flexible.
Textbook References:
Chapter 32 “A Macroeconomic Theory of the Open Economy”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
June 15
Samuelson’s Words of Warning
Paul Samuelson worries that China may lose its appetite for dollars.
Textbook References:
Chapter 31 “Open-Economy Macroeconomics: Basic Concepts”
Chapter 32 “A Macroeconomic Theory of the Open Economy”