- 'The Future of Work: Why Wages Aren't Keeping Up'
- 'The Shrinking Deficit'
- 'International Money Mania'
- 'Do Asset Purchase Programs Push Capital Abroad?'
- 'Expectations in Dynamic Macroeconomic Models'
- Links for 08-13-15
Posted: 13 Aug 2015 12:51 AM PDT
This is from Robert Solow writing at Pacific Standard magazine:
The Future of Work: Why Wages Aren't Keeping Up: One of the more puzzling and damaging features of the American labor market in the last few decades has been the failure of real (i.e. inflation-adjusted) wages and benefits to keep up with the increase in productivity. ...
The custom is to think of value added in a corporation (or in the economy as a whole) as just the sum of the return to labor and the return to capital. But that is not quite right. There is a third component which I will call "monopoly rent" or, better still, just "rent." ...
The suggestion I want to make is that one important reason for the failure of real wages to keep up with productivity is that the division of rent in industry has been shifting against the labor side for several decades. This is a hard hypothesis to test in the absence of direct measurement. But the decay of unions and collective bargaining, the explicit hardening of business attitudes, the popularity of right-to-work laws, and the fact that the wage lag seems to have begun at about the same time as the Reagan presidency all point in the same direction: the share of wages in national value added may have fallen because the social bargaining power of labor has diminished. ...
Now I would like to connect this hypothesis with another change taking place in the labor market..., the casualization of labor. The proportion of part-time workers has been rising... So are the numbers of workers on fixed-term contracts and independent contractors...
Casual workers have little or no effective claim to the rent component of any firm's value added... If the division of corporate rents has indeed been shifting against labor, an increasingly casual work force will find it very hard to reverse that trend.
Posted: 13 Aug 2015 12:42 AM PDT
The Shrinking Deficit: From the WSJ: Budget Deficit Totaled $488 Billion For Year Ended July, Down 9% From Year Earlier...
The most recent CBO projection was for the fiscal 2015 budget deficit to be 2.7% of GDP. Right now it looks like fiscal 2015 will be under 2.4% (a significant improvement). ...
Is that a good thing?
Posted: 13 Aug 2015 12:33 AM PDT
International Money Mania: China is claiming that it's not devaluing the renminbi to gain competitive advantage, it's adding flexibility to prepare for the yuan as an international reserve currency, becoming part of the basket in the IMF's SDRs and all that. That's highly implausible as a story about what's happening right now; but it may be true that China's urge to loosen capital controls is driven in part by its global-currency ambitions. ...
So what are the advantages of owning a reserve currency? ...
What you're left with, basically, is seigniorage: the fact that some people outside your country hold your currency, which means that in effect America gets a zero-interest loan corresponding to the stash of dollar bills — or, mainly $100 bills — held in the hoards of tax evaders, drug dealers, and other friends around the world. In normal times this privilege is worth something like $20-30 billion a year; that's not a tiny number, but it's only a small fraction of one percent of GDP.
The point is that while reserve-currency status may have political symbolism attached, it's essentially irrelevant as an economic goal — and definitely not worth distorting policy to achieve. Someone needs to tell the Chinese, you shall not crucify this country on a cross of SDRs.
Posted: 13 Aug 2015 12:24 AM PDT
Thomas Klitgaard and David Lucca at the NY Fed's Liberty Street Economics"
Do Asset Purchase Programs Push Capital Abroad?: Euro area sovereign bond yields fell to record lows and the euro weakened after the European Central Bank (ECB) dramatically expanded its asset purchase program in early 2015. Some analysts predicted massive financial outflows spilling out of the euro area and affecting global markets as investors sought higher yields abroad. These arguments ignore balance of payments accounting, which requires any financial outflow from the euro area to be matched by a similar-sized inflow, absent a quick and substantial current account improvement. The focus on cross-border financial flows also is misguided since, according to asset pricing principles, the euro and global asset prices can move without any change in financial outflows. ...
The recent experience with quantitative easing in Japan helps illustrate our point. In late 2012, the yen started to depreciate with the increased likelihood that the country would expand its asset purchase program. In April 2013, when the policy was actually implemented, commentary similar to that on the ECB program anticipated a "wall of money" flowing out of Japan in search of higher yields and affecting global asset prices. Indeed, analysts worried that emerging countries would have trouble absorbing these flows, leading to asset price bubbles. While asset prices and exchange rates adjusted in Japan and abroad, a surge in outflows never occurred. ... The wall of money never materialized.
Nor does euro area data suggest substantial financial outflows. ...
The euro's fall has been a key channel through which the ECB's asset purchase policy has affected financial markets in the rest the world. However, the idea that foreign asset prices would be pushed up by a surge in money flowing out of the region, as some observers predicted, runs contrary to balance of payments accounting and asset pricing principles and should be discounted.
Posted: 13 Aug 2015 12:15 AM PDT
I will be here tomorrow:
Expectations in Dynamic Macroeconomic Models
Thursday, August 13
7:30 am Continental Breakfast (Vista Room II, Floor 12)
8:45 am Opening Remarks
9:00am Cars Hommes, University of Amsterdam, "Behavioral Learning Equilibria for the New Keynesian Model"
10.00 am Coffee
10:30 am Jasmina Arifovic, Simon Fraser University, "Escaping Expectations - Driven Liquidity Traps"
11:30 am Bill Branch, University of California, Irvine Perpetual, "Learning and Stability in Macroeconomic Models"
12:30 pm Lunch
2.00 pm Mordecai Kurz, Stanford University, "Stabilizing Wage Policy"
3:00 pm Diogo Pinheiro, CUNY Brooklyn, "Refinement of Dynamic Equilibriun"
4.00 pm Coffee
4:30 pm Arunima Sinha, Fordham University, "A Lesson from the Great Depression that the Fed Might have Learned: A Comparison of the 1932 Open Market Purchases with Quantitative Easing"
6:45 pm Conference Dinner, with address by James Bullard, President and CEO, Federal Reserve Bank of St. Louis.
Friday, August 14
7:30 am Continental Breakfast (Vista Room II, Floor 12)
8.30 am Damjan Pfajfar, University of Tilberg, "Are Survey Expectations Theory - Consistent? The Role of Central Bank Communication and News"
9:30 am Stefano Eusepi, Federal Reserve Bank of New York, "In Search of a Nominal Anchor: What Drives Inflation Expectations?"
10:30 am Coffee
11:00 am In - Koo Cho, University of Illinois, "Gresham's Law of Model Averaging"
12:00 p m Martin Ellison, Oxford University, "Time - Consistent Institutional Design"
1:00 pm Lunch
2:00 pm Klaus Adam, University of Mannheim, "Can a Financial Transaction Tax Prevent Stock Price Booms?"
3.00 pm Kevin Lansing, Federal Reserve Bank of San Francisco, "Explaining the Boom - Bust Cycle in the US Housing Market: A Reverse - Engineering Approach"
4:00 pm Coffee
4:30 pm Thomas Sargent, New York University, "Sets of Models and Prices of Uncertainty"
6:00 pm Adjourn
7: 00 pm Reception
Saturday, August 15
7:30 am Continental Breakfast (Wilder Room, Lobby Level)
8:30 am David Evans, University of Oregon, "Optimal Taxation with Persistent Idiosyncratic Investment Risk"
9:30 am Anmol Bhandari, "Fiscal policy and debt management with incomplete markets"
10:30 am Coffee
11:00 am Chris Gibbs, University of New South Wales, "Disinflationary Policies with Imperfect Credibility"
12:00 pm Kaushik Mitra, University of Birmingham, UK Comparing Inflation and Price Level Targeting: the Role of Forward Guidance and Transparency"
Posted: 13 Aug 2015 12:06 AM PDT
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