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links for 2009-03-04
Economist's View —
‘No Deal’ Republicans Map Disaster of Own Making - John M. Berry
Role-playing games - Free exchange
Social entrepreneurs - Understanding Society
Yet another cut at the recent retail price data - macroblog
More Navel-Gazing from Academic Economists - Freakonomics
Trade protection: Incipient but worrisome trends - voxeu.org
Permanent and Transitory Components of Real GDP - Brad DeLong
Greg Mankiw Gets Technical - Arnold Kling ...
"Evil" Or Realistic Bears?
Stefan Karlsson's blog —
Conservative Keynesian Greg Mankiw draws the wrath of left-liberal Keynesians Brad DeLong and Paul Krugman for being pessimistic about future growth, with Krugman this time being the one to engage in hyperbole and refer to Mankiw as "evil" for doubting Obama's projections of high growth. The DeLong-Krugman argument rests on historical experience that shows that growth tends to be rapid after deep slumps, as there are a lot of unemployed workers that can be employed quickly and so produce high growth. What is noteworthy in this context is that if you look at ...
Interesting Econometric Result of the Day: And the Prospects for a Growth Bounceback
Econbrowser —
The exchange between Brad Delong and Greg Mankiw ([1] [2], followed up by [3] [4]) reminded me of some earlier work Iqd done with Yin-Wong Cheung on the time series properties of real GDP, back in the "unit root" wars. Briefly, Mankiw was alluding to work with Campbell indicating GDP was well approximated as an ARIMA process, while Delong is arguing that using unemployment, which is trend stationary, indicates that indeed sharper increases in unemployment presage more rapid GDP growth. The former characterization is univariate in nature and the latter is ...
More Reasons for Despair: Angels on Pinheads
European Tribune —
... (Paul Krugman Blog, March 3, 2009) As Brad DeLong says , sigh. Greg Mankiw challenges the administrations prediction of relatively fast growth a few years from now on the basis that real GDP may have a unit root that is, theres no tendency for bad years to be offset by good years later. After picking up my jaw from the floor, I composed the following comment (now awaiting moderation): As if there was a need for more evidence that, as Jamie Galbraith put it, "most economists teach a theoretical framework that has been shown to be fundamentally useless". The unit root is ...
Lower Growth Now, Higher Growth Later
Toro's Running of the Bulls Market Blog —
An intriguing graph from Brad DeLong.
In other words, slower or negative economic growth and higher unemployment now leads to faster growth later. The CEA also notes that the deeper the recession, the greater the recovery.
However, the analysis does not include pre-WWII data. The causes of our current decline is most similar to the 1930s. But even including the 1930s, American growth does snap back to trend.
...
How should we make economic forecasts?
VoxEU.org: Recent Articles —
... , accusing Mankiw of evil wonkishness . Brad DeLong weighed in too, pointing out that a univariate analysis was useless ; unemployment must be included in the analysis. The exchange emphasises not just that economic variables are important in forecasts, but that econometric issues matter. If GDP is trend stationary, the implications are very different for forecasting than if GDP is a random walk with drift one will correct to some equilibrium, the other won t. Economic nuances matter too what other variables make up this equilibrium relationship? Historically, there has ...
The burden of debt
Paul Krugman —
... good lesson; assume that in the future the federal government will have to amortize debt over a quite short period, even though it never had to in the past; compare this inflated debt burden with a narrow piece of the federal tax base; and ignore the likely growth in the tax base over the next decade. I’m not convinced. *Contrary to what some think, we’d actually expect growth over the next decade to be somewhat above trend, as the economy picks up some of the current slack. That’s what the historical record tells us actually happens.
