Browse

In the wake of recent events, macroeconomics has come under intense scrutiny, often from non-economists. Yet because macroeconomics is now a highly technical undertaking, it will be very hard for non-specialists on their own to sift through the body of knowledge we have accumulated, or to assess the manner in which we structure inquiries. Unless one finds this satisfactory, and I do not, the profession has some work to do. This book is an attempt to describe, in entirely nontechnical (i.e. plain English) terms, where modern macroeconomics gets its ideas from and how it goes about its business. The target audience is that of thoughtful and curious readers who lack the narrow background or time needed to read either advanced textbooks or articles in academic economics journals.

American monetary policy is formulated by the Federal Reserve and overseen by Congress. Both policy making and oversight are deliberative processes, although the effect of this deliberation has been difficult to quantify. This book provides a systematic examination of deliberation on monetary policy from 1976 to 2008 by the Federal Reserve’s Open Market Committee (FOMC) and House and Senate banking committees. The innovative account employs automated textual analysis software to study the verbatim transcripts of FOMC meetings and congressional hearings; these empirical data are supplemented and supported by in-depth interviews with participants in these deliberations. The automated textual analysis measures the characteristic words, phrases, and arguments of committee members; the interviews offer a way to gauge the extent to which the empirical findings accord with the participants’ personal experiences. Decade after decade, Fed chairman after Fed chairman, one feature is evident in the discourse between central bankers and US legislators: Fed chairmen tend to talk about the technicalities of monetary policy while senators and representatives talk about other things, such as jobs, fiscal policy, energy policy, education, and so on. All too often they simply talk past one another. Analyzing why and under what conditions deliberation matters for monetary policy in the FOMC, the book identifies several strategies of persuasion used by committee members, including Paul Volcker’s emphasis on policy credibility and efforts to influence economic expectations.

One lens through which to view global economic interdependence and the spillover of shocks is that of decoupling (and then recoupling). Decoupling between developed and developing countries can be seen in the strong economic performance of China and India relative to that of the United States and Europe in the early 2000s. Recoupling then took place as developing countries sank along with the developed world during the deepening financial crisis of 2008. This volume examines patterns of global economic interdependence and the propagation of shocks in an increasingly integrated world economy. The contributors discuss such topics as the transmission of exogenous shocks; causes of business cycle synchronicity; the differences between global and regional shocks; the South-South trade relationship and its effect on decoupling; vertical specialization and Mexico’s manufacturing exports; growth prospects in China, the United States, and Europe after the financial crisis; and the evolving role of the U.S. dollar in international monetary architecture.

Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. This book offers an original, unified perspective on these questions. In a slight, but significant, departure from the standard theory of finance, it shows how imperfect pledgeability of corporate income leads to a demand for, as well as a shortage of, liquidity, with implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. From this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.

The book claims that liquidity issues are at the heart of recent financial crises, and their analysis helps to explain phenomena that are alien to mainstream macroeconomic models. To make this point, the book first reviews crisis episodes starting with Mexico's Tequila crisis in 1994/5 and including the Great Recession in developed-market economies. The narrative reveals wide gaps in conventional models and the existence of stubborn intellectual inertia in dealing with these crises. The book devotes an entire chapter to discussing liquidity, highlighting that resilience with respect to Liquidity Crunch differs across liquid assets. This observation helps to rationalize a large set of phenomena, including resilience of the US dollar vis à vis other dollar-denominated liquid assets; global contagion in financial markets; effectiveness and limitations of central bank monetary policy; and negative effects of low and persistent international interest rates. Some of these phenomena – and others like secular stagnation – become evident once liquidity is explicitly introduced in mainstream models. In two econometric studies the book (1) focuses on Liquidity Crunch as an important component of “non-regular” recessions; and (2) identifies factors likely to contribute to Sudden Stop vulnerability in emerging-market economies.

For over a hundred years, many have envisioned a cashless society, whether utopian or dystopian. Now, in an era of mobile money and Bitcoin, it seems that cashlessness might not be far off. In recent years, there has been a flurry of payment innovation. Many of these new technologies offer a dream of money as pure information: seamless andinstantaneous. But instead of becoming dematerialized, new money technologies rely on as much, if not more, stuff than cash ever did. This book investigates the material of money past, present, and future. It is a collection of essays by scholars across fields, including anthropology, archaeology, media, technology, history, as well as journalists and industry professionals. Each essay focuses on one transactional object, including cash, checks, cards, and cryptocurrencies. Some of these items are valuable (such as bits of silver traded by libertarians), some are obsolete (such as first generation ATMs), and some are trash (such as receipts carefully collected in a cigar box). By attending to the stuff of money, these scholars investigate questions of value, authority, community, identity, and materiality.Contributors: Bernardo Bátiz-Lazo, Maria Bezaitis, Finn Brunton, Lynn H. Gamble, David Graeber, Jane I. Guyer, Keith Hart, Sarah Jeong, Alexandra Lippman, Julien Mailland, Scott Mainwaring, Bill Baurer, Taylor C. Nelms, Rachel O’Dwyer, Michael Palm, Lisa Servon, David L. Stearns, Bruce Sterling, Lana Swartz, Whitney Anne Trettien, Gary Urton

Fiscal policy makers have faced an extraordinarily challenging environment over the last few years. At the outset of the global financial crisis, the International Monetary Fund (IMF) for the first time advocated a fiscal expansion across all countries able to afford it, a seeming departure from the long-held consensus among economists that monetary policy rather than fiscal policy was the appropriate response to fluctuations in economic activity. Since then, the IMF has emphasized that the speed of fiscal adjustment should be determined by the specific circumstances in each country. Its recommendation that deficit reduction proceed steadily, but gradually, positions the IMF between the fiscal doves (who argue for postponing fiscal adjustment altogether) and the fiscal hawks (who argue for a front-loaded adjustment). This volume brings together the analysis underpinning the IMF's position on the evolving role of fiscal policy. After establishing its analytical foundation, with chapters on such topics as fiscal risk and debt dynamics, the book analyzes the buildup of fiscal vulnerabilities before the crisis, presents the policy response during the crisis, discusses the fiscal outlook and policy challenges ahead, and offers lessons learned from the crisis and its aftermath. Topics discussed include a historical view of debt accumulation; the timing, size, and composition of fiscal stimulus packages in advanced and emerging economies; the heated debate surrounding the size of fiscal multipliers and the effectiveness of fiscal policy as a countercyclical tool; coordination of fiscal and monetary policies; the sovereign debt crisis in Europe; and institutional reform aimed at fostering fiscal discipline.

While always episodic in nature, capital flows to emerging market economies have been especially volatile since the global financial crisis. After peaking at $680 billion in 2007, flows to emerging markets turned negative at the onset of crisis in 2008, then rebounded only to recede again during the U.S. sovereign debt downgrade in 2011. Since then, flows have continued to swing wildly, leaving emerging market policy makers wondering whether they can put in place policies during the inflow phase that will soften the blow when flows subsequently recede. This book offers the first comprehensive treatment of policy measures intended to help emerging markets contend with large and volatile capital flows. The book explains that, in the spirit of liberalization and deregulation in the 1980s and 1990s, many emerging market governments eliminated capital inflow controls along with outflow controls. By 2012, however, capital inflow controls were again acknowledged as legitimate policy tools. Focusing on the macroeconomic and financial-stability risks associated with capital flows, the book combines theoretical and empirical analysis to consider the interaction between monetary, exchange rate, macroprudential, and capital control policies to mitigate these risks. It examines the effectiveness of various policy tools, discuss the practical considerations and multilateral implications of their use, and provide concrete policy advice for dealing with capital inflows.