Goldman Sachs chief economist Jan Hatzius proposes designing a new Financial Conditions Index (FCI).

Chanel Holden

2018-07-19 18:38:00 Thu ET

Goldman Sachs chief economist Jan Hatzius proposes designing a new Financial Conditions Index (FCI) to be a weighted-average of interest rates, exchange rates, stock prices, and credit spreads. Each weight corresponds to the direct marginal contribution of each macro variate to real GDP economic growth. Hatzius amends a New Keynesian macroeconomic model to embed an FCI in a Taylor monetary policy rule that induces the central bank to ease the FCI when either inflation or employment falls below mandate-consistent thresholds. This macroeconometric analysis suggests an FCI-driven policy rule for maintaining the neutral interest rate that better contains inflation near full employment.

The Trump administration's chief economic advisor Larry Kudlow engages in a hot and healthy debate with several economists who warn of an economic recession that might arise from the Sino-American trade war with higher U.S. budget deficits and tax cuts. Kudlow advocates the optimistic outlook for the U.S. economy in light of both robust employment and 3.5%-4% real GDP growth in mid-2018. Moreover, Kudlow even emphasizes that the current U.S. economic boom may continue until 2022-2024.

In contrast, some other eminent economists such as Mark Zandi (Moody's chief economist) and Ken Griffin (Citadel CEO) are less optimistic about the current U.S. economic boom. Zandi shares his fresh insight that the Federal Reserve continues its interest rate hike to dampen inflationary pressure until a recession occurs early in the next decade. Griffin considers a murkier outlook that the Trump tax cuts may have pulled forward both consumer and business demand.

The current economic boom is the second-longest in U.S. history and thus may or may not sustain in the next decade. Treasury Secretary Steve Mnuchin reiterates America’s long-term credible commitment to maintaining a strong greenback with minimal risk of a currency war. In accordance with Mnuchin's recent remarks after the G20 summit of finance ministers, Mnuchin needs to dismiss the arcane idea of U.S. dollar intervention.  

On balance, the U.S. Treasury and Federal Reserve can consider the new FCI in order to make better and wiser economic policy decisions.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Warren Buffett invests in American stocks across energy, transport, and finance etc.

Daphne Basel

2017-07-07 10:33:00 Friday ET

Warren Buffett invests in American stocks across energy, transport, and finance etc.

Warren Buffett invests in American stocks across numerous industries such as energy, air transport, finance, technology, retail provision, and so forth.

+See More

Tony Robbins explains in his latest book on personal finance that *patience* is the top secret.

Becky Berkman

2017-01-27 17:19:00 Friday ET

Tony Robbins explains in his latest book on personal finance that *patience* is the top secret.

Tony Robbins explains in his latest book on personal finance that *patience* is the top secret to successful stock investment. The stock market embeds an

+See More

White House chief economic adviser Larry Kudlow points out that the recent U.S. dollar strength shows a clear sign of investor optimism.

James Campbell

2018-08-13 12:39:00 Monday ET

White House chief economic adviser Larry Kudlow points out that the recent U.S. dollar strength shows a clear sign of investor optimism.

White House chief economic adviser Larry Kudlow points out that the recent U.S. dollar strength shows a clear sign of investor confidence and optimism. Gree

+See More

The financial services industry needs fewer banks worldwide.

Daphne Basel

2022-08-30 10:32:00 Tuesday ET

The financial services industry needs fewer banks worldwide.

The financial services industry needs fewer banks worldwide. As long as banks have existed in human history, their managers have realized how not all dep

+See More

Agile business firms beat the odds by building faster institutional reflexes to anticipate plausible economic scenarios.

Fiona Sydney

2020-09-03 10:26:00 Thursday ET

Agile business firms beat the odds by building faster institutional reflexes to anticipate plausible economic scenarios.

Agile business firms beat the odds by building faster institutional reflexes to anticipate plausible economic scenarios. Christopher Worley, Thomas Willi

+See More

Most agile lean enterprises often choose to cut costs strategically to make their respective business models fit for growth.

Daphne Basel

2020-10-27 07:43:00 Tuesday ET

Most agile lean enterprises often choose to cut costs strategically to make their respective business models fit for growth.

Most agile lean enterprises often choose to cut costs strategically to make their respective business models fit for growth. Vinay Couto, John Plansky,

+See More