2018-07-19 18:38:00 Thu ET
federal reserve monetary policy treasury dollar employment inflation interest rate exchange rate macrofinance recession systemic risk economic growth central bank fomc greenback forward guidance euro capital global financial cycle credit cycle yield curve
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.
2018-01-17 05:30:00 Wednesday ET

European Union antitrust regulators impose a fine on Qualcomm for advancing its key exclusive microchip deal with Apple to block out rivals such as Intel an
2019-03-07 12:39:00 Thursday ET

A physicist derives a mathematical formula that success equates the product of both personal quality and the potential value of a random idea. As a Northeas
2019-11-05 07:41:00 Tuesday ET

The Trump administration expects to reach an interim partial trade deal with China. This interim partial trade deal represents the first phase of a comprehe
2023-08-14 09:25:00 Monday ET

Peter Isard analyzes the proper economic policy reforms and root causes of global financial crises of the 1990s and 2008-2009. Peter Isard (2005) &nbs
2019-08-14 10:31:00 Wednesday ET

Netflix suffers its first major loss of U.S. subscribers due to the recent price hikes. The company adds only 2.7 million new subscribers in 2019Q2 in stark
2019-05-05 10:34:00 Sunday ET

Former Vice President Joe Biden enters the next U.S. presidential race with many moderate-to-progressive policy proposals. At the age of 76, Biden stands ou