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

Carl Icahn mulls over steps to shake up the board of SandRidge Energy after it adopts a counter poison pill.

Jacob Miramar

2017-11-29 07:42:00 Wednesday ET

Carl Icahn mulls over steps to shake up the board of SandRidge Energy after it adopts a counter poison pill.

The octogenarian billionaire and activist investor Carl Icahn mulls over steps to shake up the board of SandRidge Energy after the oil-and-gas company adopt

+See More

Management consultants can build sustainable trust-driven client relations through the accelerant curve of business value creation.

Monica McNeil

2020-11-17 08:27:00 Tuesday ET

Management consultants can build sustainable trust-driven client relations through the accelerant curve of business value creation.

Management consultants can build sustainable trust-driven client relations through the accelerant curve of business value creation. Alan Weiss (2016)

+See More

Empirical tests of multi-factor models for asset return prediction

Apple Boston

2022-02-25 00:00:00 Friday ET

Empirical tests of multi-factor models for asset return prediction

Empirical tests of multi-factor models for asset return prediction  The capital asset pricing model (CAPM) of Sharpe (1964), Lintner (1965), and Bla

+See More

Rakesh Jhunjhunwala is India's equivalent to Warren Buffett in America.

Jonah Whanau

2016-10-19 00:00:00 Wednesday ET

Rakesh Jhunjhunwala is India's equivalent to Warren Buffett in America.

India's equivalent to Warren Buffett in America, Rakesh Jhunjhunwala, offers several key lessons for stock market investors: When the press o

+See More

Modern themes and insights in behavioral finance (Part 2)

Chanel Holden

2022-02-15 14:41:00 Tuesday ET

Modern themes and insights in behavioral finance (Part 2)

Modern themes and insights in behavioral finance   Lee, C.M., Shleifer, A., and Thaler, R.H. (1990). Anomalies: closed-end mutual funds. Journal

+See More

President Trump supports a bipartisan bill or the Foreign Investment Risk Review Modernization Act.

Charlene Vos

2018-07-21 13:35:00 Saturday ET

President Trump supports a bipartisan bill or the Foreign Investment Risk Review Modernization Act.

President Trump supports a bipartisan bill or the Foreign Investment Risk Review Modernization Act (FIRRMA), which effectively broadens the jurisdiction of

+See More