Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

France After the Election: What Next for Economic Policy in Europe?

by Robert Kahn Monday, April 24, 2017
Marine Le Pen celebrates after early results in the first round of 2017 French presidential election, in Henin-Beaumont. REUTERS/Charles Platiau

French election results show Emmanuel Macron in first place with 23.9 percent of the vote and Marine Le Pen in second with 21.4 percent, setting the stage for a run-off election on May 7. Early polls show a comfortable edge for Macron, the pro-E.U. former economy minister who ran on a campaign of ambitious economic reform including labor market deregulation and lower corporate taxes (though there will be questions about where supporters of Jean-Luc Mélenchon will land, or whether they will vote at all). While the result was expected, markets had become quite jittery in recent days and, unsurprisingly, rallied as results came in. The euro this morning is 2 percent stronger, reaching a five-month high at 1.09 to the dollar, and gold as well as other safe-haven investments have sold off. Investors are clearly relieved with the result that put Macron into the second round. But political risk is likely to remain an endemic feature in European and global markets, and European policymakers face a full calendar of challenges over the course of the year without a compelling vision about how to address the populist pressures sweeping the region.

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Currency Wars: China Escapes a Manipulation Charge

by Robert Kahn Monday, April 17, 2017

The U.S. Treasury released its semi-annual exchange rate report on Friday, and as signaled by President Trump it did not cite China (or any other country) as an exchange manipulator. There had been earlier speculation, and some concern, that Treasury would substantially rewrite the criteria to meet the President’s pre-election pledge, but the report plays it straight down the middle. No country meets all three existing criteria for manipulation of their exchange rate for competitive gain, though six countries—China, Germany, South Korea, Taiwan, Japan, and Switzerland—are placed on a watch list. At the same time, one can read in the report’s analysis a toughening of exchange rate policy, at least prospectively, in its calls for an ambitious set of reforms in the monitored countries, and its commitment to “aggressively and vigilantly monitoring and combating unfair currency practices”. On balance, the report reaffirms that, while trade and not exchange rates is likely to be the primary battleground for U.S. economic relations in the future, exchange rates remain a flash point.

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Dutch Elections and the European Economy

by Robert Kahn Thursday, March 16, 2017

European markets celebrated the strong electoral showing by Prime Minister Mark Rutte’s party (VVD), which looks to ensure another term for him leading a center-right coalition in the Netherlands. The far-right party (PVV) led by Geert Wilders finished second, after leading in the polls through much of the campaign. Other parties performed well, supported by a strong turnout, ensuring a pro-euro coalition can be formed. The vote had become an early proxy for the broader nationalistic winds sweeping Europe. Test passed, the euro rallied more than 1 percent to a five week high of 1.07 against the dollar, and stocks rose across Europe on the news.

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The President’s Economic Agenda: the Fight Begins

by Robert Kahn Wednesday, March 1, 2017

President Trump’s address to a joint session of Congress last night highlighted the central economic themes that animated his campaign: a tougher policy on immigration and trade, a focus on infrastructure, broad deregulation, “massive” tax relief and the repeal and replacement of Obamacare. The unifying theme was economic nationalism and renewal.

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The Long-Term Economic Costs of the President’s Executive Order on Immigration

by Robert Kahn Monday, January 30, 2017

For all the human disruption and confusion associated with President Trump’s executive order on immigration released on Friday, it is also worth noting the potential for substantial negative macroeconomic dislocation from increased barriers to travel to the United States.  In October of last year, I along with my colleagues Ted Alden and Hedi Crebo-Rediker published a note looking at the economic effects of a Muslim travel ban. While the title highlighted a prospect of full ban, the central historical experience we drew on for our analysis was the use of intensified security measures after the 9/11 attacks. These measures can tell us a lot about what to expect from the current extreme vetting measures, particularly if the president’s order is expanded to include more countries over time.

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After the Italian referendum: a treacherous period for banks and growth

by Robert Kahn Monday, December 5, 2016

The post-referendum market response to Italy’s referendum mirrored the reaction following the Brexit and U.S. election votes: calm after a knee-jerk negative reaction.  After all, not much has changed—Prime Minister Renzi stays on in a caretaker role (perhaps through end year), after which it is expected a new government with similar political orientation would take over with a rather narrow mandate to pursue a revised constitutional reform plan, address critical governing issues such as migration, and complete a fix of the banks. Most market participants do not expect snap new elections. Italy today in this sense does not look much different than it did yesterday.

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The President’s (Economic) Inbox

by Robert Kahn Wednesday, November 9, 2016

The election of Donald Trump creates extraordinary uncertainty about the future course of U.S. economic policy. Markets don’t like extreme unknowns, and there are valid reasons to fear that Trump’s policy proposals on trade and our economic alliances would be seriously disruptive to the global economy. Global stocks fell sharply when signs of a Trump victory emerged Tuesday, but by mid afternoon Wednesday U.S. stocks were up as markets found their footing on hopes of fiscal stimulus.  Meanwhile, U.S. Treasury yields were up and the Mexican peso weakened. It is reasonable to expect that substantial market volatility will be the norm in coming weeks.

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