Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Ukraine: Economy Matters

by Robert Kahn
Value of the Ukrainian hryvnia against the dollar—closely watched by Ukrainians as an economic signal—has sharply depreciated due to recent turmoil in Kiev. (Source: Oanda.com) Value of the Ukrainian hryvnia against the dollar—closely watched by Ukrainians as an economic signal—has sharply depreciated due to recent turmoil in Kiev. (Source: Oanda.com)

A deal that would end the violence in Ukraine appears to be holding. It would produce early elections, a return to the 2004 constitution, and a national unity government. It would also set the stage for an urgent western effort to provide financing supported by an IMF program. Good news on the politics, though, does not equate to good news on the economy.

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When Is the Next X Date?

by Robert Kahn
Source: fms.treas.gov Source: fms.treas.gov

In my post yesterday, I mentioned in passing the uncertainty about when we would again hit the debt limit (“X Date”).  The question is complicated. Yesterday’s agreement extends the debt limit until February 7, and it allows the U.S. government to replenish or repay the extraordinary measures that it took in order to finance the deficit from May until yesterday.

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No Clear Fiscal Deadline, and That’s a Problem

by Robert Kahn

It now looks likely that the U.S. government will remain shut down until an agreement is reached on the debt ceiling, and that could take several more weeks.  Markets are starting to worry—global equities are lower, commodities and other growth-sensitive assets are down, and the dollar is weaker.  But market moves so far have been moderate, hardly suggesting panic.  The usual interpretation: markets are confident of a deal before the deadline.  But when is the deadline?  Turns out, it’s uncertain and it’s endogenous, depending importantly on how markets react in coming days.

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Sour on Europe

by Robert Kahn

The most recent Pew Survey on European attitudes (summary table below) shows that support for the European integration project is dropping.  My colleagues at CFR are far more able than I am to address the broader political ramifications of this shift.  A few points though on the link between economic growth, public opinion, and support for the European reform agenda.

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The Shrinking U.S. Labor Force and Fed Policy

by Robert Kahn

Does the large drop in the U.S. labor force participation rate justify a monetary policy that is easier, for longer, than suggested by our models or the Fed’s current description of its policy?  Chris Erceg and Andy Levin, two senior researchers at the Fed now on leave at the IMF, argue yes.  Their analysis will provide fuel to the monetary policy doves who argue the Fed is failing to meet its employment mandate, and points to a battle ahead.  But it doesn’t really settle questions about whether monetary policy is an effective tool for bringing these workers back into the work force, or whether it can be done without creating inflationary pressure (which speaks to other leg of the Fed’s mandate). Still, their paper is an important read.

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Our Long-Term Unemployment Challenge (In Charts)

by Robert Kahn

The reasons why employment has lagged in the recovery remains a central challenge for macro policymakers, influencing the fiscal debate as well as figuring prominently in Federal Reserve justification for its current unorthodox policies.  My colleague Dinah Walker points out a growing body of evidence that the problem of long-term unemployment is at the heart of the puzzle.

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Cyprus: Hope Trumps Reality

by Robert Kahn

Cyprus has reached a tentative agreement with the IMF-EU-ECB team (Troika) on the economic program that will be backed by its €10 billion rescue package.  The IMF will put €1 billion, small in absolute terms and relative to the one-third share that it has had in most of its European programs but a very high share (563 percent) of Cyprus’ contribution, or quota.  The plan is for European political approval in coming days, followed by legislative approval where needed during the course of April, and IMF Board approval in early May.  If Cyprus passes all the prior actions required in the program, it could get the first drawing on the package in mid-May, well ahead of their early June debt maturities.

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New IMF Outlook: No Love for Europe

by Robert Kahn
Data shows that monetary financial institution (MFI) loans to the eurozone private sector is contracting, most notably in peripheral countries. (Data source: European Central Bank http://sdw.ecb.europa.eu/) Data shows that monetary financial institution (MFI) loans to the eurozone private sector is contracting, most notably in peripheral countries. (Data source: European Central Bank http://sdw.ecb.europa.eu/)

 

The International Monetary Fund (IMF) has again downgraded its outlook, reducing its forecast for global growth by 0.1 percentage points to 3.5 percent this year and 4.1 percent next year.  For Europe, in particular, there is not much good news: Read more »