Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Get Ready for Lift Off

by Robert Kahn

While markets are debating whether the Fed will raise interest rates in September, a more challenging question is how will they implement that policy change.  There is a new blog by Stephen Cecchetti and Kim Schoenholtz that cuts through the clutter and clearly lays out how the Federal Reserve will operate monetary policy once it lifts off from the zero lower bound. As they note, their paper draws on a valuable primer by Federal Reserve economists Ihrig, Meade, and Weinbach that was recently released on the topic. (For disclosure purposes, I am married to one of the authors of the Fed paper.) Both are well worth reading.

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The Fallacy of Euro-Area Discipline

by Robert Kahn

Throughout the Greek crisis, policymakers have acted on the assumption that Greece’s best chance at sustainable growth is through the conditionality and discipline of an IMF-EU adjustment program. Already, the desire to stay in the eurozone and receive the promised rescue package of at least €86 billion has led to significant legislative measures, and the ESM and IMF programs under negotiation will be comprehensive in the scope of their structural reforms. In contrast, “Grexit” would be chaotic, and at least initially, make it difficult for any government to reach consensus on strong policies needed to restore durable growth. In that environment, the boost to growth from devaluation could prove short-lived.

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Greek Polls Close; Surveys Say No

by Robert Kahn

The polls have closed in Greece and the initial surveys show a narrow win for the “No” side.  One GPO poll, for example, had Yes at 48.5%, No at 51.5%, within the margin of error; others also show a No lead of 3-4 points.  As I understand it, these polls are not exit polls–they were done by phone rather than as voters exited.  Phone polls are quite sensitive to assumptions about those difficult to reach, including the elderly (a majority who are expected to vote yes) and the youth (expected to vote no by a large majority). So, too early to call.  Despite this uncertainty, the major Greek TV stations are all predicting a victory for the No side, rejecting the policy measures earlier offered by creditors.

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A New Greek Proposal? (updated)

by Robert Kahn
A New Greek Proposal? The head of the Eurogroup, Jeroen Dijsselbloem, convened a meeting of eurozone finance ministers to discuss Greece’s third bailout requests on June 30, 2015. (Yves Herman/Reuters)

There are reports this morning that the Greek government has made a new proposal (PDF) to break the deadlock, involving a two-year bailout program to be funded from European facilities (e.g., ESM) and with explicit debt relief, but without the IMF financial involvement. Eurozone finance ministers will review the proposal in a call tonight.

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October Monthly: Breaking the Sanctions Code

by Robert Kahn

At last week’s World Bank and IMF meetings, I heard sharply divided views about the future path of sanctions and what lessons should be drawn from their use against Russia. Have they been successful, and at what cost to the West? Should sanctions be extended to the payments system, which enhances their power but risks damaging a global public good? What signal does it send to other countries? With growing evidence that sanctions are materially damaging the Russian economy, concerns have been raised that sanctions could become too easy an option for U.S. policymakers.

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Russian Sanctions: Europe Prepares to Act

by Robert Kahn

The Europeans look set to surprise us with significant economic sanctions against Russia (see here and here) that exceed in some respects U.S. measures. The United States likely would expand their sanctions in parallel. I yesterday published an op-ed on what we should make of the moves, and assuming reports of an agreement are true, I think it is worth highlighting four takeaways from that piece and recent developments:

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Addressing America’s Infrastructure Challenge

by Robert Kahn

America’s woeful lack of infrastructure spending is well appreciated.  What is missing is action to address it.  My colleague Heidi Crebo-Rediker writes that the Administration has now launched a new Transportation Investment Center to share best practice, provide technical assistance, and give support for accessing credit programs for new infrastructure projects. This one-stop shop within the Department of Transportation has much in common with (and looks to draw heavily on) Heidi’s earlier proposal for an “Infrastructure USA” initiative.  While no silver bullet, it’s a valuable first step.

Russian Sanctions: The United States Takes the Lead

by Robert Kahn

The United States has taken what, on first read, looks to be a significant step today, extending sanctions ( see also here) to block new debt and equity issuance by a number of energy, financial and military companies.  It is not quite full “sectoral” sanctions–both because it is limited in what it blocks (new debt and equity of maturity greater than 90 days) and because it excludes Sberbank, which holds the majority of Russian deposits. But I would argue that the reach of this new executive order in terms of institutions covered is sufficiently broad that the effects on the Russian financial system could be systemic.

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