Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

Posts by Category

Showing posts for "United States"

Currency Wars: China Escapes a Manipulation Charge

by Robert Kahn

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.

Read more »

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

by Robert Kahn

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.

Read more »

The President’s (Economic) Inbox

by Robert Kahn

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.

Read more »

Brexit’s Threat to Global Growth

by Robert Kahn

Thursday’s Brexit vote wasn’t a “Lehman moment”, as some have feared. Instead, it was a growth moment. And that may be the greater threat. If policymakers respond effectively, the benefits could be substantial: a stronger global economy, and an ebbing of the political and economic forces now pressuring UK and European policymakers. Conversely, failure to address the growth risks could cause broader and deeper global economic contagion.

Read more »

Economic Optimism in the State of the Union

by Robert Kahn

The central economic message from President Obama in his State of the Union (SOU) speech last night was that the U.S. economy was on a strong footing and well prepared to prosper in a dynamic and rapidly changing global environment. This is hardly a surprising message, but notable coming at a time when the 2016 presidential campaign is being driven by populist messages of economic decline and aversion to globalization. Running briefly through a list typical of SOUs, the president noted job growth including in manufacturing, developments in clean and conventional energy, educational improvements including rising high school graduation rates and student loan relief, improved medical insurance coverage, and the recent bipartisan agreement on No Child Left Behind among his achievements. Indeed, with unemployment at 5 percent and growth at around 2.5 percent backed by highly accommodative monetary policy, the president had a good macroeconomic story to tell, while acknowledging that a great deal more had to be done to boost middle class incomes and improve economic security.

Read more »

After the Fed

by Robert Kahn

The Federal Reserve today delivered exactly what was expected: a liftoff in interest rates from the zero lower bound, coupled with strong assurances that the future rise in interest rates will be moderate. Markets reacted hardly at all to the statement and Janet Yellen’s press conference, beyond a bit of short covering, by and large seeing the decision as a comforting first step towards normalization at a time of significant global tensions. In sum: Read more »

IMF Reform Moves Forward

by Robert Kahn

There are reports this morning that House and Senate legislators have included language authorizing U.S. support for International Monetary Fund (IMF) reform in the $1.1 trillion spending package funding the government for the rest of FY16.  If this language reaches the president’s desk and is signed into law, it would be an important achievement and a positive reflection on the perseverance of U.S Treasury officials and congressional leaders to get this deal done. The package—first agreed to by the Obama administration in 2010—changes voting shares and governance for the institution at a critical time, bolstering the IMF’s credibility and its ability to play a lead firefighting role at times of crisis.  Failure to pass the legislation had become a substantial irritant for U.S. influence internationally, and resolving this is a win for good global economic governance.

Read more »

A U.S. Budget Deal that Matters

by Robert Kahn

This is what governing looks like.

When outgoing speaker John Boehner promised to “clean the barn up a little bit” before leaving, there was understandable skepticism that a large number of must-pass pieces of legislation could be sheparded through a sharply divided congress.  From that perspective, last night’s agreement on a budget framework—if it holds—looks to be an important step forward. While far from ideal budgetary policy, it removes substantial tail risk from U.S. economic policymaking between now and the election.

Read more »

Fed Holds Fire—China Matters

by Robert Kahn

The Federal Reserve’s decision to not raise rates today was the market’s consensus expectation. Nonetheless, U.S. and foreign bond markets have rallied on revised expectations for Fed policy. With four members of the Federal Open Market Committee (FOMC) now forecasting that interest rates will lift off only in 2016 or later, markets are now putting significant weight on a rate hike only next year.

Read more »