Found 401 article(s) in category 'Q3: Financial Crisis?'

Overdosing on Heterodoxy Can Kill You

Overdosing on Heterodoxy Can Kill You. Ricardo Hausmann, May 30, 2016. “Ever since the 2008 financial crisis, it has been common to chastise economists for not having predicted the disaster, for having offered the wrong prescriptions to prevent it, or for having failed to fix it after it happened. The call for new economic thinking has been persistent – and justified. But all that is new may not be good, and that all that is good may not be new.Link

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Reducing Long Term Deficits

Reducing Long Term Deficits. Martin Feldstein, May 26, 2016, Paper. “The most serious long-term challenge for the economic policy of the US Federal government is the explosive growth of the national debt that will occur unless there are specific policy actions. The ratio of the federal government debt to the GDP has doubled in the past decade from a level of less than 40 percent that prevailed for many years before the recent recession to 75 percent of GDP now. According to the most recent report by the Congressional Budget Office (2016), the debt ratio is already beginning to rise. The CBO projects that with current policies the debt to GDP ratio will reach 86 percent within ten years and the federal debt will be on its way to 155 percent of GDP by the year 2045. I suspect that even this disturbing forecast is too optimistic because a debt trajectory like that is likely to cause portfolio investors in the United States and elsewhereto conclude that the U.S. government has lost control of its fiscal policy …” Link

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Connectedness and Contagion: Protecting the Financial System from Panics

Connectedness and Contagion: Protecting the Financial System from Panics. Hal Scott, May 2016, Book. “The Dodd–Frank Act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. Dodd–Frank is largely premised on the diagnosis that connectedness was the major problem in that crisis—that is, that financial institutions were overexposed to one another, resulting in a possible chain reaction of failures. In this book, Hal Scott argues that it is not connectedness but contagion that is the most significant element of systemic risk facing the financial system. Contagion is an indiscriminate run by short-term creditors of financial institutions that can render otherwise solvent institutions insolvent. It poses a serious risk because, as Scott explains, our financial system still depends on approximately $7.4 to $8.2 trillion of runnable and uninsured short-term liabilities, 60 percent of which are held by nonbanks.Link

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The EU Has Trust Issues, and It’s Taking Down Greece’s Economy

The EU Has Trust Issues, and It’s Taking Down Greece’s Economy. George Serafeim, May 24, 2016, Opinion, “Uncertainty can severely affect an economy. Just look at what has happened in a short period of time to the UK economy. People are postponing major investment decisions after resolving the uncertainty over whether the UK stays in the EU or not. Supporters of Brexit hope that a UK outside the EU will be different. Opposition fears that a UK outside the EU will be different. But they both agree that it will be different. So given the prospect of a very different UK, people are not willing to commit capital and resources.Link

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A Debt Agenda for the G7

A Debt Agenda for the G7. Martin Feldstein, May 23, 2016, Opinion. “On May 26-27, the heads of the Group of Seven leading industrial countries will gather in Japan to discuss common security and economic problems. A major common problem that deserves their attention is the unsustainable increase in the major developed countries’ national debt. Failure to address the explosion of government borrowing will have adverse effects on the global economy and on debt-burdened countries themselves.Link

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Risk Neglect in Equity Markets

Risk Neglect in Equity Markets. Malcolm Baker, Spring 2016, Paper. “The link between measures of risk and return within the equity market has been very weak over the past 47 years: in the United States, returns on high-risk stocks have cumulatively fallen short of the returns on low-risk stocks, during a period when the equity market as a whole experienced high returns relative to Treasury bills. In the spirit of Fischer Black’s 1993 article “Beta and Return,” published in this journal, the author takes seriously the idea that this evidence reflects a risk anomaly—a mispricing of risk for behavioral and institutional reasons—and revisits the associated implications for investing and corporate finance, examining asset allocation, high leverage in financial firms, low leverage in industrial firms, private equity, venture capital, and bank capital regulation along the way. Many of these implications fit nicely with Black’s original conjectures, and the author highlights refinements and additions to the original list.Link

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Secular Stagnation in the Open Economy

Secular Stagnation in the Open Economy. Lawrence Summers, April 2016, Paper. “Conditions of secular stagnation – low interest rates, below target inflation, and sluggish output growth – now characterize much of the global economy. We consider a simple two-country textbook model to examine how capital markets transmit secular stagnation and to study policy externalities across countries. We find capital flows transmit recessions in a world with low interest rates and that policies that trigger current account surpluses are beggar-thy-neighbor. Monetary expansion cannot eliminate a secular stagnation and may have beggar-thy-neighbor effects, while sufficiently large fiscal interventions can eliminate a secular stagnation and carry positive externalities.Link

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Richard Parker on Jobs, Financial Crises, and Inequality

Richard Parker on Jobs, Financial Crises, and Inequality April 2016. GrowthPolicy staff member Marzena Rogalska interviewed Harvard Kennedy School Professor Richard Parker, focusing on three key questions motivating the GrowthPolicy website. Below is an edited version of Professor Parker’s comments. Click here for more interviews like this one. Where will jobs come from? | How […]

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