Found 32 article(s) for author 'Robert Barro'

Coronavirus meets the Great Influenza Pandemic

Coronavirus meets the Great Influenza Pandemic. Robert Barro, March 2020, Paper, “What is a plausible worst-case scenario for outcomes under COVID-19? This column draws lessons from the 1918-1920 Great Influenza Pandemic. Data for 43 countries imply flu-related deaths back then of 39 million, 2% of the world population, implying 150 million deaths when applied to current population. Controlling for effects from WWI, GDP and consumption in the typical country declined by 6% and 8%, respectively, while real returns on stocks and short-term government bills fell meaningfully. Large potential losses in lives and economic activity justify current policy actions to limit the damage, but there is a difficult tradeoff between mortality and lost output, and this tradeoff warrants discussion that is absent so far.Link

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Cutting GDP to Counter the Coronavirus Pandemic

Cutting GDP to Counter the Coronavirus Pandemic. Robert Barro, March 26, 2020, Opinion, “One of the main policy responses to the coronavirus pandemic has been to curb economic activity as a way of reducing the contagion’s spread. I would characterize this policy as a decision to reduce U.S. and world GDP in the short run by roughly 20 percent. In essence, this is a voluntarily implemented negative supply shock, akin to a sudden loss in productivity. The world’s annual GDP today is around $100 trillion, so a 20 percent cut sustained for a year would be about $20 trillion, roughly the annual GDP of the United States. For the moment, I assume that it is a good policy choice to engineer this reduction in GDP by $20 trillion worldwide, $4 trillion of which is accounted for by the United States.”Link

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The economy and policy in the coronavirus crisis to date

The economy and policy in the coronavirus crisis to date. James Stock, Robert Barro, Jason Furman, Jeremy Stein, , Video, “This conversation took place during the Spring 2020 conference on the Brookings Papers on Economic Activity. Participants included Daniel Lewis of the Federal Reserve Bank of New York, Jan Hatzius from Goldman Sachs, and Lucrezia Reichlin of the London Business School discussing the economic outlook in the face of COVID-19. Robert Barro of Harvard University and François Velde of the Federal Reserve Bank of Chicago discussed lessons learned from the Spanish Flu, and Jason Furman and Jeremy Stein, both from Harvard University, discussed potential policy responses. Brookings Nonresident Senior Fellow and Harvard University Professor of Economics James Stock moderated the conversation.Link

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The Coronavirus and the Great Influenza Epidemic – Lessons from the ‘Spanish Flu’ for the Coronavirus’s Potential Effects on Mortality and Economic Activity

The Coronavirus and the Great Influenza Epidemic – Lessons from the ‘Spanish Flu’ for the Coronavirus’s Potential Effects on Mortality and Economic Activity. Robert Barro, 2020, Paper, “Mortality and economic contraction during the 1918-1920 Great Influenza Epidemic provide plausible upper bounds for outcomes under the coronavirus (COVID-19). Data for 43 countries imply flu-related deaths in 1918-1920 of 39 million, 2.0 percent of world population, implying 150 million deaths when applied to current population. Regressions with annual information on flu deaths 1918-1920 and war deaths during WWI imply flu-generated economic declines for GDP and consumption in the typical country of 6 and 8 percent, respectively. There is also some evidence that higher flu death rates decreased realized real returns on stocks and, especially, on short-term government bills.Link

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Rare Disaster Probability and Options Pricing

Rare Disaster Probability and Options Pricing. Robert Barro, January 2020, Paper, “We derive an option-pricing formula from recursive preferences and estimate rare disaster probability. The new options-pricing formula applies to far-out-of-the money put options on the stock market when disaster risk dominates, the size distribution of disasters follows a power law, and the economy has a representative agent with a constant-relative-risk-aversion utility function. The formula conforms with options data on the S&P 500 index from 1983-2018 and for analogous indices for other countries. The disaster probability, inferred from monthly fixed effects, is highly correlated across countries, peaks during the 2008-2009 financial crisis, and forecasts rates of economic growth.Link

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Taxes and the macro economy

Taxes and the macro economy. Robert Barro, December 17, 2019, Paper, “My research with Furman (2018) assessed the 2017 U.S. tax reform and concluded that economic growth would be boosted by about 1 percent per year for 2018-19 and to a lesser extent for the following eight years. This forecast accorded well with realizations through the first quarter of 2019, but subsequent growth is slower, likely due to adverse effects from the ongoing trade war. Extensions from the previous research consider effects from businesses’ choices of legal form between corporate and pass-through status. Corporate form conveys benefits from perpetual legal identity, limited liability, potential for public trading of shares, and ability to retain earnings. However, legal changes have enhanced pass-through alternatives, for example, through the invention of the S-corporation in 1958 and the improved legal status of LLCs (limited liability companies) at the end of the 1980s. Corporate form is subject to a time varying tax wedge, which offsets the productivity benefits. In a theoretical framework, with a distribution of firms’ productivities associated with corporate and pass-through status, the tax wedge determines the fraction of firms that opt for corporate status, the level of economywide output (productivity), and the share of output generated by corporations. This framework underlies the empirical analysis of corporate shares of business economic activity. Long-difference regressions for 1968-2013 show that a higher tax wedge reduces the corporate share of gross assets. The corporate share also exhibits downward trends, likely reflecting underlying legal changes.” Link

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Trump’s Mercantilist Mess

Trump’s Mercantilist Mess. Robert Barro, September 5, 2019, Opinion, “When US President Donald Trump boasted that trade wars are “easy to win” in March 2018, it was convenient to dismiss the remark as a rhetorical flourish. Yet it is now clear that Trump meant it, because he genuinely believes the bizarre and anachronistic macroeconomic theories underlying his approach.Link

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Is Politics Getting to the Fed?

Is Politics Getting to the Fed? Robert Barro, July 23, 2019, Opinion, “In the early 1980s, the chairman of the US Federal Reserve, Paul Volcker, was able to choke off runaway inflation because he was afforded the autonomy necessary to implement steep interest-rate hikes. Today, the Fed is clearly under unprecedented political pressure, and it is starting to show.Link

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Trump Is Slowing US Economic Growth

Trump Is Slowing US Economic Growth. Robert Barro, June 4, 2019, Opinion, “The current state of US macroeconomic policymaking across four key areas does not bode well. Although the 2017 tax legislation has done its job in promoting faster growth, rising trade tensions, persistent regulatory burdens, and a lack of investment in infrastructure all threaten to limit the US economy’s potential.Link

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