- We’re going to start covering Chapter 19, open-economy Macroeconomics
- This covers trade and foreign investment
- Next week, we’ll see how the exchange rate comes into play and how exchange rate policy affects monetary policy
- Chapters 9 and 19 are the only new chapters we’ll cover since the last midterm; we won’t get to Chapter 17, so it’s not going to be on the final exam.
Recent articles (mostly from yesterday’s Economist)
- The BEA released GDP estimates this morning that showed 2.5% annualized growth over the 1st quarter (it was forecast to be ~3%); remember that the initial estimates will be revised as more data becomes available. Ryan Avent gives a quick analysis of the release.
- Reinhart and Rogoff have an op-ed in the NYT defending their research (there are a bunch of posts on this blog linking to the debate and I’ve written up some thoughts on their data too).
- The Economist’s Free Exchange column discusses some research on behavioral economics, e.g. trying to actually study and model the way people really behave and not some mathematically perfect “rational” individual. The column emphasizes this working paper by Dan McFadden, an Econometrician at UC Berkeley who won the 2000 Nobel Prize with James Heckman (there’s a lot of accessible information about their research, speeches for the Nobel Prize, etc. at this link). If the stuff in the Free Exchange column sounds cool, check out the paper — parts of it are mathematically challenging but you should be able to get a handle on other parts. For what it’s worth, I think the columns too negative on how most economists think about this stuff: there’s broad recognition that it would be great to have more realistic models of people’s behavior, but it’s hard to do it well enough that you can use those models to make better policy recommendations, forecasts, etc., than you get from the unrealistic models. Once you can use those behavioral models to do basic economic tasks well you’ll see economists use them a lot more.
- News on Zimbabwe, mostly about current use of the dollar. But this relates to what we discussed in class yesterday about conditional convergence: Zimbabweans really can’t make the investments (in physical & human capital) that you’d need for productivity growth.
- The Economist has an editorial (sorry, leader) and article on Cyprus. Brutal opening: “Cyprus, it is said, never misses an opportunity to miss an opportunity. After its euro bail-out, that needs to change, not least for the sake of its battered economy. Cypriots face the grim reality that, thanks mainly to the collapse of much of their financial-services industry, GDP will shrink by 15% this year, another 15% in 2014, and perhaps 5% more in 2015…. That is a comparable drop to 1974-75, after a Greek-backed coup followed by a Turkish invasion led to the island’s partition into a Greek-Cypriot-controlled south and a Turkish-Cypriot-controlled north.”
- Some fun news about bumblebees and theft (I promise you, whatever you expect the article to be about, you’re wrong).