A report from Reuters (hat tip: Felix Salmon) attributes the wild commodity price moves last week to algorithmic stop-loss trading. Jim Brown offered these details on the oil trading: Those funds interviewed said the massive amount of stop losses that were triggered was beyond comprehension…. When the crash finally came the number of positions liquidated [...]
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China’s Currency and Trade Balance: Two Pictures
May 10th, 2011 
admin The US-China Strategic and Economic Dialog is underway. [0] The topics span many issues. One of the perennials is the yuan’s real value and the Chinese trade balance. Here are two figures. First, one needs to recall the distinction between bilateral and multilateral real exchange rates. Figure 1: Log real CNY/USD exchange rate (blue) and [...]
Learning about Long Term Unemployment (II)
May 9th, 2011 admin Politics and Policy Last Monday, I discussed some of the findings from the conference on causes and consequences of, and policy responses to, long term unemployment, which brought to UW Madison Prakash Loungani, an Advisor in IMF’s Research Department, Kenneth Scheve, Professor of Political Science at Yale, Phillip Swagel, Professor of Public Policy at the [...]
Lower oil prices
May 8th, 2011 admin Like a roller coaster ride, 2011 saw oil prices climb gradually, only to fall dramatically this last week. Here I offer my thoughts on some of the key contributing factors. Let’s begin with the relation between oil prices and the exchange rate. If the dollar depreciates by 1%, the dollar price of oil would have [...]
Guest Contribution: The Taylor Rule and QE2
May 6th, 2011 admin By David Papell Today, we’re fortunate to have David Papell, Professor of Economics at the University of Houston, as a Guest Contributor. The Fed recently announced that it would maintain short-term interest rates near zero for an extended period” and complete its purchases of $600 billion of longer-term Treasury securities, known as Quantitative Easing II [...]
