taylor made

" In a piece yesterday, Paul Krugman disagrees with my assessment that there was more overheating than slack in the economy in the years leading up to the 2007-09 recession and financial crisis. That assessment was one part of a broader critique I was making of a secular stagnation hypothesis.

First, Krugman says that by using an overall GDP price index for which inflation rose during the years from 2003-2005 I am picking “whatever price index makes the point,” and thus employing “Another Taylor Rule.” No. I used an overall price index for GDP in the original Taylor Rule proposal going back two decades now. There’s no picking and there’s no new rule here.  Rather than taking out food and energy price inflation I controlled for price volatility in that rule by averaging overall inflation over time. Simply taking out food and energy price inflation can lead to policy errors especially when such inflation lasts for more than a short time. And it is not only the overall GDP price level. The CPI inflation rate was also rising, not falling, during this period.

In any case, the increase rather than a decrease in overall inflation was only one part of my assessment that this was not a slack period. I also discussed the unemployment rate—which got quite low (4.4%) rather than high as in slack periods—and the huge housing boom with high housing price inflation.

Krugman does not even consider the unemployment rate in his response, and he simply dismisses the possibility that housing price inflation running at over 15 percent per year before the crisis was a sign of excesses.  Instead he talks only about the housing bust and the downturn. But the bust followed the boom—as is so often the case. In my view, the boom and excessive risk-taking which lead to the bust was exacerbated by lax regulatory and monetary policy.

As I discussed in my 2009 book  Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis “you have to look at more than inflation to assess the situation. Monetary economists have been concerned for years about the erratic nature of monetary policy, creating booms and then slamming on the brakes. Milton Friedman’s Newsweek columns were filled with that kind of complaint. In my view that has been a major problem with monetary policy in the past few years, after two decades of good systematic performance beginning in the early 1980s.”

Krugman finishes his piece by claiming that I always argue that policy is too loose.  No. I am in favor of rules-based policy, not perpetual tightness or ease. If the federal funds rate had been adjusted more promptly in 2003-2005 (following the type of rule that described policy in the 1980s and 1990s), then it would not have had to rise above 4%.  But instead it went over 5%. In this sense policy was too easy in 2003-2005 and too tight in 2006-2007.

Regarding the current unconventional monetary policy, I have long argued that it creates a two-sided risk: the risk of lower growth and the risk of higher inflation. Thus far the realized risk has been low economic growth with high unemployment. In my view, poor economic policy has been to blame."

his prayers are rarely answered...i'm told

chi-eggs

comparative class distributions of monetary and fiscal control channels

where's the research ?

tighening noose gig: watch estimated national NAWRU chase Spain's real UE rate

a  NAWRU calculation:    the best blanket toss on space ship earth

germany bullied EZ ... who's the bigger pig now ? ripped from PK's scrap book

Germany herself?




simple fiendish "how to "  value repressor mechanism
used  to  "belower " the  shadow mark 


"

more holes then asses or more asses then holes ?

"On the basis of the findings presented here, US policymakers can expect that measures taken to impede or retard US MNC expansion abroad will weaken job creation, investment, R&D, and exports at home, rather than strengthen or enhance domestic economic activity"

"When a US firm increases employment at its foreign affiliates by 10%, employment by that same firm in the US goes up by an average of 4%. Capital expenditures and exports from the US by that firm also increase by about 4%. R&D spending – which is associated not just with overall US employment but with employment in highly skilled and highly paid jobs – increases by 5.4%. "




teddy rocksoff


here's more close ups of teddy and company's
                              crooked trip thru the bullrushes :


"What about a counterfactual scenario? What would happen at home if MNC expansion abroad were limited or made more difficult? It is impossible to know precisely what would happen at home if a US firm engaged in less activity abroad. On the basis of our findings of positive interactions between increases in measures of firm activity at home and firm activity abroad, it appears plausible that increasing foreign-affiliate activity increases the overall productivity of an MNC in a way that leads to higher employment in all locations. In this case, inhibiting overseas expansion would have negative consequences for the US economy. Or it could happen that US exports and greater US employment follow foreign affiliate activity, for example, by providing post-sales services or parts and maintenance. Again, in this case, inhibiting overseas expansion would have negative consequences for the US economy.
Our findings do not mean that certain aspects of overseas expansion never diminish similar aspects of home-country MNC activity. Quite the contrary: the spread of investment and R&D – like trade in general – is likely to reshuffle economic activity within as well as across sectors on both sides of borders. Given the multiple positive and significant relationships between increases in overseas activity and increases in jobs, sales, exports, investment, and R&D at home (summarised in Figure 1), the dispassionate public policy analyst would have to bet that the aggregate result from outward FDI by US firms is strongly positive. Conversely, if overseas operations of US MNCs were restricted or made more difficult, the overall consequences would be less activity at home, not more.
Particularly striking is the novel investigation of outward R&D by US MNCs on the US domestic economy. Public discussion is full of zero-sum apprehension – overseas R&D by US multinationals means that the US is “losing its edge”, that others may 'catch up', that US R&D jobs are “being lost” and “aren’t coming back” (National Science Foundation 2012). But the evidence presented here shows clearly that when a US MNC increases its R&D abroad, it also increases its R&D, capital expenditures, exports, sales, and employment in the US. Indeed, what is notable is the discovery that US firms that do not increase their R&D abroad do not tend to increase it at home, either."

 

"The statistical analysis of the globalisation of R&D by US MNCs is reinforced by case studies that offer practical examples showing how global R&D expenditures and operations of US MNCs may create complementary capabilities and interdependent competencies, rather than simply displacing one capability or competency from a location in the US to location abroad."


"One example is GE Healthcare’s Magnetic Resonance Imaging Laboratory team operating between the Niskayuna, New York, campus and the Munich, Germany campus. The team jointly operates four whole-body scanners that have created major innovations in magnetic resonance imaging (MRI), allowing exceptional anatomic investigation involving the brain, spine, and musculoskeletal system. The synergy between the two research centers has generated spillovers that flow back to the US. GE’s Munich labs provided the initial insights that led to 32-channel, then 64-channel, then 128-channel imaging. This research is now incorporated into the high-end premium MRI equipment that is designed and built in the US."

"It may seem counterintuitive that the creation of new offshore R&D facilities could increase the amount of R&D carried out in the US, but this is what case studies sometimes show."


"  The creation of an R&D campus in Chennai, India has allowed Caterpillar to create a 24-hour R&D cycle on engine propulsion and pollution control. The capital-intensive Caterpillar engine labs in Peoria, Illinois operate two shifts with hundreds of channels of temperature, pressure, and emissions data to map diesel performance and emissions. These streams are sent overnight to Chennai, where the data is analysed and returned to Peoria ready for the US engineers when they come to work the next morning. "

" The chief technology officer of Caterpillar points out that the cost for the engine tests would be much greater if Caterpillar instead had a third shift working in the US, making the company’s overall R&D process less efficient and leaving less room for US engineers to exercise their comparative advantage. "

"Using the growing Indian talent pool affects US operations positively by increasing the through-put and lowering the cost of the asset-intensive US test facilities. Round-the-clock interactions between Caterpillar’s Indian and US test facilities help ensure the company’s international market leadership position, while enabling headquarters to hire more US engineers."