Daily Archives: March 9, 2010

Simone Baribeau

The IMF said that it did not take proper account of asset price booms when assessing Ireland’s fiscal situation in a paper today.

The paper said that the IMF’s calculation of the structural fiscal balance of Ireland was broadly based on the OECD approach. “While this approach works well in many cases, recent events have highlighted its limitations under certain circumstances, such as property or other asset price booms.” 

Simone Baribeau

With all the hub-bub over the last couple of days about the future of unemployment, it seems worthwhile to take a look back at its past.

The unemployment debate was reignited yesterday, when the San Francisco Fed put out a paper that said that unemployment was far above levels that would be expected with the drop in GDP the US has experienced over the past year. Today, Charles Evans, president of the Chicago Fed said, taking into account the labour market’s historical response to a recession, joblessness is about where some models would predict it would be.

So did he (or anyone on the FOMC) predict this?

Not even close. 

Simone Baribeau

No relationship other than that they both reported February consumer prices today and in both cases, government price controls affected inflation.

Inflation in Venezuela subsided in February, falling to 1.6 per cent, its lowest level in 11 months. That is, of course, the monthly rise, annualised inflation rose some 24.7 per cent. The lower price increases were due to smaller increases in the cost of food, communication, education and alcohol and tobacco. 

Simone Baribeau

Charles Evans, president of the Chicago Fed, warned on weak labour market conditions in a speech today.

“Once you look past the headline numbers, however, some other labor market indicators are unusually weak,” Mr Evans said, pointing to the unusually long length of time unemployed workers are spending looking for a job. 

Ralph Atkins

Axel Weber, Bundesbank president, has just dealt another blow to the idea of a European Monetary Fund, as floated by the German finance ministry. Speaking in Frankfurt, Mr Weber objected to talk about the “institutionalisation of emergency help” just as it looked like Greece might actually get its finances back in order.

Listening to him, at the Bundesbank’s annual results press conference, you might have been forgiven for thinking Mr Weber was back in the lecture rooms of Bonn, Cologne and Frankfurt universities, where he worked previously as an academic. The “game theories” he had discussed in his past life had shown how, if the end result was known in advance, the behaviour of participants altered accordingly, he told a crowded room of journalists.

What Mr Weber meant was that if Greece knew it would be bailed-out, it would give up now in its drive to bring its public finances back under control. Thus “constructive ambiguity” – being deliberately unclear about what would happen in the worse case – was an important part of eurozone policymakers’ strategy, Mr Weber concluded. 

Simone Baribeau