Isto é extraordinário

Desde há algum tempo que a minha lista de estudos se tornou tão grande e indomável que já não havia maneira de me orientar com o velhinho sistema de pastas dentro de pastas. No lento e moroso processo de conversão ao Mendeley acabei por reler algumas das notas acumuladas ao longo dos anos e dei de caras com um antiquíssimo paper de Krugman (1998), acerca da armadilha de liquidez e a situação do Japão. É engraçado reler a discussão do paper com o benefício do olhar retrospectivo.

Sem entrar em muitos detalhes, a ideia que Krugman apresentou na altura era que, dados os instrumentos à sua disposição, e os constrangimentos operacionais que o rodeavam, o Banco do Japão não conseguiria, por muito que tentasse, empurrar a inflação do terreno negativo em que estava para os desejados 2%. O mecanismo clássico de actuação da política monetária, que vai da massa monetária para o nível de preços, seria inoperante enquanto a economia estivesse a funcionar com taxas de juro nominais nulas.

A única forma de escapar desta armadilha seria o banco central ‘atar as suas mãos’ e prometer antecipadamente que a injecção de massa monetária adicional não seria revertida num período seguinte. Ou, como o próprio Krugman colocou a questão, ‘to credibly promise to be irresponsible’.

Os fundamentos teóricos da proposta não são muito importantes. O relevante, neste caso, é que Krugman argumentava que o Banco Central de um país desenvolvido estava impossibilitado de fazer aquilo que qualquer caudilho da América Latina faz do dia para a noite: aumentar a inflação. Como poderia isto ser verdade? A experiência americana e inglesa dos anos 80 mostra que travar a subida dos preços pode ser um processo doloroso, ao ponto de inflação ter sido proscrita como um tema tabu dos banqueiros centrais contemporâneos. Mas onde estava a dificuldade de fazer o contrário? O que é que o Zimbabué tem que falte ao Banco do Japão?

De facto, essa foi a linha de argumentação de Kenneth Rogoff. Acho que vale a pena ler tudo, à luz da experiência recente do BCE e do próprio Banco do Japão (versão Abenomics). O mundo dá umas voltas extraordinárias.

No one should seriously believe that the BOJ would face any significant technical problems in inflating if it puts it mind to the matter, liquidity trap or no. For example, one can feel quite confident that if the BOJ were to issue a 25 percent increase in the current supply and use it to buy back 4 percent of government nominal debt, inflationary expectations would rise. The real obstacle is that the BOJ does not want to blemish its record of price stability (…) The real problem is that the BOJ does not have the big picture right. It does not realize that a good conservative central bank should be willing to let the price level rise on a rainy day-and Japan is experiencing a typhoon.

Toward the end of the paper, Krugman intimates that the new Eu-ropean Central Bank, with its mandate to keep inflation low, may soon face similar problems, since European demographics are similar to those of Japan. This is an interesting observation, although the European Central Bank has a sufficiently flexible mandate that it could easily target an inflation rate of 1 or 2 percent for an indefinite period-if it were to perceive that such a policy was necessary.


Consequências do Grexit

Até agora, toda a gente tem trabalhado no pressuposto de que a saída da Grécia euro é algo a evitar. Mas e se a saída for libertadora a longo prazo, e não a tragédia que todos – incluindo o Syriza – julgam que será? A experiência da Argentina, pelo menos, foi bem diferente do que se pensava.  Um texto de Paul Krugman:  Grexit and the morning after.

What I urge everyone to do is ask what happens if Greece is in fact pushed out of the euro – Grexit (yes, ugly word, but we’re stuck with it).

It would surely be hugly in Greece, at least at first. Right now the core of the euro believe the rest of the countries can handle it, which might be true. But bear in mind that the supposed firewall of ECB support has never actually been tested. If markets lose faith and the time for spanish or italian bond arises, will it really happen?

But the bigger question is what happens a year or two after the Grexi, where the real risk for the euro will not be that Greece will fail, but that it will succeed. Suppose that a greatly devalued new drachma brings a flood of british beer-drinkers to the Ionian Sea, and Greece starts to recover. This would greatly encourage challengers to austerity and internal devaluation.

A regra de Taylor e a instabilidade financeira

Pode a política monetária causar bolhas de activos? John Taylor, o pai da regra de Taylor, acredita que sim, e tem defendido que foi o laxismo da Fed entre 2002 e 2005 que insuflou a bolha no sector imobiliário. As acusações geraram uma série de respostas na blogosfera americana, como Tony Yates e Paul Krugman. Desta vez, um peso pesado juntou-se à discussão: Ben Bernanke.

A primeira citação é de Bernanke, e incide sobre a crítica inicial de Taylor: a de que a regra de Taylor não foi seguida durante uma boa parte da década passada.

As you can see in the figure, the predictions of my updated Taylor rule (green line) and actual Fed policy (dashed black line) are generally quite close over the past two decades (the green line starts in 1996 because real-time data for the core PCE deflator are not available before then). In particular, it is no longer the case that the actual funds rate falls below the predictions of the rule in 2003-2005.

As for the period since the financial crisis, the modified Taylor rule in Figure 2 suggests that the “right” funds rate was quite negative, at least until very recently. If the Taylor rule predicts a sharply negative funds rate, which of course is not feasible, then it seems sensible for the FOMC to have done what it did: keep the funds rate close to zero (about as low as it can go) while looking for other tools (like purchases of securities) to achieve further monetary ease.

E a segunda é de Krugman, sobre um tema conexo, mas diferente: as implicações que uma mundivisão deste género teriam para a regulação bancária.

if it’s really that easy for monetary errors to endanger financial stability — if a deviation from perfection so small that it leaves no mark on the inflation rate is nonetheless enough to produce the second-worst financial crisis in history — this is an overwhelming argument for draconian bank regulation. Modest monetary mistakes will happen, so if you believe that these mistakes caused the global financial crisis you must surely believe that we need to do whatever it takes to make the system less fragile. Strange to say, however, I don’t seem to be hearing that from Taylor or anyone else in that camp.

Mitos e factos sobre a austeridade

Simon Wren-Lewis perdeu algum tempo a escrever uma série de posts sobre a percepção e a realidade da macroeconomia da austeridade. Ao todo são oito entradas, resumidas em Mediamacro myths. Num registo menos técnico, Paul Krugman escreveu no Guardian uma anatomia da política orçamental dos últimos cinco anos: The austerity delusion. Vale a pena ler os dois – e ter cuidado para distinguir os argumentos que valem para com acesso ao mercado dos argumentos que se aplicam a países como Portugal.

The story presented in much of the UK media is simple and intuitive. The previous government messed up: they spent too much, and it left the UK economy on the brink of financial meltdown. The coalition came to the rescue: clearing up the mess was tough at first, but now it is all coming good.

AIn previous posts I have shown that this is almost complete fiction. The increase in the government’s budget deficit under Labour was all about the recession, which in turn was created by the global financial crisis. There was no prospect of a UK financial crisis in 2010, which meant that austerity was not something the government was forced to undertake. Reducing the deficit could have been left until the recovery was secure (and crucially interest rates had risen above their lower bound), but the coalition chose to do otherwise. As a result they delayed the recovery by three years, at great cost. Even since 2013 we have simply seen a return to normal growth rates: there has been no catching up of lost ground. In that sense growth under the coalition hardly deserves the term recovery, and we have seen an unprecedented lack of growth in living standards. Productivity growth has been non-existent, yet the government has feted the employment growth that is its counterpart.

A macro nos dias de hoje

Na blogosfera internacional corre um debate muito interessante sobre a metodologia da macroeconomia. O nível está muito lá em cima, com contributos de Olivier Blanchard, Wolfgang Munchau, Simon Wren-Lewis, Paul Krugman, David Andolfatto, Tony Yates e Noah Smith. O Brugel fez um apanhado aqui. As citações de baixo são de Noah Smith, mas leiam tudo (ou pelo menos os textos de Smith e Andolfatto), porque vale a pena.

Personally I think DSGE techniques haven’t  reaped dramatic benefits (yet). But what other alternative is better? When I ask angry “heterodox” people “what better alternative models are there?”, they usually either mention some models but fail to provide links and then quickly change the subject, or they link me to reports that are basically just chartblogging. Yeah, sure, if you put out hand-wavey reports saying “capitalism sux, there’s gonna be a crash!” every year or two, you’re eventually going to be able to say “see, I told you so”. But that’s no replacement for real modeling.

E Olivier Blanchard, no Vox: Rethinking macroeconomic policy:

Fiscal stimulus can help. Public debt can increase very quickly when the economy tanks, but even more so when contingent – explicit or implicit – liabilities become actual liabilities. The effects of fiscal consolidation have led to a flurry of research on multipliers, on whether and when the direct effects of fiscal consolidation can be partly offset by confidence effects, through decreasing worries about debt sustainability.

Admittedly, navigation by sight may be fine for the time being. The issue of what debt ratio to aim for in the long run is not of the essence when there is a large consensus that it is too large today and the adjustment will be slow in any case – although, even here, Brad DeLong has provocatively argued that current debt ratios are perhaps too low. But how to assess what the right goal is for each country? This remains to be done. It has become clear that there is no magic debt-to-GDP number. Depending on the distribution of future growth rates and interest rates, on the extent of implicit and explicit contingent liabilities, one country’s high debt may well be sustainable, while another’s low debt may not.

A estratégia grega

A Grécia tem monopolizado as notícias dos últimos dias. Queria escrever sobre a estratégia seguida pelo Governo grego e sobre os constrangimentos da situação, mas não é difícil encontrar quem já o tenha feito, e de forma bem mais sintética e conseguida do que eu seria capaz. Aqui ficam os links.

Negociar do lado grego, por Ricardo Reis:

A quinta e última opção é ser louco, autêntico ou fingido. No Portugal do “agarrem-me senão eu mato-o” sabemos bem que este postura pode ser muito eficaz nas negociações. No famoso jogo em que dois carros avançam na direção um do outro, perdendo quem se desvia primeiro, o louco ganha sempre. O louco tem de estar disposto a sair da União Europeia, confiscar as poupanças dos gregos, e causar o aumento da pobreza. Ele tem de defender políticas que sabemos levam ao desastre pelo menos desde a queda do muro de Berlim. Tem de prometer fortunas quando nada tem no bolso. Quanto mais irresponsáveis as suas posições, e mais catastróficas as suas consequências, mais credível é a sua loucura, e melhores as hipóteses do outro lado ceder para evitar o sofrimento de todos. Se tudo falhar, o louco pode sempre culpar os malvados europeus imperialistas e capitalistas. As próximas semanas vão ser muito interessantes.

O perdão à Alemanha em 1953, por Bruno Faria Lopes:

A conferência de Londres serve para percebermos o óbvio: na dívida, uma reestruturação não pode ser separada do contexto político e dos incentivos dos credores. E, no caso da zona euro, os incentivos de credores e devedores não estão tão alinhados como em 53. Oincentivo comum, a viabilidade da zona euro, não passa por cima do incentivo político alemão e de outros estados credores: evitar um dominó de perdas para os seus contribuintes, causadas por países que são alvo de maus estereótipos. Perdas que podem levantar obstáculos jurídicos e sociais ao euro nesses países. A questão de fundo é, assim, política e exige tempo e liderança política quer nos países devedores (reformas e diplomacia activa para destruir estereótipos), quer nos credores (pedagogia aos eleitores sobre o que têm de aceitar para partilharem uma moeda). Até lá é muito prematuro concluir que “a Europa está a mudar”.

Continuar a ler

Não é para todos

International Mensch Fund, por Paul Krugman. Sobre o FMI e o mea culpa.

The IMF has released an audit of its own response during the aftermath of the financial crisis, which concludes that it messed up by embracing fiscal austerity in 2010. It failed to understand that you need to differentiate between countries that borrow in their own currency and those that don’t; it failed to appreciate that the negative effects of fiscal contraction would be much larger in a zero lower bound environment.

Well, I could have told you all of that at the time – and in fact I did, over and over again.

But let us nonetheless celebrate the IMF’s willingness to look honestly at its own record and learn from it. Taking responsability for your acts and statements is all to rare in modern economic discourse, as the comedic evasions of the open-letter crew demonstrate. The Fund, ir turns out, is better than that, and deserves praise.

Civismo e educação

Um bocado off-topic, mas ainda assim uma troca de opiniões que vale a pena seguir. Don’t be rude, you loser, por Noah Smith, e Wild words, brain worms and civility, por Paul Krugman – dois metaposts acerca da importância (ou não) de escrever sem ostracizar os adversários.

Noah Smith:

Sometimes, one of the parties in a debate is simply dishonest and unethical, and doesn’t really care if he or she is right or wrong. But more often, both sides deeply believe in the positions they take. The person in the wrong might be your opponent — or it might be you. Or, more realistically, it might be both. Putting red-haired people in concentration camps is obviously horrible, but most of our arguments are over things like Obamacare, or antipoverty programs, or financial regulation– issues on which reasonable people can and do disagree.

If you’re uncivil in this sort of situation — if you call your opponent an idiot, or a liar, or a nastier name simply because you think his or her argument is bad — you’re basically being overconfident. You’re assuming that there’s essentially no chance that you’re in the wrong, so it’s in the public interest for you to rail against your opponent and score points with the crowd. If you do this, there’s no chance that you yourself will learn anything from the encounter. People usually argue to win, but many times it’s possible to argue to learn.

But even if you’re arguing to win, incivility might backfire. People are naturally defensive, and they take things personally, so if you’re uncivil, they will usually (though not always) harden their position. If you want to convince the world of the merit of your ideas, then one outcome to avoid is for your opponent to leave the discussion ready to promote a bad idea even more virulently.

A third danger of incivility is that you might give your “team” a bad name. If you’re pro-Obamacare, and you fling imprecations at anyone who criticizes it, then you might contribute to the stereotype that pro-Obamacare people are vile and offensive, thus ultimately hurting the cause of Obamacare. A good example of this is the “men’s rights” movement, which sometimes makes good points, but which is known for being so abusive and aggressive that most people ignore it.

I’m not arguing that civility should be universal, or that we should dismiss uncivil arguments on the grounds of style alone. But civility has definite advantages, and these advantages are magnified when the number of civil people grows. Many arguments are a bit like thePrisoner’s Dilemma – if both people explain their positions and examine others’ positions honestly and forthrightly, in a friendly and charitable manner, then everyone benefits. The discussion contributes to the world’s overall level of understanding, and to your own. But if one person chooses to be dishonest and use the tools of rhetoric in an attempt to score points in front of an audience, then the other person has no choice but to respond either in kind, or with incivility…and the whole thing becomes a big exasperating waste of time.

So although incivility is an important tool to keep in our toolboxes, we should be very cautious about pulling it out. It’s a tough call to decide whether an idea is so awful that the only proper response is to denounce it (and its proponents) with full vitriol. In general, these cases are a lot rarer than we think. People rarely lie, and all but the worst arguments contain some grain of valuable truth. If you can’t understand how your opponent could possibly believe what they believe, odds are that you could benefit from trying harder to understand. Not always, but usually.

Paul Krugman:

First, picturesque language, used right, serves an important purpose. “Words ought to be a little wild,” wrote John Maynard Keynes, “for they are the assaults of thoughts on the unthinking.” You could say, “I’m dubious about the case for expansionary austerity, which rests on questionable empirical evidence and zzzzzzzz…”; or you could accuse austerians of believing in the Confidence Fairy. Which do you think is more effective at challenging a really bad economic doctrine?

Beyond that, civility is a gesture of respect — and sure enough, the loudest demands for civility come from those who have done nothing to earn that respect. Noah felt (and was) justified in ridiculing the Austrians because they don’t argue in good faith; faced with a devastating failure of their prediction about inflation, they didn’t concede that they were wrong and try to explain why. Instead, they denied reality or tried to redefine the meaning of inflation.

And if you look at the uncivil remarks by people like, well, me, you’ll find that they are similarly aimed at people arguing in bad faith. I talk now and then about zombie and cockroach ideas. Zombies are ideas that should have been killed by evidence, but keep shambling along — e.g. the claim that all of Europe’s troubled debtors were fiscally irresponsible before the crisis; cockroaches are ideas that you thought we’d gotten rid of, but keep on coming back, like the claim that Keynes would never have called for fiscal stimulus in the face of current debt levels (Britain in the 1930s had much higher debt to GDP than it does now). Well, what I’m doing is going after bad-faith economics — economics that keeps trotting out claims that have already been discredited.

Nor are zombies and cockroaches the only kinds of bad faith; the worst, as far as I’m concerned, involves refusing to take responsibility for your actual statements. “The failure of high inflation to materialize doesn’t mean that I was wrong, because I only said that there was a risk of inflation”. “When I said that Obamacare spending adds a trillion dollars to the deficit, I wasn’t misleading readers, because I didn’t actually deny that the ACA as a whole reduces the deficit.” And of course, people who engage in that kind of bad faith screech loudly about civility when they’re caught at it.

When there’s an honest, good-faith economic debate — say, the ongoing controversy about the effects of quantitative easing — by all means let’s be civil. But in my experience demands for civility almost always come from people who have forfeited the right to the respect they demand.

Whatever it takes 2.0

A comunicação de Mario Draghi em Jackson Hole – unemployment in the Euro area – revela que o discurso oficial do BCE está a mudar. O discurso não está ao nível do célebre whatever-it-takes de Londres, mas ainda assim é algo que vai dar muito que falar.

O primeiro destaque tem de ir para um facto que já algum tempo era referido em muita da investigação feita na Comissão Europeia, mas que estava estranhamente ausente das palavras dos principais decisores de topo europeus – que a taxa natural de desemprego oficial está, com elevado grau de probabilidade, altamente sobrestimada (sobre isso, ver os posts 1, 2, 3, 4):

(…) Estimates of structural unemployment are surrounded by considerable uncertainty, in particular in real time. For example, research by the European Commission suggests that estimates of the Non-Accelerating Wage Rate of Unemployment (NAWRU) in the current situation are likely to overstate the magnitude of unemployment linked to structural factors, notably in the countries most severely hit by the crisis.

A conclusão é que o espaço de manobra para políticas de estímulo à procura é bastante maior do que se julgaria olhando para as medidas oficiais do desemprego estrutural. E a existência de hysteresis effects, através dos quais o desemprego cíclico se vai progressivamente ‘estruturalizando’, cria uma assimetria de riscos que só reforça a urgência de actuar a este nível.

Demand side policies are not only justified by the significant cyclical component in unemployment. They are also relevant because, given prevailing uncertainty, they help insure against the risk that a weak economy is contributing to hysteresis effects. Indeed, while in normal conditions uncertainty would imply a higher degree of caution for fear of over-shooting, at present the situation is different. The risks of “doing too little” – i.e. that cyclical unemployment becomes structural – outweigh those of “doing too much” – that is, excessive upward wage and price pressures.

As palavras seguintes são mais cuidadosas e polidas, como convém a um banqueiro central. Mas parecem apenas uma forma encoberta de dizer algo muito simples: com a periferia europeia sem margem orçamental para grandes aventuras, e o BCE praticamente de mãos atadas, terão de ser terceiros – isto é, os países do centro da Europa, que não têm constrangimentos financeiros – a usar a política orçamental para expandir a procura interna e contornar os riscos (baixos mas reais) de uma prolongada estagnação da Zona Euro.

Turning to fiscal policy, since 2010 the euro area has suffered from fiscal policy being less available and effective, especially compared with other large advanced economies. This is not so much a consequence of high initial debt ratios – public debt is in aggregate not higher in the euro area than in the US or Japan. It reflects the fact that the central bank in those countries could act and has acted as a backstop for government funding. This is an important reason why markets spared their fiscal authorities the loss of confidence that constrained many euro area governments’ market access. This has in turn allowed fiscal consolidation in the US and Japan to be more backloaded.

Thus, it would be helpful for the overall stance of policy if fiscal policy could play a greater role alongside monetary policy, and I believe there is scope for this, while taking into account our specific initial conditions and legal constraints. These initial conditions include levels of government expenditure and taxation in the euro area that are, in relation to GDP, already among the highest in the world. And we are operating within a set of fiscal rules – the Stability and Growth Pact – which acts as an anchor for confidence and that would be self-defeating to break.

First, the existing flexibility within the rules could be used to better address the weak recovery and to make room for the cost of needed structural reforms.

Second, there is leeway to achieve a more growth-friendly composition of fiscal policies. As a start, it should be possible to lower the tax burden in a budget-neutral way. This strategy could have positive effects even in the short-term if taxes are lowered in those areas where the short-term fiscal multiplier is higher, and expenditures cut in unproductive areas where the multiplier is lower. Research suggests positive second-round effects on business confidence and private investment could also be achieved in the short-term.

Third, in parallel it may be useful to have a discussion on the overall fiscal stance of the euro area. Unlike in other major advanced economies, our fiscal stance is not based on a single budget voted for by a single parliament, but on the aggregation of eighteen national budgets and the EU budget. Stronger coordination among the different national fiscal stances should in principle allow us to achieve a more growth-friendly overall fiscal stance for the euro area.

Fourth, complementary action at the EU level would also seem to be necessary to ensure both an appropriate aggregate position and a large public investment programme – which is consistent with proposals by the incoming President of the European Commission.

P.S.- Ver o comentário de Krugman.

O output gap nos EUA

Um post relevante para o que andou a ser discutido ali em baixo (I, II, III). Inflation, unemployment, ignorance, por Paul Krugman.

The basic point here is that ever since the 1970s we’ve been teaching a story in which an economy with excessive unemployment is one in which inflation should keep falling. Since inflation today is roughly where it was a dozen years ago, this story suggests that we’ve been on average at full employment over that period. But we know that this period was marked by weak expansions and a terrible slump, so that can’t be true. Something is wrong.

I’ve argued that the data are more consistent with a paleo-Keynesian Phillips curve in which unemployment determines the level, not the rate of change, of inflation — which could make sense given anchored expectations and downward wage rigidity. But that’s an educated guess at best, and somewhat post hoc.

The thing is, however, that this is not a new problem. There was nothing like a Phillips curve, let alone an accelerationist Phillips curve, during the Great Depression. Here’s wages:

Wages fell as the economy was slumping, but bounced back thereafter even though unemployment was high. Applying modern arguments to these data one could easily have concluded that the economy was near capacity in, say, 1939 — and in fact many economists argued at the time that most unemployment was structural, due to the mismatch between skills and the requirements of the modern economy, and could not be cured with more demand.

But then came massive fiscal stimulus in the form of rearmament and war — and it turned out that there was plenty of slack in the economy, and American workers were just fine.