Predicting a crisis: a DSGE perspective

The last global recession raised concerns about the ability of macroeconomists to predict crises of such magnitude. Certainly, the forecasting is not the main focus of macroeconomics. I would say that, at least nowadays, it is of rather marginal interest to academic macroeconomists. A proof in this sense is provided by the very low number of publications related to macroeconomic forecasting.

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Was the Financial and Economic Crisis Predictable?

The economic science came under fire during the last financial and economic crisis for many reasons. One thing that came frequently under attention was the supposedly inability of economists to predict the crisis. Well, it seems that the crisis was predicted to a certain extent by some economists, at least that’s what the paper by Bezemer shows.

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The Big Mac Index and Real Exchange Rates

I discussed in a previous post about the shortcomings of the Big Mac Index and how these issues might lead to misuses of this index. As one would expect, there is a thin academic literature which discusses or uses the Big Mac Index, however the studies that exist make some interesting points which deserve to be mentioned.

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Is the Euro Area an optimal currency area?

The sovereign debt crisis, see also my blog post on the sovereign debt crisis that focused on deficit spending, has made more evident than ever that the Euro Area is deficient in many respects and one could reasonable state that it is far from an optimal currency area.

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Does Quantitative Easing Cause Inflation?

Following the effects of the last financial crisis, as the nominal interest rate hit the zero lower bound, the central banks in United States, Euro Area and United Kingdom (to be more precise, it was the Bank of Japan that experienced this approach first) have started to implement a rather extreme form of unconventional monetary policy which became known as the Quantitative Easing.

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