Stock prices declined abruptly in the wake of the Covid-19, reflecting both the deterioration of investors’ expectations of economic activity as well as the surge in risk aversion. In the following months however, economic activity remained sluggish while equity markets bounced back. This disconnect between equity values and macro-variables can be partially explained by other factors, namely the decline in risk-free interest rates, and -for the US- the strong profitability of the IT sector.
Working Papers
Do Foreign Yield Curves Predict U.S. Recessions and GDP Growth?
This paper shows that foreign term spreads constructed from bond yields of non-U.S. G-7 constituents predict future U.S. recessions and that foreign term spreads are stronger predictors of U.S. recessions occurring within the next year than U.S. term spreads.
Foreign direct investment under uncertainty: evidence from a large panel of countries
Menzie Chinn and colleagues examine the effect of uncertainty on foreign direct investment inflows for advanced, emerging market and developing countries over a 25 year long (pre-Covid) sample. Using a push-pull framework, and controlling for both global and local factors, they find policy uncertainty has discernable and significant effects on inflows, varying in strength and direction between different groups of countries. Moreover, it is not host country uncertainty that seems to matter the most, but rather global uncertainty. Additionally, they find that high levels of uncertainty matter disproportionately. Finally, financial openness accentuates the impact of uncertainty for emerging market and developing countries.
The Tax Autonomy of Local Governments in the United States
Statistics on the share of total government tax revenue raised by local governments provide an incomplete picture of local government taxing power. If higher level governments define the local tax base, determine tax rates, or …
Funding Public Education in Wisconsin: The Property Tax-School Funding Dilemma
This paper traces the development of school finance policies in Wisconsin and highlights deficiencies in state aid policies and the reliance on untargeted property tax relief as among the chief reasons why Wisconsin has failed to solve its property tax-school funding dilemma.
The Effect of the Housing Crisis on the Finances of Central Cities
We analyze the impact of the boom and subsequent collapse in housing prices and the unprecedented surge in mortgage foreclosures on the finances of central cities.
A Requiem for “Blame It on Beijing” Interpreting Rotating Global Current Account Surpluses
Global current account imbalances have reappeared, although the extent and distribution of these imbalances are noticeably different from those experienced in the middle of the last decade.
A Third of a Century of Currency Expectations Data: The Carry Trade and the Risk Premium
For four decades economists have been finding that the forward discount is a very biased forecast of future changes in the exchange rate. The carry trade makes money, on average. For just as long, they …
The Impact of Minimum Wage Legislation in Minnesota vs. Wisconsin: Contra Williams
In a recent CROWE Policy Brief, Noah Williams (2018) argues that the recent increases in Minnesota’s minimum wage relative to Wisconsin’s is a central reason why Minnesota’s employment in limited service restaurants (aka fast food establishments) has declined.
Purchasing Power Parity and Real Exchange Rates
Purchasing power parity (PPP), the doctrine that prices of goods and services expressed in a common currency are equalized, is described.