Frankel J.
German Ordoliberals Vs. American Pragmatists: What Did They Get Right or Wrong in the Euro Crisis?. In:
Beck T, Kotz H-H Ordoliberalism: A German Oddity? London: Centre for Economic Policy Research ; 2017. pp. 135-143.
Publisher's VersionAbstract
The editors of this volume explore the philosophical conflict between German Ordoliberalism and Anglo-Saxon or American pragmatism. This chapter asks which of these two approaches got which questions right with respect to the euro. In advance, the ordos correctly identified the problem of moral hazard in national fiscal policy, while the pragmatists correctly identified the problem that asymmetric shocks would create when national monetary policy was no longer available to respond to them. When the euro crisis hit in 2010, the ordos pointed out the importance of structural conditionality while the pragmatists were right to emphasize that fiscal austerity was highly contractionary and even worsened debt/GDP ratios.
euro_ebookordo_2017nov.pdf Frankel J.
Globalization and Chinese Growth: Ends of Trends?. In:
Onofri P Il Grande Sconvolgimento. Bologna: il Mulino ; 2017.
AbstractTwo big questions look somewhat different than they did 10 or 20 years ago. First: would the long-term trend of globalization continue? Contrary to all predictions, trade growth has slowed markedly since the Global Financial Crisis of 2008-09. But the feared increase in protectionism did not materialize, so one must look elsewhere for explanations. Two likely factors behind the slowdown in trade are a maturing of global supply chains and a slowdown in trade-intensive physical investment.
Second, would the rapid growth of emerging market economies (EMEs) continue, and which ones? Most EMEs recovered strongly in 2010-11, but now seem to be slowing down in a more long-lasting way.
For both these issues the role of China is crucial, since it now carries so much weight in the global economy. Breathless reports in 2014 that the Chinese economy had overtaken the US economy as the world’s largest (measured by Purchasing Power Parity) were followed rapidly in 2015 by breathless reports that its economy was failing. That China has slowed down from past growth rates of 10% to a more moderate rate of 7% or lower should not have come as a surprise. It is part of a natural process of long-term convergence and involves a “rebalancing” of the economy from manufacturing into services that is desirable, even if it means a loss of export markets for some others. The open question is whether the Chinese transition to a more moderate and sustainable growth path will take the form of a hard landing or a soft landing.
Globztn & China Trends.docxHKS RWP 16-029, July 2016. Delivered at a conference celebrating the 40th anniversary of Prometeia, in Bologna, 26 November, 2015.
Frankel J, Bhandari P.
Nominal GDP Targeting for Developing Countries. Research in Economics. 2017;71 (3).
Publisher's VersionAbstract
The revival of interest in nominal GDP (NGDP) targeting has come in the context of large advanced economies. We consider the case for NGDP targeting for mid-sized developing countries, in light of their susceptibility to supply shocks and terms of trade shocks. For India, in particular, one major exogenous supply shock is the monsoon rains. NGDP targeting splits the impact of supply shocks automatically between inflation and real GDP growth. In the case of annual inflation targeting (IT), by contrast, the full impact of an adverse supply shock or terms of trade shock is felt as a loss in real GDP alone. NGDP targeting automatically accommodates supply shocks as most central banks with discretion would do anyway, while retaining the advantage of anchoring expectations as rules are designed to do. We outline a simple theoretical model and derive the condition under which an NGDP targeting regime would dominate other regimes such as annual IT for achieving objectives of output and price stability. We go on to estimate for the case of India the parameters needed to ascertain whether the condition holds, particularly the slope of the aggregate supply curve. Estimates suggest that the condition may indeed hold.
NGDP DCs_uncorrctdproof_yreec2017.pdf