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in addition to tourism education services are another major us export according to the institute of international education there were just over 1 million international students enrolled in us colleges and universities last year in 2015 the us exported 35 8 billion of education related travel which includes tuition paid by international students in addition to contributing to us gdp and exports international students play a vital role in us higher education at the undergraduate level an important part of the experience is learning from one s peers the presence of international students on our campuses enhances the educational opportunities for everyone international graduate students play a significant role in the life of our research universities particularly in the sciences and economics the impact of the order was felt immediately by scientists see also this story according to the nsf international students earn more than half of the doctorates granted in the us in mathematics and computer science and engineering and over one third in physical and earth sciences the ability to attract hard working talented students from around the world is a source of strength for american university research and one of the reasons us institutions dominate global rankings us leadership in many fields also means that many of the faculty in us institutions are immigrants and green card holders technology companies have spoken out about the impact of the immigration order on their workforces but the impact will be more widespread according to the nsf 21 of the us science and engineering workforce is foreign born if the grad students post docs scientists and engineers who are so vital to our universities and industries find america a less appealing place to live and work for example if they have to worry that if they leave to visit relatives they risk not being able to get back in they have other options the competition for talent is global and this hands an advantage to non us universities and businesses america is great but president trump s order will make it less so labels academe politics trade no comments monday october 24 2016 time for a sterling crisis the uk pound plunged again earlier this month two dates are marked with vertical lines the the brexit vote red line and the prime minister s speech signalling that the most likely outcome was a hard brexit green line where the uk leaves the european single market i e that it won t become part of the european economic area like finland norway or negotiate an arrangement like switzerland s departure from the eu and the single market make the uk a less attractive location for foreign investment see e g comments from nissan s ceo about its sunderland plant a decrease in demand for uk assets implies a drop in the pound the uk is also a less attractive location for domestic investment now as well and the situation is probably not a good one for consumer confidence a reduction in demand due to lower desired consumption and investment would imply lower interest rates which also would cause the pound to fall is this yet another sterling crisis not in the usual sense as gavyn davies notes there is no fixed exchange rate to defend this time and most of the uk s external debt is denominated in pounds as paul krugman explains a fall in the pound is a part of the adjustment process he writes but it s important to be aware that not everyone in britain is equally affected pre brexit britain was obviously experiencing a version of the so called dutch disease in its traditional form this referred to the way natural resource exports crowd out manufacturing by keeping the currency strong in the uk case the city s financial exports play the same role so their weakening helps british manufacturing and maybe the incomes of people who live far from the city and still depend directly or indirectly on manufacturing for their incomes however a rebalancing of the uk economy in favor of manufacturing exports will not come quickly according to barry eichengreen robert skidelsky goes further and argues for helping the process along through import substitution policies one likely consequence is inflation as ambrose evans pritchard writes prices of imported goods will rise significantly though the process of exchange rate pass through generally occurs with a lag the marmite row may have been a harbinger of things to come the inflation will hit lower income families especially hard according to evans pritchard s column because the government has frozen some benefit payments so inflation will cause their real value to fall rising costs for imports don t only impact consumers they also affect producers on the one hand domestic producers benefit from increases in the relative prices of imported substitutes on the other and this is becoming more and more relevant in an age of global supply chains prices of imported inputs intermediate goods will rise increasing production costs with the rise in cost of intermediate inputs and the greater costs of selling to its main trading partners the impact of brexit looks like a negative supply shock supply shocks create a nasty dilemma for monetary policy policy can accommodate the shock by allowing inflation to rise doing so minimizes the increase in unemployment and helps keep output near its diminished potential or the bank of england could tighten policy to keep inflation in check with negative consequences for output and employment the risk with accommodation is not just inflation itself but a potential increase in inflation expectations and loss of the central bank s credibility part of the standard interpretation of 1970 s stagflation is that the fed was too accommodating after the 1973 oil shock and which contributed to inflation expectations getting out of control the bank of england has a formal 2 inflation target right now inflation is running below target but that will change i personally think its to bank of england s credit that it s allowed inflation go above target at a couple of points during the turmoil of recent years if their policy is credible an occasional miss doesn t cause inflation expectations to rise but the point of inflation targeting is to achieve credibility by meeting a stated target so the bofe may be putting that at risk if it s always seen to be accommodating shocks corrected 10 26 labels europe exchange rates macroeconomics monetary policy 2 comments sunday september 4 2016 revisiting lehman the eighth anniversary of the bankruptcy of the lehman brothers investment bank is coming up later this month it marked a point where the financial crisis which had been simmering since summer 2007 seemed to go from bad to catastrophic one indicator of financial stress that we were all watching closely at the time was the ted spread the difference between the 3 month libor a rate on interbank loans and the yield on 3 month us treasuries essentially a measure of the risk premium paid by financial institutions which is normally quite low the blue line is drawn at sept 15 2008 the date of the lehman bankruptcy the fed creatively expanded its lender of last resort toolkit during the crisis creating a number of new lending programs in march it helped arrange the takeover of bear stearns by jp morgan chase monday morning quarterbacking of the government s actions both the fed s the treasury s began immediately and has never really stopped academic macroeconomists consider it part of our jobs after all one of the biggest questions has been why didn t lehman brothers get the same treatment as bear stearns the fed did try to arrange a takeover by a healthier firm a potential deal with barclays was reportedly scuppered by british regulators but no deal was finalized in time at the time moral hazard concerns were prominent and people felt the us government wanted to show that it was willing to let a financial institution fail lehman s troubles were well known so it was hoped that the financial disruption would be modest since everyone had time to prepare for its demise more recently officials have claimed that the fed lacked the legal authority to rescue lehman because it was truly insolvent the intention of lender of last resort is to lend to illiquid banks not insolvent ones the fed s loans are supposed to be backed by good collateral laurence ball of johns hopkins has dug into the records and is questioning the argument that the fed did all it could and should have in a summary at voxeu he writes i conclude that officials explanation for the non rescue of lehman is incorrect in two senses first a perceived lack of legal authority was not the reason for the fed s inaction and second the fed did in fact have the authority to rescue lehman i base these broad conclusions on several findings given below first before the bankruptcy fed staff extensively analysed lehman s liquidity risk and how the fed might assist the firm in the record of these discussions there is little concern about the adequacy of lehman s collateral and nobody suggests that legal issues might preclude a fed loan second arguments about legal authority made by policymakers since the bankruptcy are unpersuasive these arguments involve flawed economic reasoning such as confusion between the concepts of illiquidity and insolvency they also include factual claims that are not supported by evidence the financial crisis inquiry commission repeatedly asked ben bernanke for details about lehman s collateral problem but bernanke was unresponsive further from a de novo examination of lehman s finances it is clear that the firm had ample collateral for a loan to meet its liquidity needs in particular i estimate that lehman could have survived with 88 billion of overnight lending from the fed s primary dealer credit facility pdcf and the firm had at least 131 billion of assets that were acceptable as pdcf collateral ball s argument was also discussed in a column by james stewart in the new york times in a bloomberg view column barry ritholtz disagrees with ball s argument that lehman was solvent but nonetheless he thinks it could have rescued lehman as subsequent events have shown most especially with the fed led bailout of insurance giant american international group if there was a will there most certainly was a way given all of the various bailouts of dubious legality the fed treasury and congress most certainly could have devised a rescue plan for the 158 year old bank even though he thinks lehman could have been rescued on the question of whether it should have ritholtz disagrees with ball and believes that the fed was correct to let it go no lehman brothers did not precipitate the financial crisis the better metaphor is that lehman was the first trailer in the park to be destroyed by the tornado whether it lived or died was not going to stop the financial forces that had been decades in the making and unleashed when the credit bubble popped i agree with ann rutledge a principal with new york based r r consulting and co author of two books on structured finance she noted it wasn t a mistake to let lehman fail it was a mistake to let it live so long i haven t yet tackled ball s monograph perhaps that would be a good project for my money and banking students in block 5 labels finance monetary policy no comments sunday july 17 2016 lies damned lies and ireland s gdp being an academic economist can be humbling while it involves learning lots of esoteric stuff it also makes one much more aware of how much one doesn t know but i know this much is true the total amount of goods and services produced in ireland did not increase by 26 3 in 2015 but that s what ireland s central statistics office has reported it s not entirely clear how they came to such a literally incredible figure for real gdp growth the expenditure approach to calculating gdp adds up purchases of new final goods and services in four categories consumption c investment i government purchases g and net exports nx i took the data from table 6 of their release and normalized each component to 100 in 2010 to illustrate how the change is driven by large jumps in i and nx news reports have focused on activities of multinational corporations particularly on inversions which involve transferring their legal headquarters to ireland in order to take advantage of its low corporate tax rates that may be correct but its not an entirely satisfying explanation gdp is supposed to measure the value of goods and services produced in a country the legal domicile of the corporations producing it is irrelevant ownership of capital both physical machinery equipment and structures and also intangible forms intellectual property etc also is irrelevant so the fact that multinational corporations like to hold ip in ireland for tax reasons shouldn t matter in principle gross national product gnp adds up the total value of goods and services produced with resources owned by a country s citizens since many multinational corporations operate in ireland it has higher gdp than gnp because some of its gdp is produced using foreign owned capital the same data release showed a shocking increase of 18 7 in ireland s gnp last year the information released by the cso is not very detailed the ft alphaville s matthew klein bloomberg columnist leonid bershidsky and seamus coffey at the irish economy blog have made useful attempts at sorting things out clearly the way the cso is calculating gdp is failing to correspond to the concept statistical agencies need to provide estimates calculated in a consistent fashion so it wouldn t have been appropriate for them to suddenly decide to calculate it differently because they got a strange number but the methods for estimating gdp are not etched in stone if legal and accounting maneuvers of multinationals are distorting some of their source data they need to find a way of correcting for it standards for national accounts are coordinated internationally and it is not clear whether the problems in this report are due to something the cso is doing or a more general methodological issue which happens to be most apparent because of ireland s unique circumstances statistical agencies update their methods and revise their estimates regularly e g in 2013 the us bea did a comprehensive revision that began the treatment of development of intellectual property as a component of investment see this earlier blog post i hope the cso will release more information to help everyone better understand what s gone wrong with their figures that will be a first step towards correcting the method used to estimate gdp and producing a revised set of figures one which will not show a 26 increase in real gdp in 2015 update procedures mandated by eurostat are mostly to blame writes colm mccarthy labels europe macroeconomics 2 comments tuesday april 19 2016 hysteresis in a new keynesian model i ve posted a draft of my research paper hysteresis in a new keynesian mode...