FEBRUARY 19 2016

Larry Summers, Summers blog: Increasingly Convinced of the Secular Stagnation Hypothesis. Unfortunately since I put forward the argument in late 2013, the data have been all too supportive.  Despite monetary policy being much more expansionary than was expected and medium term interest rates falling rapidly, growth and inflation throughout the industrial world have been much lower than anticipated.  This is exactly what one would expect if structural factors were increasing saving propensities relative to investment propensities. Bond markets are now saying that neither inflation rates approaching 2 percent targets or real interest rates substantially above zero are on the horizon anytime in the foreseeable future.  Growth forecasts are being revised downwards in most places and there is growing evidence in the United States that inflation expectations are becoming unanchored to the downside. I would put the odds of a US recession at about 1/3 over the next year and at over ½ over the next 2 years.

Chad Syverson, NBER: Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown. The U.S. has been experiencing a slowdown in measured labor productivity growth since 2004. A number of commentators and researchers have suggested that this slowdown is at least in part illusory, because real output data have failed to capture the new and better products of the past decade. I conduct four disparate analyses, each of which offers empirical challenges to this “mismeasurement hypothesis.” The complementary facets of evidence suggest that the reasonable prima facie case for the mismeasurement hypothesis faces real hurdles when confronted with the data.

Andrea F. Presbitero, Min Zhu, IMF: The Change in Demand for Debt: The New Landscape in Low-income Countries. Many low-income developing countries have joined the group of Eurobond issuers across the globe— in sub-Saharan Africa (for example, Senegal, Zambia, and Ghana), Asia (for example, Mongolia) and elsewhere, raising over US$21 billion cumulatively over the past decade. Tapping these markets provides a new source of funds, but also exposes borrowers to shifts in investor sentiment and rising global interest rates. We examined the experience of low-income developing countries with capital inflows in the last decade and a half in a recent report. We found that capital inflows have increased sharply since 2004, in two distinct waves: a first surge from 2.1 percent of GDP in 2004 to 6.9 percent in 2007, and, after a temporary dip during the global financial crisis, a strong rebound, reaching 6.3 percent of GDP in 2012.

Richard Baldwin, Francesco Giavazzi, VOX: How to fix Europe’s monetary union: Views of leading economists. Important progress has been made in repairing the design faults that the EZ Crisis revealed. This new VoxEU eBook argues that fixing the Eurozone is a job half done. The eBook, which presents 18 chapters by leading economists that hail from a broad range of nations and schools of thought, is surely the most comprehensive collection of solutions that has ever been assembled.

Dani Rodrik, Project Syndicate: The Return of Public Investment. The idea that public investment in infrastructure – roads, dams, power plants, and so forth – is an indispensable driver of economic growth has always held powerful sway over the minds of policymakers in poor countries. But this kind of public-investment-driven growth model – often derisively called “capital fundamentalism” – has long been out of fashion among development experts. It may be time to reconsider that change. If one looks at the countries that, despite strengthening global economic headwinds, are still growing very rapidly, one will find public investment is doing a lot of the work.

David H. Autor, et al, NBER: School Quality and the Gender Gap in Educational Achievement. Recent evidence indicates that boys and girls are differently affected by the quantity and quality of family inputs received in childhood.  We assess whether this is also true for schooling inputs. Using matched Florida birth and school administrative records, we estimate the causal effect of school quality on the gender gap in educational outcomes by contrasting opposite-sex siblings who attend the same sets of schools--thereby purging family heterogeneity--and leveraging within-family variation in school quality arising from family moves.  Investigating middle school test scores, absences and suspensions, we find that boys benefit more than girls from cumulative exposure to higher quality schools.

Larry Hardesty, MIT News: Automatic contingency planning. Planning algorithms are widely used in logistics and control. They can help schedule flights and bus routes, guide autonomous robots, and determine control policies for the power grid, among other things. In recent years, planning algorithms have begun to factor in uncertainty — variations in travel time, erratic communication between autonomous robots, imperfect sensor data, and the like. That causes the scale of the planning problem to grow exponentially, but researchers have found clever ways to solve it efficiently. Now, researchers at MIT and the Australian National University (ANU) have made the problem even more complex, by developing a planning algorithm that also generates contingency plans, should the initial plan prove too risky. It also identifies the conditions — say, sensor readings or delays incurred — that should trigger a switch to a particular contingency plan.