Author Archives: jfrankel

What’s “Hot” and What’s Not, in International Money

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The field of International Monetary Economics is not without its own cycles and fads.

In a speech at the European Central Bank over the summer, “On Global Currencies,” I identified eight concepts that I saw as having recently “peaked” and eight more that I saw as newly rising in relevance. Those that I viewed as losing traction were: the G-7, global savings glut, corners hypothesis, proliferating currency unions, inflation targeting (narrowly defined), exorbitant privilege, Bretton Woods II, and currency manipulation. Those that I saw as receiving increased emphasis now and in the future were: the G-20, the IMF, SDR, credit cycle, reserves, intermediate exchange rate regimes, commodity currencies, and multiple international currency system. read more

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“Why Did Economists Get it So Wrong?” — Eight who got parts of it right

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The Queen of England during the summer asked economists why no one had predicted the credit crunch and recession.   Paul Krugman points out that, inasmuch as economists can almost never predict the timing of recessions (and don’t claim to be able to), the real questions are worse.  The real questions are, rather how macroeconomists (most) could have gotten it so wrong as to believe that:
(i) a severe recession was not even looming ahead as a potential danger, and
(ii) a breakdown of many of the world’s most liquid financial markets, in New York and London, was impossible to imagine.
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Top UK regulator supports transactions tax to shrink financial sector

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A year ago, it occurred to me that if the popular blood lust against the financial sector was to be given vent, one could do worse than adopt a small (but global) tax on financial transactions.    On August 27 it was reported that Adair Turner, head of the UK Financial Services Authority, had come out in support of just such an idea, arguing that the financial sector is too large.   The Financial Times editorializes against the proposal, pointing out the importance of the sector to Britain, and arguing that “bonus-bashing is a distraction.”  Willem Buiter is with Turner in believing that the financial sector is too large, but views the transactions tax as the wrong policy tool for the job. read more

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