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State of Confusion: Economic Policy Uncertainty and International Trade and Investment

I have an article in the latest Australian Economic Review, State of Confusion: Economic Policy Uncertainty and International Trade and Investment.

The article quantifies the effect of global economic policy uncertainty on global industrial production and trade volumes. It also quantifies the effect of Australian and US economic policy uncertainty on cross-border trade and investment.

posted on 27 March 2019 by skirchner in Economics, Foreign Investment

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Unbroken: Productivity and Worker Compensation in Australia and the United States

I have a new report out with the United States Studies Centre at the University of Sydney, Unbroken: Productivity and Worker Compensation in Australia and the United States.

There is a fairly good write-up in today’s AFR. There is more media coverage here and here.

posted on 20 March 2019 by skirchner in Economics

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The Capital Share and Housing

I have an op-ed in the AFR noting that the rise in the capital share of income in the US, other G7 economies and Australia, is largely attributable to an increased scarcity of housing driven by regulation.

posted on 27 February 2019 by skirchner in Economics, House Prices

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Making America 1930 Again

I have an op-ed in the AFR on Trump’s latest tariff measures. Full text below the fold.

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posted on 05 March 2018 by skirchner in Economics, Free Trade & Protectionism

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Donald Trump has a chance to shape US monetary policy for years

I have an op-ed in today’s AFR on how Obama’s neglect gives Trump the chance to own the leadership of the Federal Reserve Board. Full text below the fold (may differ slightly from published version).

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posted on 14 February 2018 by skirchner in Economics, Financial Markets, Monetary Policy

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My Review of Sebastian Mallaby’s Bio of Alan Greenspan

The latest issue of CIS Policy includes my review of Sebastian Mallaby’s biography of Alan Greenspan. Here is a sample:

Far from being a tragedy, Greenspan’s tenure at the Fed was a spectacular success, as Mallaby for the most part acknowledges. This is not to say that US monetary policy could not have been improved by a more rules-based and transparent approach. Mallaby briefly mentions nominal gross domestic product targeting as an alternative to inflation targeting, but does not elaborate on its significance. Greenspan could have moved the Fed in these directions at the expense of his own authority and influence. While one can fault Greenspan’s highly discretionary approach to monetary policy on procedural and other grounds, the results were far better than could reasonably be expected and this is in no small part due to Greenspan’s judgement, which was spectacularly right more often than not. Had Greenspan gone against his own free market instincts and sought to second-guess financial markets on asset prices, as Mallaby suggests, the results would almost certainly have been disastrous and his biography would relate a different type of tragedy. The counter-factual in which someone other than Greenspan was Fed Chair (and we largely know who the alternatives might have been) is one that is worth contemplating.

Full article here.

posted on 29 March 2017 by skirchner in Economics, Financial Markets

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The G20 and Global Governance

The latest issue of The Cato Journal includes my article on The G20 and Global Governance, a critique of state-sponsored global governance scholarship.

posted on 26 September 2016 by skirchner in Economics

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High Frequency Trading: Fact & Fiction

The latest issue of the CIS journal Policy includes my article on High Frequency Trading: Fact and Fiction.

posted on 14 March 2016 by skirchner in Centre for Independent Studies, Economics, Financial Markets

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Too Much Finance?

I have an op-ed in the AFR looking at the long-run relationship between financial sector size and living standards that addresses the ‘too much finance’ critique. Full text below the fold.

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posted on 11 January 2016 by skirchner in Economics, Financial Markets

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Capital Gains Tax Reform in Canada: Lessons from Abroad

The Fraser Institute has released a new volume on international experience with capital gains taxes. I wrote the chapter on New Zealand, with some reference to Australia. Australia was deemed too similar to Canada to warrant a chapter in its own right.

posted on 07 November 2014 by skirchner in Economics

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I am leaving CIS and returning to financial markets

This is my last week at CIS. I will be returning to financial markets from whence I came back in 2008. Thanks to Greg Lindsay for giving me a platform to participate in the public policy debate over the last few years. Thanks also to those who contributed to Policy while I was editor over the last 18 months. Policy will continue under a new editor.

My new employer won’t be paying me to blog or tweet during business hours, so you will be hearing even less from me on what is already a very low frequency blog. I will still post material here from time to time and link to what I am doing when appropriate. Needless to say, nothing on this web site should be attributed to current or previous employers.

This blog has followed me around in various roles since 2003, back when economics blogs were a rarity. The economics blogosphere is now a very over-crowded space. Since 2009, Scott Sumner has been saying much of what I wanted to say, only better. It is more efficient for me to send him a link and have him blog on it than to do it myself. So go read him if you don’t already.

posted on 28 August 2014 by skirchner in Centre for Independent Studies, Economics, Financial Markets

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Wayne Swan on Monetary Offset and the GFC

Former Treasurer Wayne Swan is releasing some of his briefing notes from the GFC ahead of the launch of his upcoming memoir, The Good Fight. The first instalment from a meeting at the Prime Minister’s residence with the Prime Minister, Treasury Secretary and other senior officials on 4 August 2008 is remarkable for its acknowledgement of monetary offset. Indeed, the notes could just as easily have been written by Scott Sumner:

There are three broad considerations the Government would need to keep in mind in taking a decision to engage in discretionary [fiscal] action:

• The Reserve Bank through its control over interest rates, determines the overall level of aggregate demand in the economy, and the Bank would likely take account of any fiscal stimulus in its monetary decisions – that is, more spending would keep interest rates higher than otherwise…

The bottom line is that in the event of a shallow downturn, discretionary [fiscal] action may not achieve any noticeable outcomes in terms of growth and unemployment, but would leave rates higher, erode the [budget] surplus and put at risk the Government’s fiscal credibility.

These costs of course need to be weighed against the potential political costs of being seen to do nothing…

Needless to say, the ‘political costs’ argument won in the end, with the first discretionary fiscal stimulus announced in October 2008.

posted on 12 August 2014 by skirchner in Economics, Fiscal Policy, Monetary Policy

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The Financial System Inquiry and Macro-Pru

I have an op-ed in Business Spectator endorsing the sceptical approach to macro-prudential regulation taken in the Murray inquiry’s interim report:

Macro-prudential policies are seen as providing policymakers with a more targeted set of policy instruments that might complement or even substitute for changes in official interest rates. However, these instruments also implicate policymakers in making much finer judgements about risks to financial stability as well as the more traditional concern of monetary policy with price stability.

A blunt instrument like monetary policy encourages caution in making such judgements. By contrast, more targeted counter-cyclical quantitative controls are a standing invitation to micro-manage credit allocation, but do not in themselves improve the ability of policymakers to make appropriate judgements about the implications of such policies. It can also create a false impression that a central bank’s price stability mandate has been subordinated to other objectives, such as house price inflation.

Macro-prudential policies are also more politically fraught than traditional monetary policy. Quantitative controls designed to be selective in impact are more likely to provoke opposition. In Britain, macro-prudential policies are at cross-purposes with the government’s ‘Help to Buy’ mortgage guarantee scheme. Macro-prudential regulation is often a second-best approach to dealing with the inflationary implications of supply-side rigidities in housing markets. It may also push borrowing and lending activities outside the regulatory perimeter altogether.

posted on 25 July 2014 by skirchner in Economics, Financial Markets

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Rent or Buy: Does it Matter?

A RBA Research Discussion Paper on whether Australian housing is over-valued attracted considerable media attention. The (unsurprising) bottom-line was that Australian housing is currently fairly valued based on the user-cost approach, but that the average household might be better off renting now if, ‘as many observers have suggested,’ future real house price growth is less than the historical annual average rate of around 2.5% since 1955.

As it turns out, the ‘many observers’ actually referenced in the paper are the RBA itself, which makes one wonder whether the RDP’s conclusion is part of the RBA’s broader jaw-boning effort directed at expectations for future house price appreciation.

In fact, the RBA’s RDP makes an excellent case for the view that we should be indifferent between renting or buying ex ante. The user costs of owner-occupation and renting are subject to a long-run equilibrium relationship. The RBA’s RDP shows how close this relationship has been historically using matched data on house prices and rents, despite some short-run volatility. In principle, one could use deviations from this equilibrium relationship to profitably arbitrage the user cost of owner-occupation and renting, but it is likely that these deviations reflect the transaction costs associated with buying/selling and moving. The deviations arise precisely because this arbitrage is difficult in practice.

So don’t sweat on the rent-buy decision.

posted on 17 July 2014 by skirchner in Economics, House Prices

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Eight Housing Affordability Myths

I have published a new Issue Analysis with the Centre for Independent Studies, Eight Housing Affordability Myths. In the paper, I show how a number of highly persistent myths about the nature of housing markets, the dynamics of house prices and the drivers of housing affordability condition public policy to focus on excessively on housing demand at the expense of housing supply.

posted on 10 July 2014 by skirchner in Centre for Independent Studies, Economics, Foreign Investment, House Prices

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