Articles

The main goal of the macroeconomist is to understand the sources behind business cycles and the behavior of financial markets in the modern economy.

In our two papers, we analyze how changes in personal and functional (wages versus profits) income distribution interact to produce different macroeconomic outcomes in different countries. On the basis of a stock-flow consistent model calibrated for the United States, Germany, and China, simulations suggest that a substantial part of the increase in household debt and the decrease in the current account in the United States since the early 1980s can be explained by the interplay of rising (top-end) household income inequality and certain institutions (e.g. easy access to credit, privately financed education and health care systems).

Adair Lord Turner, former Chairman of Great Britain’s Financial Services Authority and current Senior Fellow at the Institute for New Economic Thinking, will argue in a keynote address to the Federal Reserve Bank of Chicago on Thursday that central banks must be equipped in future to address the dangers of excessive private sector leverage, using both pre-emptive interest rate policy and macro-prudential policy tools.

In the aftermath of the global financial crisis, few would dispute the risks of excessive borrowing. But which debts should one worry about – public or private? This column presents new research on the interplay of public and private debts since 1870 in 17 advanced economies. History demonstrates that excessive private-sector borrowing plays a greater role than fiscal profligacy in generating financial instability. However, when the credit boom collapses, the government’s capacity to alleviate the downturn is limited by the prevailing level of public debt.

Advisory Board members Carmen Reinhart and Kenneth Rogoff today issued a response to recent criticism of their paper “Growth in a Time of Debt.”

How can we contain institutional failure?

A look at the large role the trade deficit of the United States has played since the 1980s.

What happens when professionals lose touch with the people they’re supposed to serve?

Ronald Coase, who passed away last week at age 102, spent his academic career swimming against the current.

We are coming up to the fifth anniversary of the Lehman crash in September 2008. How bad was it? Have we fixed the problems?