The Brazilian Real under Krugman-Obstfeld DD-AA Model

The Brazilian Real under Krugman-Obstfeld DD-AA Model: I thought a simple but useful and complete analysis of the Brazilian economy under the DD-AA framework could help us understand the likely path of the Brazilian nominal exchange rate on a short to medium term horizon. But why the DD-AA model? Well, we all studied the DD-AA […]

Systemic Banking Problem: A Japanese Experience

I have been reading excellent analyses by Chris Whalen on potential systemic banking crisis. I missed the RGE Monitor Panel Discussion, but I enjoyed reading the report by Naked Capitalism. I find Whalen’s and others’ argument that a systemic banking crisis involving many U.S. banks is likely, starting with the failure of the Bank of […]

Inflation won’t peak yet

According to today’s Credit Suisse Emerging Markets Economics Daily, a government official for the first time suggested that we are not going to see inflation peak this year. Earlier this year most commentators and nearly all government officials suggested that inflation would peak in the second quarter before coming down over the rest of 2008. […]

Famine Futures: Deregulated Markets and Food Insecurity

In a week when Hormel celebrates another surge in Spam sales, my preferred indicator of US food insecurity, it is appropriate to raise the market and regulatory failures that are driving global food insecurity. Like so much that we have observed in the past eight years of the Bush administration, the origins of the current […]

An Exchange Rate Band for Brazil

The major purpose of this article is to argue that, in the present macroeconomic situation, Brazil could adopt an exchange rate band very well defined between 1.8 and 2.5 (real against dollar). This new exchange rate regime would be able to reconcile – or at least minimize – the economic policy dilemmas related to growth, […]

Oil price fundamentals

I’ve been offering reasons for believing that the flow of funds into commodity investing has contributed to the recent oil price highs. Although I believe this speculation has gotten ahead of fundamentals in the last few months, there is no question in my mind that market fundamentals are the main reason for the broader 5-year […]

FX Swaps Misbehaving

You’re in the middle of planning a summer tour of “classical” Greece for your family: The Parthenon in Athens, the spectacular oracle in Delphi, the ancient theater of Epidauros, a few beaches in between. But you need around 15,000 euros. What do you do? Well, a number of things: Spots and forwards: (a) You can […]

Rules versus Discretion and Managing Financial Sector Stress

with Michael Moore and Ian Tower Economic policies are increasingly subject to rules-based frameworks, except perhaps in the financial sector. A growing number of countries conduct their fiscal policies within a rules-based framework that features expenditure, deficit, or debt targets. In many economies, monetary policy is set as a function of forecast and targeted inflation, […]

Lower inflation in May?

According to today’s China Daily Morgan Stanley is predicting that year on year inflation for May is likely to decline dramatically from 8.5% in April to 7-6-8.0% in May. I haven’t seen the Morgan Stanley report but the article says “vegetable prices in the third week of May dropped 5.6 percent week-on-week, meat was down […]

Sub-prime Crisis: Argentina’s Consumption-Credit Variety

Global growth during the last five years provided a huge tailwind for agricultural producing countries boosting Argentina’s emergence of one of its biggest crises ever. The government response to this (temporary) windfall in its terms of trade and globalization not seen since the late 1800’s has been to stimulate consumption, instead of investment to capitalize […]

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