Fired from Lehman

Nice sense of humor in a dramatic situation...

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Is the yield curve back to the 1950s-1960s?

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In recent years, the yield curve has flattened and shifted downwards. The flattening has received a lot of attention because it is viewed as a recessionary signal. In this article, we argue that the fact that the curve has shifted downwards as well as flattening indicates that the yield curve may have changed regime. This regime shift seems to have been caused by lower inflation expectations and lower risk premia. In an environment of lower inflation and lower risk premia, the yield curve may occasionally invert without signalling a recession as it did in 1966. 1. The recessionary signal Inversions of the yield curve have often been used to predict recessions. The 10-year to 3-month spread between US Treasury yields became briefly negative twice this year in March and the May (figure 1), spurring debate about whether this was signalling a forthcoming recession. The negative spread was mainly the result of a decrease of the 10-year yield – from 2.8 per cent on 1 March to 2.4 per cen...
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French industry's competitiveness

The Gallois report about the French industry's competitiveness has just been made public (links here ) and received a lot of publicity from the French media. As a trained economist and French patriot, I was eager to read it. The author, a respected businessman - formerly head of aerospace giant EADS -  describes rather briefly the declining state of the French industry over the last ten years, which accounted for 18% of GDP in 2000 and is now down to 12.5%. What are the causes of this decline? The author cites various causes, ranging from product quality, technology, labour flexibility, cost, competition, education and regulation. Standard economic theory says the government should increase labour flexibility, promote competition, support education and enact smart regulation. For example, the Porter Hypothesis (cf Ambec et al 2011 ) states that market-friendly environmental policy can enhance business competitiveness through innovation. What are the main propositions? Create...
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The macroeconomic and fiscal path in Greece during the economic adjustment programmes: 2010 to 2018

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In this conference organized by the Economic Chamber of Greece on 24 November 2020, we presented joint NIESR and CEPS work on debt sustainability analysis (presented by Cinzia Alcidi) and the macroeconomic and fiscal path (presented by Corrado Macchiarelli and myself) during the three adjustment programmes from 2010 to 2018 in Greece. The panel included Yiannis Stournaras, Governor of the Bank of Greece, Christos Staikouras, Minister of Finance of the Hellenic Republic and former Ministers of Finance Euclid Taskalotos and Evangelos Venizelos. The topics discussed included (in no particular order): Should the debt relief have come earlier? Should private sector involvement have been done earlier? Was the length and severity of the adjustment programmes appropriate? Was the mix of expenditure cuts and tax rises appropriate? Should public investment have been ring-fenced? Were the fiscal multipliers underestimated? Was the EU framework appropriate to manage such crisis? European Stability...
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