Although much of the news flow regarding oil in recent days has focused on the terrible environmental tragedy off the Gulf of Mexico, another oil-related story has occupied the minds of many market analysts: that of rising oil prices, along with the overall increase in the prices of a whole host of commodities, as the global recovery has taken hold.
The World Region
What this (admittedly crude) caricature papers over, however, is the ultimate necessity for any proximate adjustment mechanism to operate on one of the levers that constitutes the real exchange rate. Recall, this real exchange rate (q) is defined as
q = ep*/p,
Think about your family. Think about your work, your earnings, debts, credit cards, your children's education, your retirement and the unforgettable taxes. Now, imagine just for just a few moments that you have just received a sealed envelope from your Congressman working at Capitol Hill. Inside this envelope there is a letter: "CONGRATULATIONS! This is your New Citizen Account Bill (PDF) with the Federal Government of the United States." Immediately the letter will tell you very good news.
Lackluster global coordination, relatively weak international responses to the worldwide financial crisis, persistent problems of over-capacity, and the likely decimation of peasant agriculture in countries with huge populations to feed are all factors largely overlooked by most economists and policymakers. Giving these issues short shrift could ultimately lead us into a double dip recession, warned a diverse panel of experts who spoke on March 25 at Columbia University.
Lost in many of the post-crisis financial reform proposals to rein in destructive financial innovation---such as calls to ban naked CDS, establish centralized clearinghouses for derivatives, and eliminate high-frequency trading---is the broader issue of whether these innovations could actually enhance welfa
So far, the indications are that the global economic recovery remains on track and broadly in line with Global Economic Prospects (GEP) 2010 projections.
The notion that systematic Taylor rule deviations has a role to play in the real estate bubble in the United States is an issue that has been rigorously debated---see John Taylor (PDF) and Marco del Negro and Christopher Otrok for opposing views---but broader evidence at the cross-country level is relatively scarce.
The Global Economic Prospects 2010 dissemination mission continues this week to Berlin, Madrid, Beijing, Hanoi, and Jakarta. Next stops: New Delhi, Ankara, Warsaw, and Moscow.
As the report authors met with policy makers, economists, think tanks, and journalists discussing the state of the global economy and its impact on developing countries (especially how to deal with tight international financing that could limit growth), the ensuing news coverage mirror the particular concerns of each country.