“The Fed and the International Financial System”

Today, students in my Master’s level Public Affairs course in macroeconomics had the good fortune to receive a guest lecture from Steven Kamin, resident scholar at AEI, formerly Director of the International Finance Division of the Federal Reserve Board (sponsored by UW’s International Division). In his lecture, he covered the centrality of the dollar in the global financial system, monetary “spillovers” of Fed policy to other economies with special reference to the pandemic response, the macro challenges posed by the most recent fiscal relief package, and implications for emerging market economies. The entire lecture is here.

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Business Cycle Indicators as of Mid-April

Industrial production figures were released today, showing a rebound in March. In the context of key macro indicators followed by the NBER Business Cycle Dating Committee:

Figure 1: Nonfarm payroll employment from March release (dark blue), Bloomberg consensus as of 4/1 for March nonfarm payroll employment (light blue +), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (4/1/2021 release), NBER, and author’s calculations.

Industrial production was whipsawed by weather in February, so it makes sense to look at manufacturing production as well. Seasonally adjusted industrial production rose 1.4% vs. 2.8% for manufacturing production (18.7% vs. 39.1% annualized). Industrial production is 3.4% below levels at NBER peak (2020M02), while manufacturing is 1.7% below. Incidentally, neither has re-attained the local maxima in January 2021.

Atlanta Fed GDPNow (4/15) is for 8.3% in Q1; IHS Markit nowcast (4/15) is 6.0% (both figures SAAR).