Publications /
Policy Brief

Back
U.S. Bubble-Led Macroeconomics
Authors
August 12, 2021

Macroeconomic dynamics in the U.S. economy has increasingly become associated with asset price fluctuations in the past few decades. Financial conditions have increasingly become an influential factor shaping the cyclical pace of the macroeconomy.
There has been a mismatch between rising financial wealth and the pace of creation and incorporation of new assets. Several secular stagnation hypotheses offer explanations for the insufficient creation of new assets. Public debt—and its partial monetization by central banks—has played a stabilizing role by boosting the net supply of assets available to accommodate the demand for financial assets.
The U.S. big balance sheet economy has been on a growth path highly dependent on the continuity of low real interest rates, as well as stretched price-earnings ratios of stocks and high corporate debt. Periodic episodes of downward adjustment of asset prices have been countervailed with lax monetary policies.

RELATED CONTENT

  • Authors
    August 12, 2021
    Macroeconomic dynamics in the U.S. economy has increasingly become associated with asset price fluctuations in the past few decades. Financial conditions have increasingly become an influential factor shaping the cyclical pace of the macroeconomy. There has been a mismatch between rising financial wealth and the pace of creation and incorporation of new assets. Several secular stagnation hypotheses offer explanations for the insufficient creation of new assets. Public debt—and its p ...
  • Authors
    December 30, 2020
    According to this month’s OECD economic outlook, global GDP --- which took a huge hit from the pandemic and is still 3% below its level of a year ago – will not recover its pre-pandemic level until the end of 2021. In a downside scenario, the return could take almost a year longer. The OECD predictions, which imply high and protracted unemployment, are in line with the view of many other official and private organizations. The arrival of effective vaccines such as Pfizer-BioNTech wa ...
  • Authors
    December 23, 2020
    This article was originally published on Bruegel  A recovery from the COVID-19 recession is underway though the suffering is far from over, especially for the most vulnerable. Inequality is both a consequence of the pandemic and a cause of its severity. Many countries need comprehensive policy change to address its worst effects. At the end of a tragic year marked by pandemic and increased poverty, the miraculously rapid arrival of vaccines stirs great hope. The COVID-19 recession ...
  • Authors
    Souha Majidi
    June 5, 2020
    Face à l’ampleur des retombées économiques et sociales des crises sanitaires, comme la Covid19, l’aide publique au développement peut jouer un rôle essentiel dans l’atténuation de l’impact des épidémies sur les économies les plus fragiles et vulnérables. L'aide publique au développement (APD) vise non seulement à combler le manque de capital nécessaire à amorcer une dynamique forte de développement, mais aussi à amorcer la capacité des Etats à répondre aux risques sanitaires et sécu ...
  • Authors
    Mehmet Sait Akman
    Shiro Armstrong
    Anabel Gonzalez
    Fukunari Kimura
    Junji Nakagawa
    Peter Rashish
    Akihiko Tamura
    Carlos A. Primo Braga
    February 9, 2020
    In the context of his role as chair of the T20 task force « Trade, Investment and Globalization », our senior fellow, Uri Dadush has led the T20 brief under the theme "World Trading System Under Stress: Scenarios for the Future", which has been published in Global Policy. The world trading system has been remarkably successful in many respects but is now under great strain. The causes are deep‐seated and require a strategic response. The future of the system depends critically on r ...
  • Authors
    Satyandra Nayak
    August 27, 2019
    Since the Fed’s July meeting, when the Fed Funds Rate had a 0.25% cut, fears about the impact of the US-China trade war on the global economy have escalated. The US yield curve inversion received much attention as a harbinger of a slowdown in the global and US economic outlooks. We approach here whether lights on next monetary policy events can be obtained from reading the minutes of the Fed’s meeting – and of the July meeting of the ECB governing council – released this week. The ...
  • Authors
    August 13, 2018
    Depuis la fin de l’année 2017, le président Donald Trump mène plusieurs batailles commerciales, contre différents partenaires, sous prétextes de sauver des emplois industriels américains et de réduire le déficit commercial des États-Unis. S’il est difficile de se prononcer sur les effets des combats commerciaux amorcés par le président Trump, l’importance des opposants et des échanges pour l’économie mondiale en fait une source de risque pour la croissance, les emplois et les prix à ...
  • Authors
    August 6, 2018
    The IMF released last July 24 its latest assessments of the current account balances for the 30 largest economies in its External Sector Report 2018 (ESR). There was no major change in 2017 relative to previous years and the reconfiguration of surpluses and deficits that has prevailed since 2013 was essentially extended. However, there are reasons to expect more abrupt alterations ahead, as the U.S. fiscal easing under high employment conditions unfolds. Given the context of ongoing ...
  • Authors
    July 3, 2018
    The addition of a fourth US rate rise to the Federal Reserve’s 2018 dot-plot graph after the June meeting of the Federal Open Market Committee sparked a bout of portfolio outflows from emerging markets. This followed a fleeting upswing at the beginning of the month that fell short on reversing the unwinding of exposure and sell-off of assets in May (Chart 1). Country differentiation has been accentuated, with exchange rate devaluation pressures and capital outflows occurring more no ...