Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺

I'm sitting here doing nothing but ageing 😌

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Cuauhtemoc_1521 Team Stanley sin duda

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@fbermingham Wow congratulations!! 😊

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@esquivelgerardo @Milenio Y ahora donde lo leemos profe?

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser I was waiting for your response after reading The Economist article! You never disappoint, excellent analysis 👌

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Brad is there a reason why you normally use the euro area data instead of that of the EU as a whole?

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@inocat_cos So sorry you had to go through this 🙏 🇲🇽❤️🇰🇷

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Understood, thanks. Looking forward to your post!

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Brad, could you talk a bit more about the differences between analysing imbalances vs excess imbalances? Maybe in a blog post?

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@eastasiaecon @Brad_Setser This is really useful, thanks a lot for sharing!!

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Great. Thanks as always Brad!

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@LuisGonzali Haz un playlist para compartirla y que la escuchemos Luis!

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser I have already reported two of those accounts impersonating you and will continue to do so if I see more.

[Michael Pettis @michaelxpettis]

Brad Setser is pleased to see the IMF conceding that intervention by a country in its currency and external accounts “can systematically generate real exchange rate depreciation and raise current account balances”.

He is being quite polite. We have known for decades that a country’s external imbalances must always be perfectly consistent with its internal imbalances, one implication of which is that if a country’s industrial policies result in the creation of persistent domestic imbalances, it can only maintain those policies to the extent that it controls its external account in ways that allow it to externalize these domestic imbalances.

So, for example, if a country’s financial system is designed mainly to take household and business saving and direct this saving into approved investment at very low interest rates, it has to control its capital account to prevent domestic saving from flowing abroad.

Or, as another example, if a country’s industrial policies require transfers from the household sector to subsidize manufacturing, this is likely to lead to persistent trade surpluses, in which case the country must intervene in the currency to prevent its appreciation from reversing those transfers. An appreciating currency reverses these transfers by effectively subsidizing households (households are net importers) and taxing producers of tradable goods.

This is nothing new. Keynes showed many decades ago that with a few, fairly obvious exceptions (when trade partners – e.g. rapidly growing developing countries, Europe and Japan after WW2, etc. – need to import capital for domestic investment purposes), persistent manufacturing surpluses are prima facie evidence of domestic interventions whose domestic costs are being exported to trade partners.

Without some form of intervention in the currency or the trade and capital accounts, in other words, policies that lead to domestic imbalances are much harder to maintain.

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Yeah, I know. Did you see their presentation at the IMF's statistical forum last year? It's the best explanation I've seen of what they're doing:
https://t.co/W0wnbPB7uS

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Right. The income balance is a direct one. But it seems to me they are ok with the goods adjustment. At least in terms of methodology.

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Barbarous data relic 😆 Is there a way for the Fund to actually imply that China manipulates its data? Considering politics and not just economic analysis.

[Michael Pettis @michaelxpettis]

That was precisely the point Keynes made at Bretton Woods. The world is only better off, he argued, if the surplus countries resolve the trade imbalances by expanding domestic demand.

If, instead, the deficit countries resolve the trade imbalances by contracting domestic demand, global GDP growth slows and unemployment rises.

Rather than demanding more aggressively that trade-surplus countries expand domestic demand, the IMF seems to find it easier to ask trade-deficit countries to reduce domestic debt, even when one of the purposes of the debt is to counter the demand impact of the trade deficit.

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@michaelxpettis Could you recommend some readings from those economists?

[Allan Holst Chaires 🥑 🇲🇽🇩🇰🇪🇺 @aholst80]

@Brad_Setser Isn't 2022 also the year when they stopped using customs data for the BOP goods account? 🤔