World Energy Outlook
On October 24, 2023, the International Energy Agency (IEA) released its annual report, World Energy Outlook (WEO), to an international audience. The agency states that the energy world “remains fragile but has effective ways to improve energy security and tackle emissions.” Agency analysts looked at how close the countries of the world are to meeting the objectives of the Net Zero Emissions by 2050 (NZE) Scenario, which limits global warming to 1.5 °C, a goal signed by many countries and often referred to as the Paris Agreement. [As of March 2021, 194 states and the European Union have signed the […]
Disruptions, Costs & Markets
The Covid-19 pandemic has caused supply chain disruptions. How much have the costs of international trade increased? What impact has this had on the U.S. economy? What is the effect on labor force participation? Can existing models properly quantify these effects? Recent research by three leading economists tried to model the real-life situation of U.S. dependence on a global supply chain and what happened when parts of that chain were broken. (“Broken” encompasses several scenarios: “ports being closed or operating at partial capacity, fewer workers being available for health reasons, and a shortage of shipping containers, among other challenges.”) On […]
Inflation & Wage Growth
As the U.S. economy emerges from the pandemic, inflation has been climbing. What effect has this had on average wages? Will it be a long-lasting effect? Recent research by leading economists at the Federal Reserve Bank of San Francisco (FRBSF) dives into these questions. “Our findings show that, since the pandemic, inflation expectations have been playing a more prominent role in wage-setting dynamics than in the past,” say the four authors of a paper released on September 6, 2022. Òscar Jordà is a senior policy advisor, Fernanda Nechio is a vice president, and Celeste Liu and Fabián Rivera-Reyes are both […]
The Beveridge Curve
In early 2021, in the wake of the Covid-19 pandemic, the U.S. saw many workers leave their jobs and seek other employment—leading to record high job vacancies—a phenomenon observed dubbed “the great resignation.” Lately, inflation is rising, markets are cooling, and the great resignation appears to be slowing. The question becomes: How will unemployment rise as growth slows and job vacancies decline? On August 29, 2022, the Federal Reserve Bank of San Francisco (FRBSF) released an Economic Letter titled “Finding a Soft Landing along the Beveridge Curve” that explores the current relationship between unemployment and economic growth. The paper was […]
“Disasters Everywhere”
What is the cost of a disaster? What is the cost of the business cycle? Economically speaking, how do business cycles compare with disasters? The cost of business cycles and the gain to be had from stabilization policy is a highly controversial topic in macroeconomics. Some believe the welfare gains from stabilizing the business cycle are extremely low and therefore not worth the effort. “Depression prevention and stabilization policies are central to the discipline of macroeconomics,” conclude the authors of recent research published by the Federal Reserve Bank of San Francisco. “Extreme and costly events are not the only reason […]
The Value of Data
What is the value of data? Who benefits from data? Can you construct a decent predictive model to manage risk if you have lousy data? Some enterprising souls have tried to sell their data back to the tech giants that collect and use big datasets. There are even some small companies such as CitizenMe and Datum that pay a user for taking a quiz or sending location data. “Data are far from becoming a standardized commodity whose value can readily be established through trades,” writes Diane Coyle, professor at University of Cambridge, in a report she tabled February 26, 2020, […]
Top 5 Trends in Risk Management
The champagne has been drunk, and the New Year has been rung in. What trends are predicted in risk management as we welcome the new decade? “In 2020, we’ll likely see significant changes in risk models, processes and functions,” predicts Brenda Boultwood, Risk Advisory Partner at Deloitte. As a senior expert in risk culture and corporate governance, she published an article online January 10, 2020, for the Global Association of Risk Professionals (GARP). We present the highlights and a link to the full article below. The three lines of defense business model, as we know it, will end This is actually […]
From brown energy to green
How will climate change affect the financial sector and the broader economy? What policy responses will mitigate climate change risks? Recently, the US Federal Reserve Bank (FRB) sponsored the first conference dedicated to exploring the economic and financial risks associated with climate change. “Climate change will have sweeping effects on our economy and financial system,” says the report summarizing the main themes of the conference. The report, released on December 16, 2019, was co-authored by Galina B. Hale, Òscar Jordà, and Glenn D. Rudebusch. Hale is a research advisor and Jordà and Rudebusch are both senior policy advisors at the Federal […]
Finding a New Balance
How can monetary policy achieve price stability and full employment objectives in the midst of a changing economic environment? Lately, the US Federal Reserve Bank (FRB) has been thinking hard about new ways to control inflation, given the new economic headwinds. “Persistently low inflation presents a new problem for monetary policymakers,” said Mary C. Daly, president and CEO of the Federal Reserve Bank of San Francisco (FRBSF). On August 29, 2019, she gave a speech to a conference of economists and policymakers in Wellington, NZ. This was a significant venue, because inflation targeting was pioneered in New Zealand in 1990, […]
A Good Start…
Financial risks due to climate change are receiving more attention of late, particularly for investors and regulators, but how far along are firms in addressing the issues? A report on climate risk management at financial firms tabled on June 28, 2019, sponsored by the Global Association of Risk Professionals (GARP), answers the question with its subtitle: “A Good Start, But More Work to Do.” The report is co-authored by Jo Paisley, Co-President, and Maxine Nelson, Senior Vice President at GARP. “Our sample covered 20 banks and seven other financial institutions … from across the globe. These firms have a global […]