outlook for the economy in 2009

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Outlook for the Economy in 2009. Steven Kyle Cornell University December 2008. Christmas Spending Plans Year Average Spending Percent Change. American Research Group Survey Nov10-13; Tel. Interview with 1,100 Adults. The Gap in Demand. GDP = C + I + G + Net Exports - PowerPoint PPT Presentation

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  • Outlook for the Economy in 2009Steven KyleCornell UniversityDecember 2008

  • Christmas Spending Plans

    Year Average Spending Percent ChangeAmerican Research Group Survey Nov10-13; Tel. Interview with 1,100 Adults

    2008$431- 50%2007$859- 5%2006$907- 4%2005$942- 6%2004$1,004+ 3%2003$976- 6%2002$1,037-1%2001$1,052+ 9%2000$968+ 3%1999$939+ 1%1998$928+ 34%

  • The Gap in DemandGDP = C + I + G + Net ExportsC is down People have rediscovered savingsI is down Why invest if nobody is buying?NX is down The rest of the world is in recession alsoThat leaves only G able to expand

  • What Kind of Stimulus?DOMake it soonContribute directly to immediate spendingExtend UnemploymentAid to state governmentAid to already-in-the-pipeline projectsTry to promote long run growth where possibleDONTMake it piecemealThink that tax cuts will necessarily be spentImagine that incentives to lend = actual lendingImplement permanent programs unless they contribute to long run growth and productivity

  • How Much?Historical ContextWW2 is what got us out of the Great Depression Deficits ranged as high as 20% of GDP That was likely more than enough but still, it was huge Chinese just announced stimulus of 20% of GDPGoldman Sachs estimate of current gap at around 10% of GDPToo much less dangerous than too little

  • NAHB Housing Market Index Builder ConfidenceSource: Builders' Economic Council (BEC) Monthly Surveys

    JFMAMJJASOND20015258605958595759554648552002585862616161615563616263200362635655606365676769686920046866666969686770676970712005706970677072706765686157200657565451464239333031333320073539363330282422201919182008192020201918161617149