Measuring the Financial Soundness of Firms

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Pierre-Olivier Weill writing on a board

Pierre-Olivier Weill

A commonly held view is that adverse macroeconomic shocks are greatly amplified when firms are financially unsound.  For example a large adverse macroeconomic shock will trigger the bankruptcy of highly levered firms. When it does not trigger bankruptcies, this shock will create a debt overhang amongst highly levered firms, slowing down investment.  A related amplification effect goes through financial firms. Indeed when banks are financially unsound, they have poor incentives to identify good investment opportunities, and low capacity to make new loans.

Motivated by these observations, Andrew Atkeson (UCLA Economics), Andrea Eisfeldt (UCLA Anderson) and Pierre-Olivier Weill (UCLA Economics) have recently developed a macroeconomic measure of the financial soundness of U.S. firms called Distance to Insolvency, or DI. DI measures a firm’s leverage adjusted for its business risk. This adjustment, which follows insights from the corporate finance literature, is crucial: for example, holding leverage constant, a higher business risk will deteriorate financial soundness because it is now more likely that an adverse shock will be large enough to push the firm into bankruptcy.  Professors Atkeson, Eisfeldt and Weill show that DI can be approximated in a very simple way by the inverse of a firm equity volatility. Because data on equity prices are readily available, this allows them to construct and study the distribution of DI in the economy, for the entire universe of U.S. publicly traded firms, for a long time period (1926-2012). They obtain three main empirical findings.

Andrew-Atkeson

Andrew Atkeson

First, they find that over this time period a number of episodes occurred in which the distribution of DI deteriorated sharply. During these episodes, which they call “insolvency crises” the median firm’s DI fell to extremely low levels, normally associated with junk credit rating or worse. They find that the largest recessions in the sample, namely 1932–1933, 1937, and 2008, are indeed episodes of insolvency crises. But the other recessions are not. While this shows that financial frictions matter for the worse U.S. postwar recessions, this also casts some doubt on their importance in most of the other recession.

Second, they find that the sharp deterioration of firms’ DI during the insolvency crisis of 2008 appears to be mainly a result of an increase in business risk. The contribution of a rise in leverage due to excess borrowing or to a fall in asset values is relatively small.  This highlights the importance of considering business risk to evaluate macroeconomic financial soundness.

Third, they find that during the recession of 1932-1933, 1937 and 2008, the timing and magnitude of the insolvency crisis were the same for all firms, financial or nonfinancial, large or small. They find that the DI of systemically important financial institutions deteriorated significantly during the crisis, but not before. This highlights that one major challenge for prudential financial regulation is to identify weak financial institutions in advance of financial crises.

For more details see “Measuring the Financial Soundness of U.S. Firms, 1926-2012”.

Conference in honor of Hugo Hopenhayn

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Hugo Hopenhayn

Hugo Hopenhayn

This weekend the department hosted a conference in honor of Hugo Hopenhayn. Since receiving his Ph.D. from Minnesota, Professor Hopenhayn has made fundamental contributions to industrial organization, macroeconomics and finance. Professor Hopenhayn is perhaps best known for his work on the evolution of industries, where he has provided elegant, tractable and quantitatively accurate models of industry transitions. He has also published path breaking papers on patents, unemployment insurance, and financial contracts.

Reflecting Professor Hopenhayn’s broad interests, the conference featured papers on topics as diverse as gender wage gaps, dynamic bidding in auctions, and capital misallocation. Participants included Professor Hopenhayn’s colleagues and coauthors, including Nobel prize winner Edward Prescott (ASU), Richard Rogerson (Princeton) and VV Chari (Minnesota). Also in attendance were many of Professor Hopenhayn’s former students, including Andy Skrzypacz (Stanford), Gianluca Clementi (NYU), and Matt Mitchell (Toronto).

The conference was co-sponsored by the Center of the Advanced Study in Economics Efficiency at ASU.

Investigating Income Inequality

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Till Von Wachter

Till Von Wachter

It is well known that income inequality in the United States has risen substantially since the early 1980s. However, the sources of the ongoing rise in inequality are still debated. Yet, an understanding of these sources is important for assessing potential policy options to address potential adverse consequences of inequality. In his recent paper “Firming Up Inequality,” Professor Till von Wachter substantially improves our understanding of these issues by examining the role firms have played in the observed rise in inequality.

The major economic hypotheses put forward to explain rising inequality are intimately related to workers’ employers. Yet, very few studies had access to the necessary information to analyze the evolution of income inequality within and between firms.  A classic hypothesis is that adoption of more computer-intensive technologies has increased the demand of more skilled workers and reduced the demand for routine, manual labor. If some firms adopt new technologies earlier than others and share some of the resulting profits with their workers, this could lead to a rise in differences in mean pay between firms. Alternatively, if early adopters raise wages of higher skilled workers this could imply within-firm wage inequality to rise faster in some firms than others. Changes in technology can also affect the organization of production and which workers firms hire. While this has received less attention in the literature, such reorganization can have profound consequences for inequality. For example, if high-wage firms increasingly hire high-skilled workers, such changes in worker composition can also lead to a rise in differences in mean pay between firms and an increase in income inequality as a whole.

In his paper, Professor von Wachter studies the role of firms for rising inequality using a massive, new longitudinal data set from the Social Security Administration that contains information on earnings for all workers ever employed in the United States since 1980 to the present time. Professor von Wachter obtains three key findings. The first finding is that firms appeared to have played a key role in rising inequality –over two thirds of the rise in inequality in the United States from 1980 to today occurred due to a rise in inequality in average pay between firms. Strikingly, Professor von Wachter documents that this rise in differences in mean pay between firms was entirely driven by changes in which workers firms hired. In contrast, differences in wage premiums between firms, holding constant worker composition, have remained roughly stable in the United States since the early 1980s. Finally, the paper also documents that for workers at large firms and for top employees in general, a more substantial rise in inequality has actually occurred within firms.

The fact that changes in worker composition between firms plays such an important role in explaining rising inequality has important implications. The findings suggest the rise in inequality in the United States has been related to a substantial reorganization in production that has led to a concentration of high-skilled (and hence high-wage) workers at firms that pay above average wages. Professor von Wachter also presents evidence that high- and low-skilled workers are increasingly like to be working in different firms, even independently of firm pay. These findings are consistent with other evidence documenting a rise in both domestic and foreign outsourcing of U.S. companies, as well as a rising concentration of low-wage and high-wage occupations between firms in the U.S. and other countries. It appears firms have increasingly reorganized their production around more homogeneous work forces.

This ongoing reorganization has shaped the way Americans work, with important consequences for inequality and for the economic opportunities of lower-skilled individuals. Obtaining a job at a high-wage firm has increasingly become a privilege for high-skilled workers. In contrast, in the 1960s and 1970s low-skilled workers had access to high-wage employers and work environments with high-skilled workers. In other words, it does not appear that the availability of high-wage jobs has been changing, but that these good jobs have been increasingly been taken by high-skilled workers. At the same time, lower-skilled workers are now less likely to work with high-skilled workers, potentially limiting their productivity. What the underlying economic forces behind the ongoing reorganization of production are is an important question for future research.

Navigating Minimum Advertised Prices

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john-asker

John Asker

In his recent working paper entitled “Vertical Information Restraints,”  Professor John Asker studies minimum advertised price (MAP) policies that prevent retailers advertising “excessively low” prices.

When a retailer enters into a distribution agreement with a manufacturer, the agreement may impose ‘vertical’ restraints on the retailer that restrict price or non-price aspects of retailer activity. Price restraints include resale price maintenance (RPM), in which the manufacturer imposes floors and/or ceilings in retail pricing. Non-price restraints include exclusivity provisions or the imposition of sales territories. In his new paper, Professor Asker considers a third type of vertical restraint: information restraints and, in particular, MAP policies. These policies impose a floor on the price at which retailers can advertise a product, but, crucially, not the price at which it can be sold to a consumer. That is, even if a MAP policy imposes a floor of $10 a unit on advertised prices, nothing restricts the retailer from selling it to a consumer for $7.

To understand the way MAP restrictions work, and in particular how they differ from the price restraint embodied in an RPM restriction, it is useful to examine a typical MAP provision. As an example, consider the January 1, 2016, MAP policy of Samsung Techwin America (a manufacturer of security cameras and surveillance equipment). The MAP price is specified as a percentage of the manufacturer’s suggested retail price (in this instance, 40% of MSRP). The policy explicitly applies to all advertisements in all media, including online. The MAP restriction only applies to advertised prices and not to the price at which products are actually sold. In physical stores, this means that the posted price in the store is not affected by the MAP restriction. As regards online pricing, the policy states:

“Pricing listed on an internet site is considered an “advertised price” and must adhere to the MAP policy. Once the pricing is associated with an actual purchase (an internet order), the price becomes the selling price and is not bound by this MAP policy. Statements such “we will match any price”, and “call for price” are acceptable.”

In particular, such policies allow retailers to advise customers that they will be able to see the price when the item is in a (digital) shopping basket. Lastly, Samsung reserves the right to punish non-compliance with termination.

Professor Asker’s paper examines the pro- and anti-competitive impacts of MAP policies through the lens of a series of closely related models. Since, superficially, MAP and RPM policies appear similar, the economic impact of these policies are compared and contrasted. Two themes emerge. First, for MAP policies to have any market impact, consumers need to have an informational (search) friction that advertising helps alleviate. Hence, in every setting we consider search frictions are a central feature. Without search, MAP is irrelevant to market outcomes. Second, MAP policies soften competition by obscuring prices. Thus, consumers allocate themselves to competitors somewhat randomly, being unable to sort as they would if perfectly informed as to prices. By contrast, RPM softens competition by equalizing prices. When consumers, or retailers, are heterogenous, MAP is helpful in retaining the flexibility to profitably accommodate heterogeneity. Thus, MAP will have an impact on markets when search and heterogeneity among similarly situated economic actors are important features of the environment. This paper therefore suggests that the divergent policy stance of the courts with respect to vertical price restraints (like RPM) and information restraints (like MAP) may warrant reconsideration.

New Book by Leah Boustan

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boustanbook

Professor Leah Boustan published a book entitled “Competition in the Promised Land: Black Migrants in Northern Cities and Labor Markets”. This builds on her 10 years of research into the great migration carried out at UCLA.

You can buy the book from Amazon.

A Quick Overview: From 1940 to 1970, nearly four million black migrants left the American rural South to settle in the industrial cities of the North and West. Competition in the Promised Land provides a comprehensive account of the long-lasting effects of the influx of black workers on labor markets and urban space in receiving areas.

Traditionally, the Great Black Migration has been lauded as a path to general black economic progress. Leah Boustan challenges this view, arguing instead that the migration produced winners and losers within the black community. Boustan shows that migrants themselves gained tremendously, more than doubling their earnings by moving North. But these new arrivals competed with existing black workers, limiting black-white wage convergence in Northern labor markets and slowing black economic growth. Furthermore, many white households responded to the black migration by relocating to the suburbs. White flight was motivated not only by neighborhood racial change but also by the desire on the part of white residents to avoid participating in the local public services and fiscal obligations of increasingly diverse cities.

Employing historical census data and state-of-the-art econometric methods, Competition in the Promised Land revises our understanding of the Great Black Migration and its role in the transformation of American society.

 

 

Understanding the Current Economy: UCLA Economists Speak Out

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In recent months, UCLA economists have actively written and spoken about the current economic crisis. We have compiled links (in chronological order) to the various opinions and ideas put forth by our economics faculty on issues such as how the current disaster was allowed to develop, how the proposed economic policies are likely to work, and what the future holds for our economy.

Prof. Lee Ohanian, November 12, 2017:
My Kingdom for a Renewable Energy Source

Prof. Lee Ohanian, July 11, 2016:
Prescott, Ohanian: How the Golden State lost its luster

Prof. Lee Ohanian, April 7, 2016:
U.S. Needs A President Who Understands Benefits Of Free Trade

Prof. Lee Ohanian, September 3, 2015:
4% Economic Growth? Yes, We Can Achieve That

Prof. Lee Ohanian, December 29, 2014:
European Economic Errors for the U.S. to Avoid

Distinguished Professor Roger Farmer, October 20, 2014:
Will Americans ever vote for a far-reaching wealth tax?

Prof. Lee Ohanian, October 9, 2014:
U.S. Income Inequality Isn’t Soaring, It’s Falling

Distinguished Professor Roger Farmer, August 12, 2014:
No more boom and bust? The financial policy committee has time on its side

Prof. Lee Ohanian, June 24, 2014:
Edward Prescott and Lee Ohanian: Behind the Productivity Plunge, Fewer Startups

Prof. Lee Ohanian, February 10, 2014:
Why we continue to lose the War on Poverty

Distinguished Professor Roger Farmer, February 4, 2014:
A Q & A with Roger Farmer (Interview with World Economic Forum’s Tomas Hirst)

Prof. Lee Ohanian, February 3, 2014:
U.S. Productivity Growth Has Taken a Dive

Distinguished Professor & 2013 Senior Houblon Norman Fellow Roger Farmer, December 19, 2013:
“How to Stop Financial Panics? Say Hello to Qualitative Easing” (Interview with WSJ Jason Douglas)

Prof. Lee Ohanian, September 18, 2013:
What Economic Recovery?

Distinguished Professor & Senior Houblon Fellow Bank of England Roger Farmer, July 19, 2013:
A sovereign wealth fund can save the UK from market meltdown

Distinguished Professor Roger Farmer, April 1, 2013:
Confessions of a Keynesian heretic

Distinguished Professor & Senior Houblon Norman Fellow Bank of England Roger Farmer, January 23, 2013:
Why financial markets are inefficient

Prof. Lee Ohanian, December 12, 2012:
Prescott and Ohanian: Taxes Are Much Higher Than You Think

Prof. Lee Ohanian, October 30, 2012:
Equality of opportunity, not income, is needed

Prof. , October 29, 2012:
Payroll Taxes Are ‘Regressive’? Time to Rethink That Idea

Prof. Lee Ohanian, October 29, 2012:
Payroll Taxes Are ‘Regressive’? Time to Rethink That Idea

Prof. Lee Ohanian, August 21, 2012:
Ohanian on the Great Recession and the Labor Market

Prof. Aaron Tornell, June 22, 2012:
Europe Needs a Federal Reserve

Distinguished Professor and Department Chair Roger Farmer, May 8, 2012:
Central banks should do much more

Prof. Aaron Tornell, March 28, 2012:
Has the ECB hit a limit?

Distinguished Professor and Department Chair Roger Farmer, March 5, 2012:
Roger Farmer: Espero ver un nuevo relajamiento cuantitativo en EE. UU.

Prof. Aaron Tornell, December 6, 2011:
Eurozone Crisis, Act Two: Has the Bundesbank reached its limit?

Prof. Andrew Atkeson, November 28, 2011:
The Rising Fear in Bank Stock Prices (search the title in Google News to unlock the article)

Distinguished Professor and Department Chair Roger Farmer, November 4, 2011:
Banks, Wealth and a Crisis of Confidence

Prof. Aaron Tornell, September 28, 2011:
Greece: The sudden stop that wasn’t

Prof. Harold L. Cole and Lee E. Ohanian, September 26, 2011:
Stimulus and the Depression: The Untold Story

Distinguished Professor and Department Chair Roger Farmer, September 16, 2011:
‘The Fear Factor’, Project Syndicate(French)

Distinguished Professor and Department Chair Roger Farmer, September 16, 2011:
‘The Fear Factor’, Project Syndicate(Arabic)

Distinguished Professor and Department Chair Roger Farmer, September 16, 2011:
‘The Fear Factor’, Project Syndicate(German)

Distinguished Professor and Department Chair Roger Farmer, September 16, 2011:
‘The Fear Factor’, Project Syndicate(English)

Distinguished Professor and Department Chair Roger Farmer, September 16, 2011:
‘The Fear Factor’, Project Syndicate(Italian)

Distinguished Professor and Department Chair Roger Farmer, September 16, 2011:
‘The Fear Factor’, Project Syndicate(Czech)

Distinguished Professor and Department Chair Roger Farmer, September 16, 2011:
‘The Fear Factor’, Project Syndicate(Spanish)

Distinguished Professor and Department Chair Roger Farmer, September 5, 2011:
Market psychology, high unemployment and rational bubbles

Distinguished Professor and Department Chair Roger Farmer & Economics Ph.D Student Dmitry Plotnikov, September 5, 2011 Roger Farmer, September 5, 2011:
Does fiscal policy matter? Is there a better way to reduce unemployment?

Prof. Andrew Atkeson, Lee Ohanian and William E. Simon Jr, August 23, 2011:
Fed’s Faulty Policies Will Create Inflation, Not Jobs

Distinguished Professor and Department Chair Roger Farmer, May 1, 2011:
Follow the Money: Looking at the Economic Crisis’, Los Angeles Times Festival of Books, USC

Distinguished Professor and Department Chair Roger Farmer, April 21, 2011:
Don’t Let Banks Gamble With Taxpayer Money

Distinguished Professor and Department Chair Roger Farmer, April 10, 2011:
How to Raise Interest Rates and Lower Unemployment at the Same Time

Prof. Andrew Atkeson, January 10, 2011:
How to Revive the California Dream

Prof. Lee Ohanian, December 13, 2010:
The Bush Tax Cuts Never Went Far Enough

Distinguished Professor and Department Chair Roger Farmer, November 15, 2010:
How to Restore Confidence in the Economy Without Inflating a New Asset Market Bubble

Prof. Lee Ohanian, October 28, 2010:
Where are the Jobs? The Parallels between Today and the Great Depression

Prof. Lee Ohanian and Edward C. Prescott, October 11, 2010:
Solid Long-term Policies, Not Quick Fixes, Need to Turn Economy Around

Prof. Lee Ohanian, August 27, 2010:
FDR and the Lessons of the Depression

Distinguished Professor and Department Chair Roger Farmer, August 25, 2010:
We need more QE (quantitative easing) to prevent another Great Depression: Round 2

Distinguished Professor and Department Chair Roger Farmer, August 18, 2010:
We Need More Quantitative Easing to Create Jobs

Distinguished Professor and Department Chair Roger Farmer, August 1, 2010:
Featured Interview about new book, ‘How the Economy Works: Confidence, Crashes and Self Fulfilling Prophecies’, Summer 2010 Volume Fourteen, UCLA COLLEGE REPORT: UCLA College of Letters and Science

Distinguished Professor and Department Chair Roger Farmer, July 29, 2010:
How the Economy Works: Confidence, Crashes and Self Fulfilling Prophecies, Talk and Book Signing, HSBC, NYC

Distinguished Professor and Department Chair Roger Farmer, July 28, 2010:
How the Economy Works: Confidence, Crashes and Self Fulfilling Prophecies, Talk and Book Signing, Bryant Park, NYC

Distinguished Professor and Department Chair Roger Farmer, July 18, 2010:
Austerity or Stimulus? We Don’t Have to Choose

Prof. Lee Ohanian, July 8, 2010:
The Right Way to Raise Wages: The President’s Drive to Strengthen Unions Will Increase Unemployment

Prof. Lee Ohanian, June 29, 2010:
It’s Time to Bring Back Jobs

Distinguished Professor and Department Chair Roger Farmer, June 21, 2010:
How to Bail Out Good Banks and Let Bad Banks Fail

Distinguished Professor and Department Chair Roger Farmer, June 11, 2010:
Why the Fed Should Buy Stocks

Distinguished Professor and Department Chair Roger Farmer, June 7, 2010:
International Television Interview with Jen Rogers of Reuters Insider

Distinguished Professor and Department Chair Roger Farmer, June 1, 2010:
Economic Policy Through the Lens of History

Prof. Lee Ohanian, May 18, 2010:
Taxing Like Europe

Prof. Lee Ohanian, May 11, 2010:
Another Too Big To Fail Firm

Distinguished Professor and Department Chair Roger Farmer, April 28, 2010:
Quantitative Easing

Distinguished Professor and Department Chair Roger Farmer, April 28, 2010:
How the Economy Works: Confidence, Crashes and Self-Fulfilling Prophecies

Distinguished Professor and Department Chair Roger Farmer, April 28, 2010:
Derivative Market Regulation

Distinguished Professor and Department Chair Roger Farmer, April 28, 2010:
US Finance Reform

Distinguished Professor and Department Chair Roger Farmer, April 25, 2010:
Professor Featured at the Upcoming L.A. Times Festival of Books

Distinguished Professor and Department Chair Roger Farmer, April 25, 2010:
Future of the American Economy Panel

Prof. Emeritus Axel Leijohufvud, April 10, 2010:
Instabilities

Distinguished Professor and Department Chair Roger Farmer, April 8, 2010:
A History Lesson from Lombard Street for Wall Street in 2010

Distinguished Professor and Department Chair Roger Farmer, March 29, 2010:
UCLA Today Magazine- 10 Questions for UCLA Economist Roger E.A. Farmer-with Meg Sullivan

Prof. Emeritus Earl A. Thompson, March 18, 2010:
No reason for Economic Optimism

Distinguished Professor and Department Chair Roger Farmer, March 16, 2010:
Exclusive Podcast Interview on the Current Economic Crisis

Distinguished Professor and Department Chair Roger Farmer, March 16, 2010:
Pepperdine University, Distinguished Lecture Series-Roger Farmer Lecture on How the Economy Works_Part1

Distinguished Professor and Department Chair Roger Farmer, March 16, 2010:
Pepperdine University, Distinguished Lecture Series-Roger Farmer Lecture on How the Economy Works_Part2

Distinguished Professor and Department Chair Roger Farmer, March 16, 2010:
Pepperdine University, Distinguished Lecture Series-Roger Farmer Lecture on How the Economy Works_Part3

Distinguished Professor and Department Chair Roger Farmer, March 16, 2010:
Pepperdine University, Distinguished Lecture Series-Roger Farmer Lecture on How the Economy Works_Part4

Distinguished Professor and Department Chair Roger Farmer, March 16, 2010:
Pepperdine University, Distinguished Lecture Series-Roger Farmer Lecture on How the Economy Works_part5

Distinguished Professor and Department Chair Roger Farmer, March 25, 2010:
Roger E. A. Farmer’s “How the Economy Works”

Distinguished Professor and Department Chair Roger Farmer, February 28, 2010:
Macroeconomics for the 21st Century: Part 2

Distinguished Professor and Department Chair Roger Farmer, February 27, 2010:
Macroeconomics for the 21st Century: Part 1

Prof. Lee Ohanian, February 24, 2010:
Did Stimulus Create Any Jobs?

Distinguished Professor and Department Chair Roger Farmer, January 28, 2010:
Why I Don’t Believe in Fairies

Prof. Lee Ohanian, January 26, 2010:
Lee Ohanian on Hoover, Roosevelt, and the Great Depression

Prof. Emeritus Axel Leijohufvud, January 23, 2010:
A Modest Proposal

Distinguished Professor and Department Chair Roger Farmer, January 6, 2010:
Farewell to the Natural Rate

Prof. Lee Ohanian, November 17, 2009:
A Cure for Unemployment: Forget Short-Term Fixes. Good Long-Run Policies Will Create Jobs

Prof. Lee Ohanian, October 21, 2009:
A Temporary Hiring Tax Credit?

Distinguished Professor and Department Chair Roger Farmer, October 16, 2009:
Don’t Give Up on Quantitative Easing: We Can Have Our Cake and Eat It Too

Distinguished Professor and Department Chair Roger Farmer, October 5, 2009:
The Great Recession Ended in May of 2009

Prof. Lee Ohanian, September 2, 2009:
Wages of Depression: Hoover-Era Lessons for Today’s Policymakers

Distinguished Professor and Department Chair Roger Farmer, August 6, 2009:
The Great Recession and the Coming Jobless Recovery

Prof. Lee Ohanian, July 21, 2009:
How Not to Pay for Healthcare

Prof. Lee Ohanian, July 15, 2009:
The Depression Divide: Why Economists Disagree

Prof. Lee Ohanian, July 8, 2009:
Will Reducing Government Spending Derail the Recovery?

Prof. Lee Ohanian, July 2, 2009:
No, Inflation Is Not the Key to This Recovery

Prof. Lee Ohanian, July 1, 2009:
Fed Policy On Inflation: As Good as It Gets

Prof. Lee Ohanian, June 29, 2009:
The Fed Fears Deflation More Than Inflation

Prof. Lee Ohanian, June 16, 2009:
How Stimulating Is Stimulus? Not Very

Prof. Lee Ohanian, June 10, 2009:
The $787 Billion Mistake

Distinguished Professor and Department Chair Roger Farmer, May 27, 2009:
Why Keynes Was Right and Wrong, and Why It Matters

Prof. Emeritus Michael Intriligator, May 3, 2009:
It Will Take Years Before the Current Recession Will End

Prof. Lee Ohanian, April 30, 2009:
Revisiting the 1930s: Why Did the Great Depression Last So Long?

Distinguished Professor and Department Chair Roger Farmer, April 16, 2009:
Macroeconomics: Adjusting the Big Picture

Distinguished Professor and Department Chair Roger Farmer, April 6, 2009:
Bah Humbug: Stagflation is Around the Corner

Prof. Lee Ohanian, April 4, 2009:
Hearing on Lessons from the New Deal – Testimony for the U.S. Senate Subcommittee on Economic Policy (pdf)

Prof. Lee Ohanian, April 4, 2009:
Hearing on Lessons from the New Deal – Testimony for the U.S. Senate Subcommittee on Economic Policy (video)

Prof. Lee Ohanian, March 30, 2009:
The Role of Labor Policy: Council on Foreign Relations Symposium on a Second Look at the Great Depression and the New Deal

Prof. Andrew Atkeson, March 16, 2009:
Featured Guest in Economist Debates: This House Believes that We Are All Keynesians?

Visiting Scholar David Mayer-Foulkes, March 5, 2009:
Long-Term Fundamentals of the 2008 Economic Crisis

Prof. Emeritus Earl A. Thompson, March 5, 2009:
What President Obama Should Know About Recessions

Prof. Emeritus Deepak Lal, March 5, 2009:
The Mont Pelerin Society Presidential Address: A MANDATE RENEWED

Prof. Emeritus Deepak Lal, March , 2009:
The Great Crash of 2008: A collection of The Business Standard columns

Prof. Emeritus Michael Intriligator, February 23, 2009:
The Current Worldwide Financial and Economic Crisis

Prof. Edward E. Leamer, February 17, 2009:
How to Improve the New Bank Rescue Plan?

Prof. Emeritus Axel Leijonhufvud, February 13, 2009:
No Ordinary Recession

Distinguished Professor and Department Chair Roger Farmer, February 9, 2009:
How to Fix the Banks

Prof. Emeritus Earl A. Thompson, February 6, 2009:
An Economist’s Advice to President Obama

Distinguished Professor and Department Chair Roger Farmer, February 4, 2009:
The Government Should Target the Stock Market

Prof. Lee Ohanian, February 2, 2009:
How Government Prolonged the Depression: Policies that Decreased Competition in Product and Labor Markets were Especially Destructive

Prof. Lee Ohanian, January 30, 2009:
The New Deal Stimulus

Prof. Emeritus Axel Leijonhufvud, January 13, 2009:
Fixing the Financial System

Prof. Emeritus Axel Leijonhufvud, January 12, 2009:
Fixing the Crisis: Two Systemic Problems

Distinguished Professor and Department Chair Roger Farmer, January 12, 2009:
A New Monetary Policy for the 21st Century

Distinguished Professor and Department Chair Roger Farmer, December 30, 2008:
How to Prevent the Great Depression of 2009

Distinguished Professor and Department Chair Roger Farmer, December 19, 2008:
U.S. Has 50% Chance of Depression

Prof. Lee Ohanian, December 16, 2008:
Obama’s New Deal: As Bad as the Old New Deal?

Prof. Lee Ohanian, December 10, 2008:
Revisiting the New Deal

Prof. Emeritus Michael Intriligator, December 5, 2008:
A Toyota Takeover Could Save GM

Prof. Lee Ohanian, November 12, 2008:
Obamanomics: To Fix the Economy, the President-Elect Should Take His Cues from History

Prof. Lee Ohanian, November 3, 2008:
Don’t Raise Capital Gains Taxes

Prof. Francisco J. Buera, November 1, 2008:
Learning the Wealth of Nations

Prof. Lee Ohanian, October 31, 2008:
The “Bailout Puzzle”

Distinguished Professor and Department Chair Roger Farmer, October 9, 2008:
How the U.S. Economic Crisis Will Affect the Global Economy

Distinguished Professor and Department Chair Roger Farmer, October 9, 2008:
What’s Wrong with the Economy and How to Fix It

Prof. Lee Ohanian, October 8, 2008:
Good Policies Can Save the Economy: Why We Need Lower Tax Rates and More Skilled Immigrants

Prof. Earl A. Thompson, September 24, 2008:
No Bailout Necessary

Prof. Edward E. Leamer, September 1, 2008:
Please Think This Over

Prof. Emeritus Axel Leijonhufvud, May 13, 2008:
Central Banking Doctrine in Light of the Crisis

Prof. Emeritus Axel Leijohufvud, May 1, 2008:
Keynes and the Crisis

Prof. Emeritus Axel Leijonhufvud, October 26, 2007:
Bubble, Bubble, Toil and Trouble

Prof. Pierre-Oliver Weill, August 23, 2007:
Crashes and Recoveries in Illiquid Markets

Prof. Pierre-Oliver Weill, January 18, 2007:
Leaning Against the Wind

Prof. Lee Ohanian, August 10, 2004:
FDR’s Policies Prolonged Depression by 7 years, UCLA Economists Calculate

Welcome New Faculty Members

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The Department of Economics is pleased to introduce our new faculty members:
Assistant Professor Youssef Benzarti (Ph.D. 2016, University of California, Berkeley)
Assistant Professor Michela Giorcelli (Ph.D. 2016, Stanford University)
Assistant Professor Martin Hackmann (Ph.D. 2014, Yale University, previously an Assistant Professor at Pennsylvania State University)

Also joining us this year as a Visiting Professor is Volker Nocke, on leave from Mannheim University in Germany.

New book by Roger Farmer

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Professor Roger Farmer’s new book, Prosperity for All: How to Prevent Financial Crises, was published this month by Oxford University Press.

The book is available on Amazon.

Learn more about the book on his website.

In my book Prosperity for All: How to Prevent Financial Crises,I draw on evidence not just from the 1930s, but also from later decades, to build a theory that accounts not just for depressions, but also for stagflation. Unlike Keynes, I do not conclude that more government spending is the right way to cure a depression. Instead, I argue for a new policy in which central banks and national treasuries systematically intervene in financial markets to prevent the swings in asset prices that have such debilitating effects on all of our lives.