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Sat | Jul 12-2025 | 2:18 am EDT

IMF Growth Projections and Overfitting in Judgment-based Economic Forecasts

In a recent IMF working paper "Overfitting in Judgment-based Economic Forecasts: The Case of IMF Growth Projections", economist Klaus-Peter Hellwig examined IMF's World Economic Forecasts (WEO) and check if the forecast model suffer from the problem of overfitting.

Blanchard’s “Policy Model” v “Theory Model”

Back in November last year, Professor Olivier Blanchard discussed with me about his view that there should be four types of macroeconomics, and "theory...

Hong Kong dollar amid ‘Asian Financial Crisis in reverse’ — basic explainer

An explainer on how Hong Kong Linked Exchange Rate System works, what Aggregate Balance is, and how interest rate arbitrage help maintains Linked Exchange Rate System.

Why Fed projects to cut rates next year even it expects failure to reach...

Inflation projections by Fed officials show that PCE inflation will not reach 2% by the end of 2025. Why the Fed expects to cut rate next year then?

Is there a Zero Lower Bound?

In a recent research, four European Central Bank economists found that negative interest rate policy in the eurozone can encourage banks to increase lending and encourage cooperations to increase investments. That is, contrary to what macroeconomics models usually predict, interest rate policy can still has stimulative effect even the zero lower bound is reached.

What is Hysteresis?

Hysteresis is referred to the hypothesis that recessions may have permanent effects on the level of output relative to trend.

Hong Kong Linked Exchange Rate & HKD-USD interest rate differential

HKD tends to be on the strong side (closer to HKD 7.75 per USD) when the interest rate differential is positive (HIBOR > LIBOR).

Aging, Output Per Capita and Secular Stagnation

Gauti B. Eggertsson, Manuel Lancastre, and Lawrence H. Summers explain in their paper "Aging, Output Per Capita and Secular Stagnation" the role of aging in the Secular Stagnation model.

Federal Reserve has never been this ‘confused’ about neutral rate

Federal Reserve decided to cut rate by an supersized 0.5 percentage point. The decision finally ended the weeks-long market debate of whether the central bank would cut 25 or 50 basis points. One important thing, though, didn't reach the headline: The Fed has never been this "confused" about where the natural rate should be.

Central Bank’s Balance Sheet and the Rise of Reserves

The above figure shows the balance sheet of four major central banks from 2005 to 2015. Above the horizontal axis is the asset side...

Interviews

DSGE model and the State of Macroeconomics | Q&A with Olivier Blanchard |

In this interview, Blanchard discussed his view on the role of DSGE model in modern Macroeconomics and policymaking. He also explained his decision to rewrite his macroeconomics textbooks after the Great Recession. His recent research on hysteresis was also discussed.