• Forecasting US GDP: assessing the quantity theory of money as a device

      Chang, Daphne Miyagawa (2021-12)
      We revisit Friedman’s Quantity of Money Theory and analyze the ability to forecast US real GDP using lagged M2 money supply. The Granger Causality Test indicates that M2 money supply Granger causes real GDP. However, we find that the causality is one-way, from M2 to real GDP, as real GDP fails to Granger cause M2. We surveyed a range of ARIMAX models to ascertain whether M2 money supply still forecasts economic activity, both before and during the global COVID pandemic. While economic theory suggests that money is neutral, we found that hybrid models that combine both standard ARIMA parameters plus M2 money supply growth as an exogenous regressor(s) actually improve forecast accuracy. Both before, during, and in the full sample, a hybrid model combining money supply and autoregressive parameters outperform atheoretical Box Jenkins models as well as the naïve model. Our results suggest that, while money supply has fallen off the radar screen of many economists, employing M2 in a hybrid model still improves forecasting ability.
    • Trumponomics in post-industrial America: understanding the causes of deindustrialization and its role in the emergence of right-wing populist economics

      Greenman, David A. (2018-05)
      Since 2001, the American economy has swiftly shed over six million manufacturing jobs. To this day, large swaths of the American rural working class are left struggling to compete with domestic and external forces that are driving American labor away from the production process altogether. Much of the political rhetoric surrounding this economic phenomenon is dominated by politicians pointing fingers across the Pacific towards China and their ‘unfair’ trade practices. This technique of political and economic scapegoating was heralded by Donald J. Trump who emerged onto the American political stage with the immediate incrimination of China in the economic woes of the American working class. Although the American trade deficit with China is an often cited cause of American deindustrialization, are there other factors at play? To what extent can the increasingly widespread variables of automation and service growth explain the “hollowing out” of the American manufacturing sector? Additionally, to what degree is Donald Trump’s anti-globalist and economic nationalist rhetoric responsible for his shocking electoral win in 2016? I explore these topics together and illustrate the troubling recent shifts in the American labor force as well as the American electorate.