Working Papers

EII Working Paper 23-1

Fighting the Pandemic Inflation Surge of 2021-2022

This study reviews the contributions of supply shortages and excess demand to the pandemic inflation surge of 2021-2022. It finds that only about 40 percent of US pandemic fiscal relief was focused on sectors and recipients most affected by the pandemic. The analysis posits a “fiscal quantity theory” whereby, under constrained supply, an increased fiscal deficit causes increased inflation proportionate to the resulting rise in demand relative to GDP. Calculations applying this approach to the timing of increased demand from fiscal pandemic relief find that it contributed one-third to two-thirds of the pandemic price shock for the United States. As a possible supplementary policy instrument to curb still high inflation if needed, it suggests a contingent version of the income-tax surcharge employed in the United States in the late 1960s. Available at: EIIWP23-1

EII Working Paper 21-02

Debt Sustainability in Emerging Market Economies after the Covid-19 Shock (November 2021; rev. December)

This study examines debt burden metrics for 11 major EMEs to gauge the severity of the Covid-19 shock to public debt sustainability.  It finds that Brazil, South Africa, and Turkey have experienced the most severe deteriorations, and identifies Colombia and India as also warranting caution. Medium-term projections examining the sensitivity of debt burdens to upward pressure on real interest rates find Brazil, South Africa, and India relatively more affected as a consequence of relatively high baseline debt and interest burdens. So far there has been no generalized slide of the major emerging market economies into unsustainable debt burdens requiring debt renegotiation.  Available at: EIIWP21-02R2

EII Working Paper 21-01

US Debt Sustainability Under Low Interest Rates and After the Covid-19 Shock (March 2021; rev. June)

New attention to interest rate versus growth rate debt dynamics has shifted economic thinking toward less concern about public debt levels. Nevertheless, applying a prudential benchmark of 1 percent for the real interest rate on US debt – the 33rd percentile over the past six decades – this study finds that by 2050 the US federal debt burden reaches dangerously high levels not only as measured by the ratio of debt to GDP but also by the ratio of interest payments to GDP. Primary (non-interest) deficits will need to be cut sharply from their baseline of 3-5 percent of GDP to avoid rising risk to debt sustainability. Available at: EIIWP21-01JunR3

 EII Working Paper 20-03

Carbon-Equivalent Taxes on US Meat (July 2020; rev. December)

Almost 6 percent of US greenhouse gas emissions come from methane and nitrous oxide in the livestock sector. This study calculates carbon-equivalent consumption taxes for beef, milk, pork and chicken that could accompany fossil-fuel taxes or regulations in the rest of the economy. Available at: WP20-03decR

EII Working Paper 20-02

Transient Climate Response to Cumulative Emissions (TCRE) As A Reduced-form Climate Model (May 2020)

This study examines the paradox that Transient Climate Response to cumulative past Emissions (TCRE) is linear even though radiative forcing and warming are only logarithmic against atmospheric concentration of carbon dioxide.  It provides parameters for a simple linear TCRE climate model.  Available at: EIIWP20-02.

EII Working Paper 20-01

Calculating the China Shock to US Employment:  An Input-Output Labor-Accounting Approach (March 2020).

(William R. Cline with David Xu)       This study refines and extends the analysis of EII Working Paper 19-01.  It finds that from 2000 to 2016, the China shock displaced 716,000 jobs in manufacturing but created 39,000 jobs in the rest of the economy.  The net job loss of 676,000 was only about one-third as large as the most widely cited estimates of about 2 million jobs lost.  Available at EIIWP20-01.

EII Working Paper 19-01

Recalculating the China Shock to US Manufacturing Employment (April 2019; rev. Sep.)

(William R. Cline with David Xu)       This study uses counterfactual input-output analysis rather than statistical regressions to estimate the employment impact of the large increase in imports from China.  For 2000-16, it estimates a loss of about 775,000 jobs in manufacturing and about 750,000 for the economy as a whole, well below the corresponding estimates of 1 million and 2 million respectively in the leading previous study. The lower estimates stem from inclusion of induced export job gains, deflection of imports otherwise provided by countries competing with China, and new jobs in downstream sectors benefiting from cheaper imported intermediate inputs.  Available at EIIWP19-01Rsep.

EII Financial Markets Analysis 19-01: Justified Stock Market Price, January 2019

Following the fourth-quarter correction in the US stock market, the JSMP model indicated substantial scope for market appreciation in 2019 even allowing for a significant price discount from heightened political risk.  Available at EIIFMA19-01.

EII Financial Markets Analysis 18-02: Estimates of Fundamental Equilibrium Exchange Rates, November 2018

In October, 2018, the US dollar was marginally overvalued, the Japanese yen and Korean won moderately undervalued, and the euro and Chinese renminbi were at fundamental equilibrium levels. Available at EIIFMA18-02.

EII Working Paper 18-01

US Median Household Income Has Risen More Than You Think (October 2018)

After changing the price deflator from the consumer price index to the personal consumption expenditure index, and after adjusting for changing household size, trendline real median household income rose by 50 percent from the late 1960s to 2017, instead of just 21 percent as reported by Census.  Available at this link: EIIWP18-01f.

This paper was subsequently published in the Winter 2019 issue of the Cato Journal and is available at this link.

EII Financial Markets Analysis 18-01:  Justified Stock Market Price, October 2018 

Despite moderate overvaluation at end-2017, by end-September 2018 this overvaluation had diminished and US stock prices were on track to rise significantly through end-2019 as major increases in earnings more than offset normalization of price-earnings ratios.  Available at: EIIFMA18-01.