RaboResearch - Economic Research

Special Dutch version

Wolf! Wolf! Wolf? Increasing US recessionary risks

In this publication we look at three different indications pointing at increasing US recessionary risks. Our treasury yield curve model suggests a 27% probability of a recession in the 17-month window. This probability is much higher than the recession expectation of the NY Fed.

Special

India: trade wars and capital flight

US trade and monetary policy will have a substantial effect on the Indian economy. We calculate a Indian capital flows model to assess the impact of an acceleration of the Fed’s tightening cycle. Our results show that India would lose USD 22bn in missed capital inflows up to 2022.

Economic Comment

The defence spending gap in the EU

The EU is temporarily exempted from the steel and aluminium tariffs in the US. While seeking permanent exemption, it might be difficult for the EU to increase defence spending to the satisfaction of the US, due to the possibly massive costs involved.

Special

Is a US trade war imminent?

Trump’s protectionist steel decision increases the risk of a trade war. But a full scale trade war would hurt the US economy even more than China and the EU.

Special

US: Is there rising wage growth on the horizon?

We predict wage growth to peak at 3.0 to 3.3% in the next two years. While this is higher than current levels, it’s on the low end of the Fed’s preferred range. At the same time, our models show that we’re already getting close to the peak of the economic cycle.

Special

The economic impact of a (partial) NAFTA breakdown

The total economic costs of a NAFTA breakdown up till 2025 would range between 0.9% and 1.0% GDP for the US, 1.3% and 2.0% GDP for Canada, and 2.2% and 2.6% GDP for Mexico, depending on the severity of the breakdown.

Special

India: getting inside the head of the RBI

We have developed a two-equation model to forecast India’s interest rate and inflation. Going forward, we expect that both variables will follow an upward trajectory. In our lower bound forecasts, we are even more hawkish than the repo forecasts from a Bloomberg survey among 46 economists.

Column

India: a continuing balancing act for the RBI

A two-equation forecasting model shows that we expect interest and inflation rates to increase in India. It might be worthwhile for the Reserve Bank of India to examine whether it is useful to communicate medium-term forecasts on these variables.

Economic Comment

India: what is the economic impact of the new stimulus package?

The announced stimulus package in October will support the ailing banking sector, but we expect limited additional effects on economic growth of India (of 0.2ppts in fiscal year 2018/2019). Moreover, it is a missed opportunity that the package does not contain measures to foster total factor productivity growth.