1. NS4540 Winter Term 2017 Class Discussions January 30/February 1, 2017
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. Class Discussion 1/30/2017, 2/1/2017
Latin America has always been greatly affected directly or indirectly with developments in the U.S. Economy – hard to make a forecast without this frame of reference: Indirect effects:
Mohamed El-Erain, “Trump’s Economic Approach Starts to Take Shape,” Bloomberg January 26, 2017
Robert Looney, “Trump’s Supply-Side Economics Have Little Chance of Working in 2017,” World Politics Review December 28, 2016
Direct effects
Neil Irwin: What is NAFTA and how might Trump change it?,” New York Times January 25, 2017
Jose Ocampo, “Will Trump block Latin America’s Recovery?” Project Syndicate, January 24, 2017

3. Trump’s Overall Program
Mohamed El-Erain, “Trump’s Economic Approach Starts to Take Shape,” Bloomberg January 26, 2017
Strategy based on “import-substitution plus” – combines an industrial policy
Operates at macro and micro levels
Uses signals and narratives as economic policy tools
Uses carrots and sticks
Willing to depart from long-established rules governing cross-border relationships
How will all this be managed?
Collaborative manner that balances countries' domestic and global responsibilities or
Disjointed and uncoordinated fashion

4. Trump’s Supply Side Program
Robert Looney, Trump’s Supply-Side Economics
Business man’s approach vs. economist’s
Proposals suggest supply-side approach – tax breaks, deregulation – free up resources for private sector
Question of whether supply-side worked in the 1980s
Are conditions similar to the 1980s?
Productivity
Potential output
Entrepreneurship
Offsetting effects today
Interest rates
Dollar
Micro view – bigger picture Carrier deal

5. NAFTA
Neil Irwin, What is NAFTA and how might Trump change It?, New York Times, January, 26, 2017
NAFTA – FTA – eliminated barriers to trade
NAFTA Results – major expansion trade interconnecting of economies – supply chains
Impact – theoretically should create more high-paying jobs in U.S. – shift lower paying jobs to Mexico
In practice – decline in some high value jobs in U.S. mainly blue-collar men
Can Trump kill NAFTA – yes, but messy and at high cost – U.S. credibility
What does Trump want – rules of origin – Increase in North American share comes at expanse of China, U.S. border tax to offset Mexican VA tax
Withdraw could be gradual with new deals with Canada and Mexico – considered inefficient by most economists

6. Latin American Recovery
Jose Ocampo, Will Trump Block Latin America’s Recovery? Project Syndicate January 24, 2017
Problem: new trade and financial uncertainties
Mexico already had investments affected and a sinking peso
Other countries Brazil, Argentina, Venezuela – domestic issues more important
Chile, Colombia and Uruguay on slow growth trajectory.
Peru recovering but at much slower rate than usual
Only Paraguay and Bolivia, Central America and DR doing well
Slow trade growth a significant risk for Latin America
Interest rates could be increasing with U.S. fiscal expansion