Author Archives: Emma Zhang

Effective federal fund rate forecasting

The effective federal fund rate plays a key role in the U.S. economy. It is not only the benchmark interest rate underlying financial instruments in the financial market, but also the pivotal factor in pricing of assets in other industry. Therefore, effective Federal Fund Rate has always been the focus of forecasting activities performed by academy and businesses. However, since December 16th, 2008, federal fund rates have been targeted within a range of 0%-0. 25%. Effective Federal Fund rates, which center on the target rate, become less unpredictable. However, as the economy recovering, effective federal fund rate will very likely resume its current role. Given this, it is still of profound significance to forecast fed fund rates.

Effective federal fund rate is determined by the federal fund market, where Financial institutions trade federal fund with each other overnight. Financial institutions and the Federal Open Market Committee (FOMC) are the major market forces that ultimately decide the effective fed fund rate.

There are a lot of forecasting models for effective federal fund rate. Hauwe, Paap and Dijk(2011)used a Bayesian forecasting model for federal funds target decisions using large set of macro economic predictors . Although this model initially is used for federal fund target rate prediction,it can be adapt to predict the effective federal fund rate. This is because effective federal fund rate is forced to stay close to federal fund target rate by the Trading Desk at Federal Reserve Bank of New York, see Taylor (2001). The Trading Desk performs Open Market Operation (OMO) and counteracts large deviations of effective federal fund rate from its target. In the meantime, financial institutions will also react to federal fund target changes immediately, given that they anticipated the OMO will bring the effective federal fund rate to new target rate very soon. Therefore, predicting effective federal fund rate can be roughly substitute for predicting target rate, which is determined by FOMC. Hauwe, Paap and Dijk examined the minutes of FOMC meetings and discovered that a large set of macro-economic indicators is used in determining the target rates.

 Thorton (1998) proposed a model using the 30 days federal fund future rate as predictor. Federal fund futures rate can help predicting the target rates because futures market participants make commitments that are contingent on what they believe the federal funds rate will be and look to factors they believe will influence its course. The Fed targets the funds rate, and the overnight federal funds rate stays close, on average, to the Fed’s target. Hence, the federal funds futures rate naturally embodies the market’s expectation of what the Fed will do.

Theory suggests that model averaging can improve predictability. Ravazzolo, Dijk, and Verbeek (2007) discovered that averaging yield higher predictive gains than selecting the best model, and time varying model weights have higher statistical and economic values than other averaging schemes.  Therefore, we can take the average of the above two models.

(Revised) Interest rate liberalization in China

China’s top officials made New Year resolution to bring about economic overhaul. At the Boao Davos Forum, Premier Li Keqiang emphasized that the government won’t panic in the face of slowing growth. Some analyst says that the slowing growth means that difficult reforms will be put off indefinitely. But easier one such as the interest rate reform is unwinding. The People’s Bank of China is in its final stages of winning approval for a bank deposit insurance system.

Interest rate liberalization in China is long overdue. But once it is implemented successfully, it will put money in the pockets of ordinary Chinese savers, make the banks evaluate risks more carefully, and direct lending to privately owned firms that complain of China’s largest banks ignoring them.

Yet steering the banking system of the second large economy in the world to a new direction is not an easy task. Currently, the PBOC targets a measure of bank credit called M2 and instructs China’s giant state-owned banks about their lending practices. For instance, the PBOC has told banks to halt loans to troubled real-estate developers and industries marked by overcapacity.  By contrast, other central banks take a less direct role by setting benchmark rates that offer a guidepost to banks as they lend.

 PBOC is hiring new brains to deepen their understanding of how to transform to a central bank more like other central banks. Ma Jun, until recently Deutsche Bank ‘s top China economist, was hired as the Chinese central bank’s new chief economist. He proposed a plan to liberalize the country’s financial system in steps within three years. First it needs to establish a central bank-blessed interest rate (China’s interbank rate) that would set a benchmark for lenders. That would give China the equivalent of the U.S. federal funds rate. During a first stage of reform, the PBOC should keep its intentions about the interbank market quiet and target a broader measure of money supply, known as M3. If the interbank lending system stabilized, China could shift fully to a monetary policy where the PBOC would set the interbank market rate, and banks would be free to charge what they like for deposits and loans.

But for such a plan to carry out, there are several caveats that must be factored in.

First of all, will PBOC be willing to give up control of lending by state-owned banks? Ma Jun must bear in mind the fact that it is much more easy for PBOC officials to send directives than to maneuver in a much more complicated market like Federal Funds Market.

Secondly, the biggest obstacle lies ahead for interest rate liberalization is what is known as the local government debt issue. Lots of local governments of China have been facing the risk of default on the colossal debts borrowed from state-owned banks. These debts were used to fund local governments unplanned and outrageous investment in infrastructure in order to boost local GDP growth, which is closely tied to the evaluation of local governors performance.

If the interest rate freed up too quickly, there is fear that the interest rate will be too high and local government will have to borrow more new debts to payback old debts. The huge default risk will put China’s economy in a perilous situation.The growing inability of local government to finance their debt is considered one of China’s biggest financial weaknesses. Unless there is a safer way to settle down local debt problem, I am afraid the interest rate liberalization agenda will be postponed.

Is Chinese medicine gaining credibility in U.S. hospitals ?

I just saw an article on WSJ saying that the Cleveland Clinic, one of the country’s top hospitals, is now dispensing herbal medicine, a practice that is well established in China and other Eastern countries but has yet to make inroads in the U.S. because of a lack of evidence proving their effectiveness. Chinese herbal therapy center was recently opened by the Cleveland Clinic.The aim to establish this new clinic is to  fills in the gap of western medicine has on chronic-care. While acupuncture programs have sprouted across the U.S., there are only a handful of herbal clinics.  According to Jamie Starkey, lead acupuncturist at the Cleveland Clinic who got the herbal clinic started, this might be due to little scientific research outside Asia on using herbs as medicine. Ms. Starkey says she had to translate studies to convince the Integrative Medicine’s former medical director that an herbal clinic could be effective.

If you want to practice Chinese Herb in U.S., you need to get a license. But the license doesn’t allow the license holder to claim she treats diseases. She can only say that Chinese herbs can stop or alleviate pain.  Chinese herbal medicine is still being critically evaluated. “In the past it wasn’t even considered seriously,”A doctor at Cleveland Clinic says. “At this point there is a thinking, ‘Some of the things we’re doing now aren’t very effective. Should we really be looking at alternatives a little more seriously?’ I think the verdict is still out.” 

I don’t know what is ultimately preventing the Chinese herb’s widely usage in U.S. But lacking scientific research of the herb’s effectiveness is not convincing me. Chinese medicine exist for at least 2000 years and 1800 years before the invention of Western medical system. This is a practice that has been well tested and established. To speak frankly, those test is not done in medical lab with white mice and restricted conditions, but with 1.4 billion Chinese people living in an ever changing environment today.If it is not effective, how can the 1.4 billion people live in China before the invention and introduction of western medical system?

Chinese medicine established through practice and experience, not through theory and experiments, which is what western world definition of science is. Chinese traditional medical theory think the illness is part of us, so it must be cure with the help of our body. Medicine is just a mitigator or facilitator,  that can help our body restore its normal state.  It goes against the western medical system’s idea that if one part of our body is ill, we must fight with that part and even remove it from our body. This is, from Chinese perspective, as if we are fighting with ourself.

But I guess the ultimate reason why Chinese herb cannot go into U.S. is because it is so effective that it could be a huge threat to the existing system.

 

 

 

(Revised) Alibaba, the E-Commerce Legend in China

Can anyone imaging that a company who generates 2% of total China’s GDP and whose transaction volume is one-third larger than that of Ebay and Amazon’s combined, is created in a spartan apartment by this small, thin man?Jack Ma started Alibaba.com in his apartment in 1990, and vowed to build Alibaba into the greatest Chinese-made company in the world.  The 49-year-old Mr. Ma is a tenacious, charismatic leader, and he keep his words. Alibaba now handles roughly 80% of all online shopping in China, which some analysts say is already the world’s largest market for e-commerce. Tmall, a website under the name of Alibaba, has about 800 million product listings from seven million sellers who pay Alibaba for advertising and other services.  Apart from market share, it is also of growing potentials, given that hundreds of millions of Chinese still haven’t shopped online. Yahoo reported late Tuesday that Alibaba’s revenue jumped 66% from a year earlier to $3.06 billion, and profits more than doubled to $1.35 billion.

What’s the story behind this success?

Alibaba‘ s strategy is different from that of Apple or Google. Rather than inventing revolutionary products, Alibaba often adapts existing technology to serve China’s fast-growing e-commerce market. Taobao, (now known as Tmall ), was created to sell directly to consumers as the Internet emerged in China. Tmall is a middleman, making most of its money from charging merchants for marketing and ad services so they can stand out in the crowded marketplace. Sellers on Tmall and Alibaba.com pay annual fees, but they allowed sellers to list their products for free . He said Taobao wouldn’t try to turn a profit for three years. “I know the Chinese user market and users better than Meg Whitman, ” Mr. Ma said about eBay’s chief executive at the time. The company was in business for three years before it posted its first annual profit: $1 in 2002. “Alibaba has played the scale game really, really well,” says Paul McKenzie, an analyst at Hong Kong brokerage firm CLSA in Hong Kong. “They created a virtuous circle of more merchants attracting more shoppers, which in turn brings in more merchants.”

Taobao, the online version of a raucous Chinese street market, quickly leapfrogged eBay in China. But Alibaba executives worried that the site would be a turnoff for big, brand-name companies because they wouldn’t want to be associated with tiny, unknown sellers. Mr. Ma sent a team of about 30 engineers back to his old apartment to develop a site that would win over the big names. “Jack’s apartment was reserved only for the most important projects,” says Wang Yulei, an Alibaba vice president who was one of the engineers on the team. “It’s a spiritually important place.” Officials at companies that Alibaba hoped to attract often visited to tell the engineers what they wanted. “When they walked into the apartment and saw our messy rooms, they looked very curious,” Mr. Wang recalls.

Even after stepping down as chief executive, Mr. Ma exerts his influence at Alibaba’s headquarters campus in Hangzhou, designed with a Silicon Valley feel that includes brightly colored cafeterias, gyms and recreational areas with pool tables.No one lives in his old apartment, but Alibaba uses it occasionally to work on new projects. Mr. Ma has said he wants to turn it into a museum someday.

(Revised) Predicting the Effective Fed Fund Rate (3rd post)

In the last post, I talked about how market moves even without the intervention of fed trading desk. This might have gave you an illusion that OMO is less important in the determination of effective fed fund rate. However, it is the very commitment that trading desk will use OMO to keep effective rate around targets that leads to the market forming expectation, and ultimately actualize the expectation. From the graph below we can see that, in the long run, fed trading desk has done a great job in keeping the effr around the target . 

fredgraph

The average deviation of effr from target is about only 0.1 basis point. And there is evidence that the gap in between is shrinking overtime. This means that fed had become more and more apt at smoothing macro economic shocks. It could also mean that the market have been getting better and better at predicting the move of trading desk, out of the expectation that it will always follow the reaction function.

So there is obviously a gain for the forecaster who wants to forecast effective fed fund rate in the longer horizon. It is difficult for forecaster to use the traditional approach where supply and demand of fed fund is estimated and then the equilibrium fed fund rate is calculated. It is especially tenuous for forecaster to estimate the demand for federal funds. As I discussed earlier, demand for fed balance is now largely driven by loaning opportunities in hundreds of other markets, rather than driven by the need to fulfill legal reserve requirement.  There is an interesting research paper about topology of fed fund market, where it shows that larger banks usually plays a role as fund buyers and smaller banks fund suppliers. Larger banks tend to have more credits and more lending opportunities. Those small banks fund larger banks by selling extra reserves. Thus it became harder and harder to trace out exactly how much each bank need the fed balance by simply looking at how much they need to hold at the Fed.

More importantly, since effective fed fund rate is moving closely around the target and policy makers set the targets manually, it is obvious that the fed has been playing more important role in determining the fed fund rate. Estimating demand is less important. The Federal Reserve Bank set the target rate to make sure sufficient credits are available for the economy, and they adjust the target rate according to a large set of other macro-economic indicators.  The fed trading desk make sure effr does not go astray the target rate.

The fact that effr does not deviate fed target rate for too long and by too much is convenient for forecasting fed fund rate in the longer horizon. Now we can focus on forecasting the fed fund target rate. Fed fund target rate is determined by FOMC who keep track of bunch of macroeconomic indicators.  If we can approximate the indicators used by them in making decision of next period fed fund target rate, we can also forecast the movement of fed fund target rate. Forecasting effective fed fund rate would, therefore, be roughly the same as forecasting fed fund target rate.

(Revised) Predicting Fed fund rate (2nd post)

In my last post, I talked about how effective fed fund rates are influenced by two market forces: the banks and trading desk that takes directives from FOMC. I also talked about the difficulties to forecast effective fed fund rate. In this post I will continue to talk about how to predict effective fed fund rates.

We all know to this point that effective fed fund rate is determined by the market. But, fed trading desk has done a great job in counteracting deviation of effective fed fund rate from target rates. The market has observed this pattern, too. Therefore, expectations of actions of fed trading desk have been widely formed, guiding the banks’ movement.

According to John Taylor, when FOMC announced the new target rate, the market anticipate that trading desk’s will perform OMO, which will bring effr to its targets.  Therefore the banks move even before OMO, bringing effr to its new target level. Rational expectation plays a part because market agencies know the reaction of fed trading desk through their day to day interaction, and they take this reaction into account when they choose how much funds to buy. How much fed fund they want to buy depends on effr today and expectation of effrs in the future. If they predict that fed fund rate will rise tomorrow, they will buy more reserve today, and the effect of which is that the fed fund rate will rise today. Same logic apply: If they expect the fed trading desk will perform OMO that bring up fed fund rate tomorrow, they will demand more fund today.

To be more specific, I will give an example. Suppose that the Fed announced today that the target would rise by 0.5 basis points. What will trading desk do? Unfortunately, Trading Desk cannot do anything that day, because the Desk typically enter into the market at 9:30 am before the day of trading start and before the FOMC announced the new targets. It is important to know that the trading desk action is based on last period’s information.

On the other hand, traders in the market can react immediately to the new targets. They know the Trading Desk will perform OMO tomorrow to bring effr up to new target. Knowing for sure that the future fed fund rate will rise, traders will try to buy more funds today to avoid higher expense tomorrow. This increases the total demand in the market, which eventually bringing effr up almost within a few days to the new target rate. 

The fact that effr does not deviate fed target rate for too long and by too much is convenient for forecasting fed fund rate in the longer horizon. I will continue to talk about how to incorporate this information into forecasting model in the next post.

(Revised) Predicting the fed fund rate (1st post)

Since 2008, federal fund rates have been targeted within a range of 0%-0. 25%. Therefore, prediction of this rate seems to be less attractive at this particular moment. However, given the important status of fed fund rate in financial world and the fact that it will return to positive in the future, it would be interesting to see how economists forecast fed fund rates.

To make forecasting more accurate, it is important to distinguish factors that driving the federal fund rates. Effective fed fund rate is determined by the federal fund market, where Financial institutions trade federal fund with each other, usually over night, on an un-collateralized basis. There are two major players in this market: traders employed by financial institutions, and the Trading Desk who takes command from Federal Open Market Committee (FOMC). These market forces are what ultimately influencing the effective fed fund rate.

On the one hand, banks with surplus balances direct their traders to bid a higher price and banks with a deficit bid a lower price.  Brokers find the match of those bids to facilitate the transactions. At the end of each day, a weighted average of all settlement prices is the effective federal funds rate. On the other hand, fed trading desk intervene in the fed fund market through buying and selling treasury notes in the Treasury markets (not the fed fund markets), so as to influence the reserve balance held at banks and keep the effective fed fund rate moving around the federal fund target rate. This is known as Open Market Operation (OMO). The federal funds target rate is determined by a meeting of the members of the FOMC, normally occurs eight times a year about seven weeks apart.

Beginning in 1994, the FOMC began issuing changes about the target fed fund rate explicitly. This greatly affect the Fed fund market behavior, and this effect has been discussed in Expectation, Open Market Operations and Changes in the Federal Fund Rates, a paper by John B. Taylor at ST. louis FED. According John Taylor, the effective fed fund rate responds to deviations of it from the target quickly, even without the Trading desk’s intervention (or OMO). This model might be expected to forecast well at short horizons but less well at longer horizons.

It would be tempting to use the supply and demand model to predict the effective fed fund rate. However, this is a less effective method because nowadays banks holding reserves not solely out of the need to meet legal requirement. Modern technology facilitates the emergence of “sweep” account.Banks “sweep” their customers accounts from those with reserve requirement to those without reserve requirements. Typically, the bank can sweep the checking account  into more lucrative Money Market Mutual Funds.  Another evidence that fed fund markets plays more than a role of helping member banks meet reserve requirements is the fact that, the flow of trade in the federal funds markets is more than ten times greater than the stock of fed balance. Banks typically buy funds in the market to make loans in other markets. Fed funds purchases are a source of funds for other loans creates a connection between the federal funds rate and the other loan rates.

Thus, forecasting fed fund rate is not as intuitive as it seems.

Luckily, if one closely observes the activities of market participants, predicting future fed fund rate is not impossible. I will continue talk more about how to predict fed fund rate in the next post

 

Alibaba, E-Commerce legend in China

Can anyone imaging that a company who generates 2% of total China’s GDP and whose transaction volume is one-third larger than that of Ebay and Amazon’s last year combined, is created in a small apartment by this small, thin man?

Jack Ma started Alibaba.com in his apartment in 1990, and vowed to build Alibaba into the greatest Chinese-made company in the world.  The 49-year-old Mr. Ma is a tenacious, charismatic leader, and he keep his words. His Alibaba now handles roughly 80% of all online shopping in China, which some analysts say is already the world’s largest market for e-commerce. Tmall, a website under the name of Alibaba, has about 800 million product listings from seven million sellers who pay Alibaba for advertising and other services.  Although its profit is not comparable to Amazon, its deserve the name of the most busy online market in the world.  It is also of growing potentials, given that hundreds of millions of Chinese still haven’t shopped online. Yahoo reported late Tuesday that Alibaba’s revenue jumped 66% from a year earlier to $3.06 billion, and profits more than doubled to $1.35 billion.

What’s the story behind this success?

Alibaba has never been a market changer as Apple or Google. Rather than inventing revolutionary products, Alibaba often adapts existing technology to serve China’s fast-growing e-commerce market. Taobao (now known as Tmall ), which means “searching for treasure,” was created to sell directly to consumers as the Internet emerged in China.

Alibaba doesn’t own the merchandise it sells. The company is a middleman, making most of its money from charging merchants for marketing and ad services so they can stand out in the crowded marketplace. Sellers on Tmall and Alibaba.com pay annual fees. Alibaba is tiny in revenue compared with Amazon because the Seattle company sells products to consumers.

Taobao allowed sellers to list their products free rather than pay a fee. He said Taobao wouldn’t try to turn a profit for three years. “I know the Chinese user market and users better than Meg Whitman, ” Mr. Ma said about eBay’s chief executive at the time.The company was in business for three years before it posted its first annual profit: $1 in 2002.”Alibaba has played the scale game really, really well,” says Paul McKenzie, an analyst at Hong Kong brokerage firm CLSA in Hong Kong. “They created a virtuous circle of more merchants attracting more shoppers, which in turn brings in more merchants.”

Taobao, the online version of a raucous Chinese street market, quickly leapfrogged eBay in China. But Alibaba executives worried that the site would be a turnoff for big, brand-name companies because they wouldn’t want to be associated with tiny, unknown sellers. Mr. Ma sent a team of about 30 engineers back to his old apartment to develop a site that would win over the big names. “Jack’s apartment was reserved only for the most important projects,” says Wang Yulei, an Alibaba vice president who was one of the engineers on the team. “It’s a spiritually important place.” Officials at companies that Alibaba hoped to attract often visited to tell the engineers what they wanted. “When they walked into the apartment and saw our messy rooms, they looked very curious,” Mr. Wang recalls.

Even after stepping down as chief executive, Mr. Ma exerts his influence at Alibaba’s headquarters campus in Hangzhou, designed with a Silicon Valley feel that includes brightly colored cafeterias, gyms and recreational areas with pool tables.

No one lives in his old apartment, but Alibaba uses it occasionally to work on new projects. Mr. Ma has said he wants to turn it into a museum someday.

China’s dilemma: reform or stimulate

Getting rid of one’s old and harmful behavior pattern is not an easy task, let alone changing the economic stimulus pattern of a whole nation.

Earlier this year, China’s top officials declared new resolution to  bring about economic overhaul and to stop such myopic and harmful stimulus measures as state initiate spending.

At the Boao Davos Forum,  Premier Li Keqiang emphasized that the government won’t panic in the face of slowing growth. “We won’t resort to strong short-term stimulus policies just because of temporary economic fluctuations.” Yet this does not mean they give up growth rate on the list of economic performance measures. They told business leaders that they would use monetary policy or “slightly bigger adjustment” measures if growth slips below acceptable levels. I guess that’s why there are so many room for public debates on what official statements mean.

But apparently, China’s slowdown in growth will likely put pressure on Beijing to pick up old stimulus measures and postpone structural reforms. What are the signs for this trend?

For example. Beijing has announced plans to build more railways and cut some taxes. Stimulus measures in coming weeks will likely involve stepped-up investments in transportation, urban renewal and alternate energy projects. The government is also planning to spur growth with a more accommodative monetary policy. Many analysts expect there will be a reserve-requirement reduction to give banks more money to lend. But it will more likely continue its long-standing reliance on investment even as spending becomes less effective.

Apart from Fiscal and Monetary policies, slower growth may also make PBOC continue depreciating yuan that has been downward trending for the past two months.  Although it is stated by PBOC officials that their currency moves were aim to reduce Yuan speculation, not to improve competitiveness of domestic product on foreign market. Actually, even if yuan were depreciating, China’s export barely increase. According to export companies, what they needed the most to improve competitiveness is more innovated product and better service quality.  But according to RBS economist Louis Kuijs, “the longer China needs to wait for convincing export growth, the more likely it is that keeping the currency down is a tempting policy measure to try to instill some life in exports and manufacturing.”

UBS analyst Tao Wang says that the slowing growth means that difficult reforms will be put off indefinitely. First up, said Ms. Wang: cutting red tape, opening the service sector to private investment and development of new financial products. For instance, the People’s Bank of China is in its final stages of winning approval for a bank deposit insurance system. Ms. Wang said more difficult efforts, including restructuring state-owned enterprises, land reform and establishing a nationwide property tax “will progress more slowly.”

 

Trade figures for March and China’ s Growth Prospect

If plunging of Chinese export is not surprising, then the double decline of both export and import is truly stunning. According to WSJ, China posted a 6.6% drop in exports in March, a drop compared with last March confounded economists, many of whom had expected growth of more than 4%. Imports also fell 11.3% year-on-year.

It is widely known that export reflect the foreign demand on domestic goods and services, and import reflect the domestic demand on foreign goods and services. Does these figures suggesting that China growth perspective becomes even more gloomy?

There are two reasons to believe the real picture may not be as bleak as the numbers suggest. One is that the “over-invoicing” artificially boosted trade figures of March 2013, making the latest data look poor by comparison.Over-invoicing is a phenomenon where companies use fake export invoices to dodge China’s capital controls and get money into the country, often for investment. Beijing cracked down on the practice last spring, but over-invoicing was still prevalent in March 2013. Another reason is that  China’s trade statistics in the first quarter are often skewed by the Lunar New Year holidays, which will make March figure relatively ugly.

But this two reason only explain for the drop of export, what is dragging down the import?

“I’m not that worried about exports,” Shuang Ding, an economist at Citigroup in Hong Kong said. “Imports are more worrisome. Tightening credit conditions are continuing to affect domestic demand, especially investment.” China’s policy makers have been walking a tightrope, trying to constrain the rapid growth of lending without stifling the economy. Even the modest tightening under way seems to have had a pronounced effect on demand, Mr. Ding said.

China is the major importer of raw materials, commodities, machinery and transportation goods. If import of China declined, this would have a huge impact on the global recovery pace.

Never the less, Premier Li Keqiang, when making a speech at the Boao Davos Forum,  emphasized that the government won’t panic in the face of slowing growth. “The downward pressure on economic growth remains,” Mr. Li said in a speech just as the trade data were being published. “We can’t underestimate these difficulties. We won’t resort to strong short-term stimulus policies just because of temporary economic fluctuations.”

I am glad to see that our government is determined to carry out economic reform that well bring China with a more sustainable growth prospect. Our economy has already paying a huge price on the rapid industrialization, which result in heavy pollution, unhealthy financial system, and a looming housing bubble. Nevertheless, the government’s tolerance for a slowdown has limits. Stability is always the number one priority for any politician.  Unemployment, although lack of a official and credible statistics in China, is posing more pressure on the government and central banks policy making decision. “The real space to watch in determining whether or not the leadership is stimulating the economy will be the pace of credit growth,” said Andrew Polk, an economist at The Conference Board, in a research report this week. March’s lending data is expected in the next few days.