Category Macro
Unemployment, aggregate demand, and search/matching
For what it's worth, I thought I would lay out my own views, after reading John Quiggin and Noah Smith. This is what I think: 1. Fluctuations in the unemployment rate from year to year are mostly caused by fluctuations in aggregate demand. Very standard, boring, demand-side monetarist/keynesian view of the business cycle, that predates […]
Some simple arithmetic for mistakes with Taylor Rules
[Updated to fix arithmetic errors spotted by Min. A big thank you to Min! (I did not leave my embarrassing original mistakes in, because I wanted to keep it clear). The effects I am talking about are even bigger now.] Sometimes I think that US monetary policy is too important to be left to the […]
A simple test of simple rules against actual policy in the actual economy
A "simple rule" is a formula that tells a central bank how to set the nominal interest rate as a fixed function of a small number of variables. The Taylor Rule, which sets the nominal rate as a function of the gap between actual and target inflation, and the gap between actual and potential output, […]
Employment and Investment: the great Canadian disconnect
[This is a guest post by Hashmat Khan of Carleton University and Nyamekye Asare of the University of Ottawa.] Can policies stimulating private investment deliver higher employment? Maybe, but investment and employment have become disconnected recently in Canada. John Taylor has noted a strong negative correlation between investment and the unemployment rate, and argued that […]
Insufficient Demand vs?? Uncertainty
It's a false dichotomy. Just a quickie, in response to Noah Smith and John Cochrane. John Cochrane says: "John Taylor, Stanford's Nick Bloom and Chicago Booth's Steve Davis see the uncertainty induced by seat-of-the-pants policy at fault. Who wants to hire, lend or invest when the next stroke of the presidential pen or Justice Department […]
Neofiscalist delusions?
It seems I need to respond to Paul Krugman. "The neomonetarist movement starts from an acknowledgement of reality: shortfalls of aggregate demand do happen, and they do matter, and we need an answer. Like the original monetarists, however, they reject any government role in the form of discretionary fiscal policy. Instead, they argue that the […]
Repeat after me: people cannot and do not “spend” money
John Maynard Keynes famously wrote that: "Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist." A modern example of that dictum, relevant to the economy, policy, and markets, is the widespread view that people can "spend" their money, as if money represented a […]
House prices and inflation targeting
"Should house prices be included in the CPI?" is not a good question to ask. The best answer to that question is another question: "Why do you want to know?" Or, "It depends; what are you planning to use the CPI for?" Instead, it would be better to ask the question in a different way […]
Bank runs, keynesian multipliers, monetarist cold potatoes
They are all the same. Do bank runs cause recessions, or do recessions cause bank runs? Both. Neither. They are the same thing. (This post isn't as clear as I want it to be, because my mind isn't as clear as I want it to be, so read at your own risk.) I was making […]
Fiscal Policy Shocks
Well, here is a new contribution to the debate over the effect of fiscal policy shocks from the journal of the Institute for Fiscal Studies. The authors Paweł Borys, Piotr Ciżkowicz and Andrzej Rzońca are from the Warsaw School of Economics and look at the impact of fiscal policy shocks on EU new member states. […]
Worthwhile Canadian Initiative 
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