Category Macro
Macroeconomics when all goods are non-rival
Sometimes it's good to build really weird models. Because bits of the real world are a bit weird, even if the whole world isn't as totally weird as the model, and taking an extreme case can help us understand the effect of those weird bits. Plus it's fun. I'm going to assume that all produced […]
Testing productivity shocks vs labour hoarding in a traditional industry?
This is just an idea that's been floating uselessly in my mind for some time. I have never been able to apply it. But maybe someone out there could. This isn't an earth-shattering post. Maybe someone else has already thought of the same idea. Or even applied it, and I just haven't heard about it. […]
Monetary stimulus vs financial stability is a false trade-off
There's an idea floating around out there that I fear may be influential. And that idea is horribly wrong. Which makes it dangerous. And I want to try to kill it. But macro is hard. And it's not easy to explain clearly and simply. I can only try. And I can only hope that others […]
What happened in 2008?
1. Did a financial crisis cause a fall in expected and actual aggregate demand? (With central banks being unable or unwilling to do enough to stop it). 2. Or did a fall in expected and actual aggregate demand cause (or worsen) a financial crisis? (With central banks being unable or unwilling to do enough to […]
Begging the long run question: inflation variability vs NGDP growth variability
Forget about the short run benefits of NGDP targeting. This post is about the long run benefits. Just suppose, in some alternative universe, the Bank of Canada for the last 20 years had been targeting 5% NGDP growth rather than 2% inflation. And that everyone had gotten used to NGDP growing at 5%. And suppose […]
Did inflation targeting make the Phillips Curve really flatter or just look flatter?
We know that inflation targeting failed. But we don't know why it failed. One theory is that inflation targeting failed because inflation targeting made the Phillips Curve flatter. It made the Phillips Curve so very flat that keeping inflation close to target wasn't enough to keep output and employment close to potential. Inflation targeting contained […]
Modern LM curves are vertical
Modern teaching of modern macroeconomics and modern monetary theory should reflect modern monetary policy — what modern central banks actually do nowadays. That means the modern LM curve is vertical.
DSGE and me, or Why I ended up being an applied econometrician
I've never used Dynamic Stochastic General Equilibrium (DSGE) modeling techniques for pretty much the same reasons that Noah Smith outlines. I keep meaning to write a post about my misgivings about DSGE, and it appears now is the time. This is going to be a pretty technical and wonkish post, but there's really no way […]
Teaching Mundell Fleming
The Mundell Fleming model is usually taught in second year macroeconomics. It's the open economy version of the ISLM model. This post is me disagreeing with Simon Wren-Lewis about teaching open economy macro (in textbooks and in the classroom). It is not a disagreement about open economy macroeconomics. Simon says that the textbook Mundell Fleming […]
Exchange controls, barter, and Cunning Plans
It was sometime in the 1960's. My uncle was teaching in Bulgaria. He wanted to buy stuff in Britain, but wasn't allowed to take much money out of Bulgaria. My father was farming in Britain. He wanted to buy stuff in Bulgaria, but wasn't allowed to take much money out of Britain. My uncle and […]
Worthwhile Canadian Initiative 
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