Category Macro
Are there “Peso Problem” recessions?
Suppose monetary policy never changed for 99 years. Suppose nothing ever changed for 99 years. Would it be possible for there to be a deficient Aggregate Demand recession for 99 years? Why wouldn't prices adjust? Wouldn't 99 years be long enough for prices to adjust?
Ideology, Business Cycles and Macroeconomics
Being more of an empirical bent, I do not generally indulge in the analysis of macroeconomic theory as thinking about it often causes me to recall what I think was a quote by John Kenneth Galbraith something to the effect that “Macroeconomics is like a religion, nobody truly knows what comes in the hereafter.” More […]
A suggestion for complicating the simple aggregate production function (bleg)
I wrote this post. Then I realised it was wrong. I really wish my math were better. So I'm turning it into a sort of bleg. I should have written the technology in implicit form as F(C,I,K,L)=0 rather than H(C,I)=F(K,L). Because the way I wrote it makes Pk depend only on I/C, when it should […]
My simple theory about why macroeconomists disagree.
Every other macro blogger seems to be taking a crack at this question. I like what they have to say. But I have a much simpler theory. Let's suppose you wanted to design an experiment to test the effects of monetary and fiscal policy. And suppose you had the power to do whatever you wanted, […]
Technology, preferences, and wages; kinks and curves, Moseley and Krugman.
Look at the red curve PF1 and the blue curve PF2 in this picture. Ignore everything else: That's the picture Paul Krugman drew, showing how a capital-biased change in technology would shift the production function.
Does monopoly power cause inflation?
I am far too clued out about people and politics to understand the sub-text(?) behind Mark Thoma's short post. But this is a lovely exam question, that any macroeconomist ought to be able to take a crack at. And it reminds me of my youth in the early 1970's, when Milton Friedman was arguing, against […]
Money and bond bubbles: a parable
I'm using this fable to try to clarify my thoughts. Suppose, just suppose, that Nortel shares had sticky prices. Rather than adjusting almost instantly to ensure market-clearing equilibrium, the price of Nortel shares adjusted slowly over time in response to excess demand or supply of Nortel shares. That would mean that uninformed traders, who knew […]
The Duke of Wellington on the best way to start a Japanese debt crisis
I happened to read Michael Schuman's article in Time. The title is "Will Japan's Next Prime Minister Start a Debt Crisis?" . My immediate reaction: I hope so. Because the only thing that can save Japan is a debt crisis. It's a pity Japan didn't have a debt crisis 20 years ago, but better late […]
Production of Robots by means of Robots.
(Sorry about the title. The devil made me write it.) What are we afraid of? Let's think about the worst-case, nightmare scenario for the distribution of income. Assume that all capital is robots, and robots are perfect substitutes for human workers. One robot can produce everything and anything one human worker can produce. And that […]
Mark Carney and NGDPLPT
Mark Carney said: "If yet further stimulus were required, the policy framework itself would likely have to be changed.19 For example, adopting a nominal GDP (NGDP)-level target could in many respects be more powerful than employing thresholds under flexible inflation targeting. This is because doing so would add “history dependence” to monetary policy. Under NGDP […]
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