Category Macro
Triangles, rectangles, trapezoids, stripes, and gaps.
I liked Steve Williamson's post on gaps and triangles. But I think about it a bit differently.
Defending Hayek against the Austrians
[I wrote this post several days ago, as an afterthought in what JP Koning calls "The great monetary injection debate of 2012". Then I sat on it. Not just because it's a bit ad hominem/gotcha!. I'm not sure it's quite right. Anyway, with that caveat, I'm just throwing it out there, to see what readers […]
Cantillon effects and non-SUPER-neutrality = does fiscal policy matter?
Scott Sumner and Bill Woolsey have been fighting valiantly against the Austrians. The fight is about "Cantillon effects" — non-neutralities of money that are supposed to arise not from the increase in the money supply itself but from where exactly that new money enters the economy. Sometimes you get a clearer answer to a question […]
Focal Points and the Short Run Phillips Curve; NGDPLPT beats PLPT
Suppose every firm gets surprising news: after having been flat for years, the central bank will raise Nominal GDP by 10% next period, and hold NGDP constant thereafter. How will firms respond? The Calvo Phillips Curve says that 90% of firms will hold their prices fixed, because the Calvo fairy won't give them permission to […]
$600b debt x (2% inflation + 2.5% real growth) = $27b
Just a little bit of simple debt and deficit arithmetic. Let's adjust the deficit for long run inflation and long run real growth. That cuts the deficit by around $27 billion.
Precautionary taxation vs tax-smoothing – on paying down the debt
Bob Murphy is arguing with Steve Landsburg over whether the debt/GDP ratio should be (slowly, eventually) reduced. So I have to join in. Plus, (with my Carleton colleague Vivek Dehejia) I actually published a paper once on this very topic (unfortunately not available online) (link here thanks to Keshav Srinivasan). (Just to forestall some comments, […]
Bond vigilante attack = bursting the bond bubble = target NGDP
The title says it all. There's not much to add. "Bond vigilante attack" is just another name for "bursting the bond bubble". And loosening monetary policy would do that.
We Will Bury You…Eventually?
Few probably recall (I was not even born yet) the November 18, 1956 Western ambassadors reception at the Polish embassy in Moscow where the then Soviet First Secretary of the Communist Party Nikita Krushchev supposedly uttered the famous quote: “We will bury you.” The actual line apparently was apparently something to the effect of “Whether […]
Waiting for the bond vigilantes
Paul Krugman is right if he is talking about a small attack by the bond vigilantes. It's a good thing, because it increases Aggregate Demand, which is what the US economy needs. But too much of a good thing will be a bad thing. A large attack by the bond vigilantes would be a bad […]
Forward guidance, borrowing degrees of freedom, and the inflation target horizon
This is something I do not understand very well. I'm writing this to try to help me think about it more clearly. Eight times a year, at each Fixed Announcement Date, the Bank of Canada does two things: it announces a target for the overnight rate until the next FAD; it provides some "forward guidance" […]
Worthwhile Canadian Initiative 
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