Category Macro
The inverse function theorem and the monetary policy instrument
I'm not very good at math. So treat this post accordingly. [Ooops! As Kevin points out. I meant the *inverse* function theorem. I did say I was no good at math. I've edited it now. Can't find the strikeout function.]. The basic idea here seems rather obvious. But I don't remember anyone making this connection […]
The macroeconomics of doing nothing
Suppose there is an increase in desired saving, and the monetary and fiscal authorities do nothing. What happens? That's the most important practical question in macroeconomics over the last few years. And it's also a really stupid question. And understanding why it's a really stupid question, and changing the way that question is asked — […]
Headline and Core, again. And the ECB.
They are still at it! (Making totally irrelevant arguments about headline vs core.) How to kill this zombie? Here is a very simple model of inflation. Don't take it too literally. It's just for illustration. 1. H(t) = aH(t-1) + bC(t-1) – cR(t-1) + e(t) H(t) is headline inflation at time t; C(t) is core […]
Thomas K Rymes, 1932 – 2011.
TK Rymes' publication list begins with a disclaimer "Those marked with an asterisk I consider to be worth reading." That line is typical TK – direct, honest, and self-deprecating. After all, how many academics would suggest, even by implication, that much of their work is not worth reading? One of the first asterisked publications on the […]
Population aging and labour’s share of income
There aren't many statistical regularities in macroeconomics, and very few of them are as important as the apparent long-term stability of the shares of income that go to capital and labour. This 'stylized fact' was first noted by Nicholas Kaldor back in 1957, and his list of stylized facts shows up in every macroeconomics sequence. […]
The monetary transmission mechanism
The reason that New Keynesians don't like talking about the supply of money and velocity has nothing to do with problems in defining the supply of money, the instability of velocity, or the instability of the money supply multiplier. As I argued in my last two posts, similar criticisms would apply equally to the New […]
Y tu actual rate of interest tambien, tambien
Damn. This is getting too easy. It's like shooting sitting pheasants! Hoisted from comments: reason says , in response to my last post, "The problem is with 'M'. It isn't well defined and it isn't under the direct control of the central bank." [Update: My response, in a nutshell: "The problem is with 'r'. It […]
Y tu natural rate of interest tambien
In the olden days there was a debate between the Old Monetarists and the Old Keynesians. The Old Keynesians said that the Old Monetarists' MV=PY was useless, because (desired) velocity was not constant. Milton Friedman responded with what philosophers call the "Y tu mama tambien" argument. The Old Keynesian multiplier wasn't constant either.
No, Atlanta and St Louis Feds, you can’t test whether core is useful that way
This is frustrating me. People (e.g. the Atlanta Fed Macroblog, the St Louis Fed Economic Synopses (pdf)) still aren't getting it. What can I do to attract attention to my simple point? Think up some totally insulting inflammatory blog post title? Nope, that's not really me. I'm just going to try again. And use bold. […]
The New Keynesian confidence fairy multiplier
The graphs from the University of Michigan's Survey of Consumers (HT Mark Thoma) show something that isn't supposed to happen in New Keynesian macroeconomics. It's not that New Keynesian macroeconomics says it can't happen; it just assumes it doesn't happen. So if the empirical evidence says that it did just happen, we need to re-think […]
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