Category Monetary policy
Fiat Bling
I visited a country where people wore paper money as jewelry. Richer people wore larger denomination notes, to signal how wealthy they were, and poorer people wore smaller denomination notes. Only the very poorest wore none at all. Then I learned the paper money wasn't used as money. They only produced one homogeneous good called […]
Interest Rates and Money Growth; Two Types of Central Bank
I want to imagine two different types of central bank. The first type of central bank cuts nominal interest rates to increase money growth. The second type of central bank raises nominal interest rates to increase money growth. In both cases the increase in money growth causes Aggregate Demand to start growing, and eventually causes […]
Inflation and the Debt/GDP ratio
I'm trying to write a simple explainer. The best way to understand how inflation affects the debt/GDP ratio is to start out with a scenario where it doesn't. Then look at ways in which the real world is not like that scenario. Here's the "No Effect" scenario: The Bank of Canada suddenly decides to raise […]
“Are we at full employment yet?”
I vaguely remember having seen this movie before, the earlier British version. And it's a frustrating movie to watch, because nobody knows where full employment is, except maybe when we've driven past it and can see it in the rear-view mirror. And the question itself always gets confused between asking where full employment ought to […]
Are Open Market Operations wrong-signed when nominal rates are negative? (No)
I'm going to start out with a silly unrealistic thought-experiment. Then I'm going to say why I think my silly unrealistic thought-experiment might matter. A central bank issue two types of money: $1 notes; and $100 notes. The two types of money are not perfect substitutes: the $1 notes are convenient for small purchases; the […]
Bicycle Disequilibrium Theory
Suppose you need a bicycle to get to work. Suppose bicycles are a common property resource, because bike locks don't work. Every night the workers deposit their bicycles in the bike bank, and in the morning it's first come first served. And suppose that sometimes there aren't enough bicycles to go around. So sometimes the […]
Tracking the Bank of Canada’s staff projections through the 2008-9 recession
The Bank of Canada has released an archive of the staff projections prepared for the Governing Council for the quarterly Monetary Policy Reports. There's a five year lag, so the most recent set of projections are the ones prepared in 2013Q4. While these projections don't answer the question "What was the Governing Council thinking?", it […]
The 1 vs 3 Model of Quick Recessions vs Slow Recoveries
Business cycles are not symmetric; if you flipped the time-series data upside-down the fluctuations would look different. Recessions are usually quick; recoveries are usually slow. And Milton Friedman's "Plucking Model" seems to fit the data: big falls in economic activity are usually followed by big increases; but big increases are not usually followed by big […]
The Blind Target Shooter
This is an attempt by someone who is not very good at math to understand the alleged "indeterminacy problem" of central banks using market signals of expected inflation to help them target inflation (or whatever). [I used to do rifle shooting at school. "If you can't group you can't shoot". But if you could group, […]
Micro Profs teaching Intro Macro
My crappy little Twitter poll isn't conclusive of course, but it mostly agrees with my priors based on anecdotal evidence, so I think it's probably mostly right. I think this points to a problem, in two senses: Finding profs willing and able to teach Intro well is not easy. It's low status (and economists dumping […]
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