Category Monetary policy
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.
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 […]
Deposit insurance, bank runs, international currencies, and the inflation tax
Just a short post on one point about the recent Cyprus business. (It looks like Cyprus will impose a "one-time tax" on bank deposits rather than honour its deposit insurance.)
Why don’t we have disinflation (until now)?
Just a quickie, between meetings. Paul Krugman asks "Why don't we have deflation?" His answer is: downward nominal wage rigidity. And he shows that graph of frequency distribution of nominal wage changes with a big spike at zero. I don't think that's quite the right question. So I don't think that's quite the right answer. […]
What is an “excess demand for money”?
I know what it means to say there is an excess demand for apples. And I know where to look to see whether there's an excess demand for apples. I go to the apple market, where people buy and sell apples for money. If I see that it is hard for people who want to […]
Draft notes for teaching Intro Money
I always suffer self-doubt when I teach the Money part of Intro Economics. Perhaps I'm over-thinking it, and it would be better for my students if I told myself to shut up, and just give them some simple clear story. But how to get it simple and clear, yet not horribly wrong or incomplete? I'm […]
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