Category Monetary policy
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 […]
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, […]
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 […]
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 […]
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 […]
Mark Carney to the Bank of England
You might think I have a lot to say about this. (A top UK newspaper just emailed asking me to write something.) I don't. I have very little to say. And what I do have to say is fairly obvious. I think Britain needs him more than Canada does, because the British economy is in […]
Worthwhile Canadian Initiative 
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