Category Monetary policy
Two (probably) unstable macroeconomic equilibria
Some people argue about whether the macroeconomy is inherently stable or unstable. I don't think that's a very useful question. Because…..it depends. And one of the things it depends on is monetary policy. And that is a useful discussion to have, because we can actually do something about monetary policy. Don't adopt a monetary policy […]
Fedspeak NGDP portfolio
I want to pick a very small fight with Paul Krugman. And I want to get my head clearer on something. (It's still not clear, so read at your own risk.) So I'm writing this post. Here's Paul: "The problem, at least in part, is that the indirectness of Bernanke’s language, the way an inflation […]
Three different ways expectations can matter. And the ZLB.
Nothing new here. Think of this as a teaching post. Partly for the people of the concrete steppes, but for others too. I'm just going to talk about different ways that expectations can affect what happens. The main distinction is between multiple equilibria and unique equilibrium.
A case for ZLB denial
This post is in response to two posts by Simon Wren-Lewis on "Zero Lower Bound Denial". First post here and second post here. I'm just collecting my thoughts from my comments on Simon's posts and from my previous posts. This is what I think: 1. The ZLB is a real wall. Bad stuff happens if […]
The orthodox recovery of faith?
In May 2010 I wrote a post with the title "the orthodox loss of faith". Please read it (or re-read it). It's a short post, and it would take me as long to repeat what I said there. And I can't recapture today how pessimistic I felt just over two years ago. If "orthodox" means […]
Goldpunk, strategy space, and Michael Woodford
On the one hand: it's very good news that Michael Woodford has endorsed NGDP level path targeting (pdf). (For non-economists, Michael Woodford is the most influential living academic monetary economist; he's the one who wrote the book that defines how graduate students think about monetary policy.) On the other hand: I'm going to rain on […]
What’s Up with Carney & Flaherty?
Well, I’m still sifting through my thoughts trying to exactly understand what was behind the corporate “dead money” debate last week. After a speech to the Canadian Auto Workers, Bank of Canada Governor Mark Carney drew attention to the rising amounts of cash in the bank accounts of Canadian firms and commented to the effect […]
The very short run
Most macroeconomists make a distinction between the short run (sticky prices) and the long run (flexible prices). I want to talk about the very short run. We mostly ignore the very short run, and I don't think we should. Because the very short run probably isn't really that short. Old Keynesians used to talk about […]
Supertanker and canoe Phillips Curves, and inflation targeting
This post is an attempt to give some intuition for my previous post. There are two differences between a supertanker and a canoe: 1. Position. You can easily pick up a canoe and make it jump a nautical mile north or south of its present position; while a supertanker really wants to stay where it […]
Calvo vs Mankiw/Reis, and IT vs PLPT/NGDPLPT
An economy is humming along very nicely in full long run equilibrium. All real variables are at their natural rates. Actual and expected inflation are both equal to the 2% inflation target. As the years go by, the price level goes: 90, 92, 94, 96, 98, and everybody expects it to continue 100, 102, 104, […]
Worthwhile Canadian Initiative 
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