Category Monetary policy
Worrying about the Canadian housing market, Part 1: Higher interest rates
Like Nick, I've been thinking and worrying about the Canadian housing market, but not blogging about it. I've decided that it's worth putting some points out for discussion on the topic, if only because it's something we should be talking more about. I've broken it down to three separate posts: the second is here and […]
Things I think about and worry about but don’t blog about
I mean macroeconomic things, not just cars and canoeing and stuff. This is another "selection bias in blogging" post. Probably a more important selection bias than the one I talked about in my previous post. If you thought that my blog posts are about all the things in macroeconomics I think are important, you would […]
Strategy space and the theory of monetary policy Two
Industrial Organisation economists have known since 1883 that strategy space matters. To say the same thing another way, Industrial Organisation economists have believed in fairies ever since 1883, when a French mathematician proved the existence of fairies in oligopoly theory. Industrial Organisation economists, at least by stereotype, tend to be very practical down-to-earth people, quite […]
Strategy space and the theory of monetary policy One
In ECON 1000 we teach that a monopolist picks a point on his demand curve that maximises his profits. We can think of the monopolist as setting a price to hit that point, or we can think of the monopolist as setting a quantity to hit that point; and we teach that it doesn't make […]
A response to David Andolfatto – monetary policy as insurance policy.
David has two posts in which he presents a model in which price level targeting is optimal and NGDP targeting isn't. (It's best to start with his second post). His model has an interesting feature (the bit about imperfect news being IS shocks but the shocks themselves being AS shocks is really neat), but to […]
The Canadian fiscal union: lessons for the eurozone?
Paul Krugman noted a few days ago that [A]s far as underlying economic inequalities are concerned, the EZ is no worse than the US. The difference, mainly, is that we think of ourselves as a nation, and blithely accept fiscal measures that routinely transfer large sums to the poorer states S.C. at The Economist's Free […]
Multiple own rates of interest don’t matter, but the monetary policy target does matter
There are lots of problems with thinking about monetary policy as setting a nominal rate of interest, and trying to keep the actual real rate of interest equal to the natural real rate of interest. But multiple own rates of interest (the "Sraffa problem") isn't one of them.
Permanent productivity differentials and Optimal Currency Areas
Many good economists, like Simon Johnson and Paul Krugman for example, have said something about permanent productivity differentials and optimal currency areas I simply do not understand. (Lots of other people say the same thing, but when good economists say it and I don't understand it I get worried.) Maybe they are making some implicit […]
Jobs, inflation, expectations, and causation.
Matt Yglesias says that "Inflation doesn't create jobs, jobs create inflation". Well, yes and no. Both. Neither. It's simultaneous causation. It's a non-linear story, in the Artsie sense of "non-linear". And don't forget expectations. When we add in expectations, the story becomes very non-linear. Here's a simple plot summary. (OK, it's not at all simple, […]
What’s a “country”?
Take any country. Or rather, take any normal country, with its own currency. Suppose some people in that country are less "productive" (defined however you want) than other people in that country. That's normal. Now let's call the less productive people "Greeks" and the more productive people "Germans". Does calling them different names suddenly cause […]
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