Category Monetary policy
How do the French control the size of the Sun? Hume vs Patinkin.
How do the French control the size of the Sun? How does the Fed control the size of the US economy? More importantly, how are those two questions related? [I'm still thinking about this, but have decided to post it anyway.] There is a metal rod in Paris that defines the length of the metre. […]
An NGDPLP Target vs a higher Inflation Target as insurance against the ZLB
This is not a new point (Scott Sumner has made it before), but it needs repeating. The Zero Lower Bound is something we want to avoid. Here are two ways we can change monetary policy to reduce the risk of hitting the ZLB. Both work, but one comes at the cost of higher average inflation. […]
Artsie non-linearity, economics, and the concrete steppes
When economists say that something is "linear", rather than "non-linear", they normally mean it is a straight line, rather than curved. Y=a+bX is linear; Y=a+bX2 is non-linear. That is NOT what I am going to mean by "linear" in this post. Instead, I am going to use the words "linear" and "non-linear" in the way […]
Three (maybe four) main questions about money
What are the main questions in monetary economics? This post isn't really about the answers to those questions. It's about the questions themselves. This is how I think about dividing up monetary economics into a small number of main questions, and how those questions are related to each other. Others may want to divide it […]
“Does monetary policy have (bad) distributional consequences?”
Some questions are bad questions. This is one of them. We can get a clearer and more useful answer if we change the question. We can avoid wasting a lot of time arguing at cross purposes. Here's a better question: "If we used fiscal policy instead of monetary policy to remove a shortage of aggregate […]
Abolish the Equity Premium Now!
This post is slightly whimsical. I can't decide myself if I'm being totally serious. My argument is certainly less than watertight. But it's not (to me) obviously wrong either. So I'm just throwing it out there.
Two ‘what ifs’ about Canadian macroeconomic policy during the recession
There's a lot for econobloggers in the US and Europe to get exercised about. They are facing serious problems, and their policy makers have demonstrated an alarming inability to deal with them. It's harder for Canadian econobloggers – okay, for this particular econoblogger – to put together arguments documenting how Canadian policy makers got things […]
Devaluation and the Euro
"Consider a small open economy with fixed exchange rates. Suppose the central bank announces that it will devalue the currency by 50% one year from today. What are the consequences of this announcement?" IIRC, the whole point of the Euro was that questions like that wouldn't make any sense, and so would never need to […]
Are quantities backward-looking or forward-looking?
I've been reading three things this morning: Chris Dillow, responding to my earlier post. Chris says that expectations (of future monetary policy) are a "weak lever". Roger Farmer, showing that lagged stock prices plus lagged unemployment have really good out-of-sample forecasting properties for unemployment. Paul Krugman, saying: "As I read it, price and wage setting […]
Identity Economics
Here are two macroeconomic identities: 1. Y=C+I+G+NX 2. MV=PY Both are true by definition.
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