Category Nick Rowe
The Law of Reflux vs Helicopter Money
Let me start out with an extreme (and very silly) assumption, just so I can explain something simply. Assume that the demand for currency does not depend on the price level, nor on real income, nor on interest rates, nor on anything. It's just fixed. Every individual wants to hold exactly $100 in currency, no […]
On Olivier Blanchard on ISLM and Teaching Intermediate Macro. And my despair.
I read Olivier Blanchard on how to change the ISLM model in response to the recent recession to teach Intermediate Macro better. And I despaired. Not because he says anything daft, but precisely because what he says seems so sensible a set of minor modifications. But it's a set of minor modifications that takes us […]
Accounting for central bank profits
Just a simple "teaching" post. There are two different ways of thinking about central bank profits (of doing the accounting). A simple numerical example will illustrate the difference. Assume 2% inflation, and 1% real GDP growth, so Nominal GDP grows at 3%. Assume the stock of currency is 5% of annual NGDP. Assume the nominal […]
Helicopter Money is small beer, and normal
Let's do a back-of-the-envelope calculation. Assume a 5% currency/Nominal GDP ratio. Assume the government/central bank wants to use helicopter money to permanently raise the level of NGDP by 5% above what it would otherwise be. So the stock of currency will be permanently higher by 0.25% of NGDP. And assume currency pays 0% interest, so […]
Democratic Helicopter Money and the non-observance of two counterfactual conditionals
I give my kids $100 and tell them to spend it not save it. 1. How can I tell whether my kids have really spent $100 more than they otherwise would have spent? Maybe they would have spent $100 anyway. 2. How can my kids tell whether I have really given them $100 more than […]
Adding more periods to the Diamond Dybvig Model; fear of illiquidity not insolvency
David Andolfatto has a very good post on "Monetary Policy Implications of Blockchain Technology". In passing (it's not a central point of his post), David says: "However, it's worth pointing out that the leading economic theory of bank sector fragility, the Diamond and Dybvig model, does not rely on the existence of opacity in the financial […]
Fewer Fiscal Multipliers and more Clarity from the Bank of Canada
At the risk of being thought "cavalier", I don't like what Bank of Canada governor Stephen Poloz is reported as saying by Kevin Carmichael. Inflation targeting is supposed to be inflation forecast targeting. The Bank of Canada is supposed to do what is needed to ensure that its own internal forecast of future inflation (at […]
Neo-Fisherian Microfoundations, with non-binding price ceiling and floor
Update: Here's a picture: Original post follows:
On Central Bank Lending to Government
The central bank prints money, lends it to the government, and the government sooner or later spends it (or uses it to cut taxes or increase transfer payments). There seem to me to be two views on this question that are equally daft: The Orthodox Daft View: "Central bank lending to government is a Bad […]
Two Problems with Designing a Basic Income Experiment
WARNING: I don't do (micro) Public Finance. And I don't do experimental economics. Those who have read the literature may tell me they are well aware of these problems, or that I'm wrong about something. Suppose someone asked me to design an experiment to test whether Basic Income would be a Good thing. (They wouldn't […]
Worthwhile Canadian Initiative 
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