Category Nick Rowe
Do the Greeks need Greek banks?
Or could they all use foreign banks? Dumb question. I don't know the answer. Are there some laws that make it hard to use foreign banks? Tourists seem to manage OK without opening a foreign bank account. It ought to be easier still if the foreign country uses the same currency. Could the foreign banks […]
Keynesian Cross as simultaneous moves symmetric Nash equilibrium
Let there be two players. The apple producer buys bananas from the banana producer; and the banana producer buys apples from the apple producer. Each must place his order for how much fruit he wants to buy before observing the other's order. Each player's action depends on his expectation of the other player's action. The […]
Fixed exchange rates and Blame Thy Neighbour
There is a parallel universe in which the Euro was never invented, and the Eurozone countries kept their own moneys and their own central banks, with flexible exchange rates. I think the economic outcomes would have been better. But let's just suppose they weren't. Suppose that each of those independent central banks had screwed up […]
Do economically illiterate slobs use duality theory?
Dunno. I was never that good at micro/math. That's why I'm asking. The government has a banana machine that converts any number of apples into the same number of bananas. If it starts the machine up we get a new equilibrium, where people will produce more apples and fewer bananas, and/or consume fewer apples and […]
“Human Capital” and “Land Capital”
Branko Milanovic (HT Mark Thoma) misses the point about the usefulness of the concept "human capital". To explain the point, let me talk about "land capital" instead. Raw land, in it's natural state, often isn't very productive. Before you can grow wheat on it, you usually need to clear it, or drain it, or fertilise […]
Teaching, OLG models, and the phenomenology of perception
When we teach students economics, we sometimes use numerical examples to help them understand general principles. Sometimes we make them work through those numerical examples by themselves, as an assignment. It's the only way they will really get it, and see what's really going on. But once they get it, they don't need the numbers […]
Debt does have intergenerational distributional implications
Consider two possible worlds: World A: Us old people bequeath our government bonds to the next generation (as a freebie). World B: Us old people sell our government bonds to the next generation (they pay us for the bonds). See the difference? In world A the next generation inherits the tax liabilities inherent in the […]
Money as closed-end mutual fund
[I don't think this is very original, but it's a fun and instructive metaphor to play with. The most important lesson is the way the metaphor fails.] Suppose I start a closed-end mutual fund. (Brits call it an "investment trust".) I issue shares, and use the proceeds to buy assets like bonds and stocks. Shares […]
Instrument independence vs target independence under flexible exchange rates
Sebastian Edwards (HT Mark Thoma) says that monetary policy independence under flexible exchange rates is an illusion. This conflates instrument independence with target independence. Instrument independence is always an illusion, given the target. Target independence is not an illusion.
How to lie with NGDP statistics?
I'm not very good at this. But I think we need to ask the question. Others could answer it better than me. Scott Sumner tells me that Greece is considering issuing NGDP-linked bonds, where the amount the government pays to bondholders is proportional to Nominal Gross Domestic Product. Like Scott, I rather like the idea […]
Worthwhile Canadian Initiative 
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