Category Nick Rowe
Liquidity pile-ups on the Wicksellian roundabout
I'm trying to model something, and failing miserably. So I'm going to try to articulate my vision, hoping for inspiration. Imagine a large number of cars forever circling around a very large roundabout. Initially they are all going the same speed, and are evenly spaced. What happens if one car slows down temporarily? (I saw […]
Alpha banks, beta banks, fixed exchange rates, market shares, and the money multiplier
Forget money and banking for a minute. Let's think about international macroeconomics. Just suppose the US Fed, for reasons unknown, pegged the exchange rate of the US dollar to the Canadian dollar. The Fed makes a promise to ensure the US dollar will always be directly or indirectly convertible into Canadian dollars at par. The […]
Two LM curves
Sometimes we borrow money from the bank because we plan to spend more than we expect to get in income. And sometimes we borrow money from the bank because our stock of money is too small relative to our flows of planned spending and expected income. Here is a rough sketch of a simple model […]
The sense in which the stock of money is “supply-determined”
Consider three positions: 1. The stock of money is determined by the demand for money, and not by the supply of money. 2. The stock of money is determined both by the demand for money and by the supply of money. 3. The stock of money is determined by the supply of money, and not […]
One general theory of money creation to rule them all!
The Bank of England has published a lovely clear article (by Michael McLeay, Amar Radia and Ryland Thomas) on "Money Creation in the Modern Economy". Thanks to JKH for the tip-off. (Here is JKH's blog post). But I disagree with it. Thinking about monetary policy in terms of interest rate policy just doesn't work. It […]
Feminist framing and general equilibrium theory
Consider a very simple general equilibrium 2X2 example to illustrate my point: Divide the population into two groups: call them "men" and "women". Divide all outcomes into two groups: call them "arts" and "science". Everybody is somewhere in the 2X2 matrix. Here are four questions we could ask of the data: 1. Why are women […]
Macro savings vehicles
An individual who decides to save for retirement has a choice between a number of different savings vehicles: stocks, bonds, real estate, etc. What are the choices when we aggregate up to the economy as a whole? I write this post in response to an email from someone who is knowledgeable about the savings vehicle […]
Coordination and the demand for money
Why do financial (and other) crises (sometimes) cause a recession? Because they increase the demand for money and so cause an excess demand for the medium of exchange. But why do financial crises increase the demand for money? Because the demand for money depends on the synchronisation of payments and receipts of money, and synchronisation […]
Where has all the spam gone?
Dumb question. The most recent genuine spam comment in the WCI spam filter is dated 17th February. The second most recent is dated 4th February, and the third is dated 28th January. There are 30 spam comments dated 28th January, and 62 dated 27th January. And roughly the same number each and every day before […]
Keynes, New Keynesians, and the Keynesian Cross
Simplify massively. Ignore investment, government spending and taxes, and exports and imports. All output is consumed. Assume a Keynesian consumption function: Cd = a + bY. Draw Samuelson's "Keynesian Cross" diagram. Real consumption demand Cd on the vertical axis, and real output (real income) Y on the horizontal axis. Demand for consumption this current period […]
Worthwhile Canadian Initiative 
Recent Comments