Category Nick Rowe
Getting the right sign on the nominal interest rate signal
This is in response to John Cochrane's good post. First off, you need to understand that Keynesians don't actually believe their own New Keynesian models. When they reason informally, they always assume inertia in actual or expected inflation. But the standard New Keynesian model, with the Calvo Phillips Curve, doesn't have inflation inertia in it. […]
Does finance need money/macrofoundations?
(I'm not 100% happy with this post. Too much emphasis on interest rates, for one thing. I sat on it for a few days, but have decided to post it anyway. Because I like my question better than I like my answer. So let's see your answers.) David Glasner has a very good post: Does […]
More Greek barter evidence for monetary disequilibrium
Just one small snippet of news from Greece (HT MacroDigest), but to my mind a very important extra bit of evidence that confirms the monetary disequilibrium approach to understanding recessions:
Microfoundations we like vs microfoundations we can solve
Take just one example: the Calvo pricing model. In that model, the Calvo fairy visits each firm at random, taps it with her wand, and lets it change its price. The probability of her visiting in any period is 1/n, so she visits each firm on average every n periods. Firms know this and set […]
Microfoundations for people’s sake
There are two simple reasons why I like microfoundations: 1. Because the economy is what people do. Understanding and explaining economies is understanding and explaining why people do what they do.
Natural rate =/= trend or average
Start with the actual unemployment rate in (say) Canada over (say) the last 20 years (the years of targeting 2% inflation). Calculate the average unemployment rate over that 20 years. Call it "Ua". Now imagine a policy counterfactual. Suppose that the Bank of Canada had done exactly what it did do, plus or minus a […]
We know the economy needs a bubble; but how big?
This isn't as clear as I want it to be. Sorry. Mr Ponzi issues a financial asset. Assume that the demand to hold that asset grows at the same rate as GDP. If people are willing to hold that asset at a rate of return less than the growth rate of GDP, Mr Ponzi can […]
Does house building cause house price inflation? Our Sokal hoax
What we have just witnessed is the economics equivalent of the Sokal hoax. It wasn't a hoax, just a mistake, but the effect was the same. We all make mistakes. What matters is that the rest of us didn't all spot that mistake immediately. Even those of us who did see that something was wrong […]
Stability and counterfactual conditionals
I'm writing this just to try to get my own thoughts straight, on a topic I know nothing about. And because commenter Ram asked me to. Read at your own risk.
On intro micro first, and splitting micro and macro
I thought Noah Smith's post on why we should teach intro micro before intro macro was very good. I agree with Noah: even though macro is much more glamorous, micro is just as useful and important, and we are more confident that micro works. (Read his post for the full story.) I want to add […]
Worthwhile Canadian Initiative 
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