Category Nick Rowe
Helicopter money does not cause deflation
Steve Williamson's latest: "Next, conduct a thought experiment. What happens if there is an increase in the aggregate stock of liquid assets, say because the Treasury issues more debt? This will in general reduce liquidity premia on all assets, including money and short term debt. But we're in a liquidity trap, and the rates of […]
A simple story about non-reversibility of causation
I believe there exists an equilibrium relationship between three variables: the position of the Gas pedal; the Speed of the car; the position of the speedometer Needle. I have verified this relationship empirically. I have a crude theory of how cars work that can explain this relationship. But any automotive engineer would laugh at my […]
The effect of nominal interest rates on inflation
This is for David Andofatto, in response to his recent post (and for anyone else who might be interested). If the central bank raises the nominal interest rate, what happens to actual and expected inflation depends on why people think the Bank did it. The representative agent cannot be assumed to know he is the […]
Why inflation will not fall off a bottomless cliff
"My model can identify the edge of a bottomless ZLB cliff. To the north of the edge of that cliff, there can be an equilibrium rate of inflation. To the south of the edge of that cliff, there cannot be an equilibrium rate of inflation, because the cliff is bottomless. Therefore inflation will not go […]
On firing your advisers
[Update: Steve Williamson says in comments the lack of communication started much earlier. If that's right, then I think my theory fails empirically in this case.] If you are in a position of power and responsibility you need advisers. The main job of your advisers is to stop you saying something stupid in public. You […]
Intertemporal Say’s Law
Say's Law says there cannot be a general glut: if some goods are in excess supply, other goods must be in excess demand. It's wrong, in a monetary exchange economy, as Say himself eventually realised. Suppose you are short-sighted. You can observe the markets that are close to you in space, but you cannot see […]
Does the invention of nifty new goods increase AD?
I'm going to offer a partial defence of Michael Mandel against Scott Sumner. (Read Scott to see what Michael said and might have meant, but it doesn't really matter what he really meant, because it's an interesting question anyway). The question is this: would the invention of a lot of nifty new goods that people […]
Optimal fiscal and monetary policy in a hybrid Old/New Keynesian model with and without the ZLB
Update: see update at very end. Some people aren't as rational and future-oriented as agents in New Keynesian models. Some people aren't as present-oriented as agents in Old Keynesian models. A hybrid Old/New Keynesian model, with both types of agents, looks attractive. But other people's hybrid models looked too complicated, so I decided to build […]
A suggestion for simplifying some macro math
She took a lot of heat for saying it, but I agree with Talking Barbie: math class is hard. It's especially hard in economics. And I find it much harder than most economists. So I have always been on the hunt for devious little tricks to avoid doing hard math. Here's one such trick:
Neo-Wicksellian indeterminacy in pictures
Pre-requisite: second year macro (go read the intermediate textbook on ISLM).
Worthwhile Canadian Initiative 
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