Category Nick Rowe
How can we spot a boom?
Suppose I had perfect knowledge about the economy. So I knew exactly what the right monetary policy would be to keep the economy growing along some sustainable path. And I knew exactly what that sustainable path would look like. I would then be able to tell the difference between: 1. Monetary policy is too loose, […]
Monetary policy is not interest rate policy – Japanese version
Suppose I announced I would be buying an asset, both now and in future. And suppose people believed my announcement. It would be paradoxical if my announcement caused the price of that asset to fall. It would be even more paradoxical if I had said I was buying the asset because I was trying to […]
If you don’t like low interest rates, you want the Bank of Canada to loosen monetary policy now
Two weeks ago I wrote a post "Monetary stimulus vs financial stability is a false trade-off". My opening lines in that post were: "There's an idea floating around out there that I fear may be influential. And that idea is horribly wrong. Which makes it dangerous. And I want to try to kill it." Today, […]
Do New Keynesians need to assume (much) labour hoarding?
We know that measured productivity falls in a recession (relative to trend). Real Business Cycle theorists say that this is because a negative productivity shock is what caused the recession. Keynesians say that a negative aggregate demand shock is what caused the recession, and labour hoarding (firms don't like to lay off workers even if […]
Macroeconomics when all goods are non-rival
Sometimes it's good to build really weird models. Because bits of the real world are a bit weird, even if the whole world isn't as totally weird as the model, and taking an extreme case can help us understand the effect of those weird bits. Plus it's fun. I'm going to assume that all produced […]
Testing productivity shocks vs labour hoarding in a traditional industry?
This is just an idea that's been floating uselessly in my mind for some time. I have never been able to apply it. But maybe someone out there could. This isn't an earth-shattering post. Maybe someone else has already thought of the same idea. Or even applied it, and I just haven't heard about it. […]
Monetary stimulus vs financial stability is a false trade-off
There's an idea floating around out there that I fear may be influential. And that idea is horribly wrong. Which makes it dangerous. And I want to try to kill it. But macro is hard. And it's not easy to explain clearly and simply. I can only try. And I can only hope that others […]
What happened in 2008?
1. Did a financial crisis cause a fall in expected and actual aggregate demand? (With central banks being unable or unwilling to do enough to stop it). 2. Or did a fall in expected and actual aggregate demand cause (or worsen) a financial crisis? (With central banks being unable or unwilling to do enough to […]
Begging the long run question: inflation variability vs NGDP growth variability
Forget about the short run benefits of NGDP targeting. This post is about the long run benefits. Just suppose, in some alternative universe, the Bank of Canada for the last 20 years had been targeting 5% NGDP growth rather than 2% inflation. And that everyone had gotten used to NGDP growing at 5%. And suppose […]
Did inflation targeting make the Phillips Curve really flatter or just look flatter?
We know that inflation targeting failed. But we don't know why it failed. One theory is that inflation targeting failed because inflation targeting made the Phillips Curve flatter. It made the Phillips Curve so very flat that keeping inflation close to target wasn't enough to keep output and employment close to potential. Inflation targeting contained […]
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