Category Nick Rowe
Artsie non-linearity, economics, and the concrete steppes
When economists say that something is "linear", rather than "non-linear", they normally mean it is a straight line, rather than curved. Y=a+bX is linear; Y=a+bX2 is non-linear. That is NOT what I am going to mean by "linear" in this post. Instead, I am going to use the words "linear" and "non-linear" in the way […]
Three (maybe four) main questions about money
What are the main questions in monetary economics? This post isn't really about the answers to those questions. It's about the questions themselves. This is how I think about dividing up monetary economics into a small number of main questions, and how those questions are related to each other. Others may want to divide it […]
Competition between unions
Suppose you were a believer in the benefits of canoes. You want as many Canadians as possible to own a canoe. You would presumably want to encourage competition between different canoe manufacturers, so they would compete on price and quality, so that price would be lower and/or quality would be higher, so that more Canadians […]
“Does monetary policy have (bad) distributional consequences?”
Some questions are bad questions. This is one of them. We can get a clearer and more useful answer if we change the question. We can avoid wasting a lot of time arguing at cross purposes. Here's a better question: "If we used fiscal policy instead of monetary policy to remove a shortage of aggregate […]
Abolish the Equity Premium Now!
This post is slightly whimsical. I can't decide myself if I'm being totally serious. My argument is certainly less than watertight. But it's not (to me) obviously wrong either. So I'm just throwing it out there.
Devaluation and the Euro
"Consider a small open economy with fixed exchange rates. Suppose the central bank announces that it will devalue the currency by 50% one year from today. What are the consequences of this announcement?" IIRC, the whole point of the Euro was that questions like that wouldn't make any sense, and so would never need to […]
Are quantities backward-looking or forward-looking?
I've been reading three things this morning: Chris Dillow, responding to my earlier post. Chris says that expectations (of future monetary policy) are a "weak lever". Roger Farmer, showing that lagged stock prices plus lagged unemployment have really good out-of-sample forecasting properties for unemployment. Paul Krugman, saying: "As I read it, price and wage setting […]
Identity Economics
Here are two macroeconomic identities: 1. Y=C+I+G+NX 2. MV=PY Both are true by definition.
How much do expectations matter?
It is a cliche (among economists) to say that expectations matter. It is even more of a cliche to say that expectations matter for asset prices. But how much do expectations matter? I'm going to do a quick and dirty back of the envelope calculation to show that expectations matter a lot. And that the […]
Ulysses of the concrete steppes
Ulysses had to take concrete steps to influence his own future actions. He had himself tied to the mast. Unlike Ulysses, most of us don't have to take concrete steps to influence our own future actions. Instead we make promises.
Worthwhile Canadian Initiative 
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