Category Nick Rowe
Blue sky money one – the dual mandate
Leland Yeager's (ed.) "In search of a monetary constitution" was the book that most excited my thinking about monetary economics as a PhD student. He asked the contributors to the volume to design a monetary system from scratch. He told them to think "blue sky". I can't remember all the contents. The answers given were […]
Darwin Awards, and other random thoughts on the Euro
1. Is the European Central Bank, or maybe the whole EU, a good candidate for a Darwin Award? There doesn't seem to be a category for institutions that bring about their own demise through their own self-destructive behaviour, but perhaps there should be. In the very long run we should perhaps be thankful for dysfunctional […]
Could the failed German bond sale be good news for the Euro?
File this one under "desperately looking for a silver lining in the unfolding disaster". Suppose, just suppose, that all 17 Eurozone countries were identical. Suppose they were all at the Eurozone average. Suppose they all faced the same default risk and moderately high interest rates on their government bonds. What would the European Central Bank […]
The inflation fallacy
Sometimes I despair. Sometimes I wonder if the inflation fallacy is at the root of all the US and Eurozone troubles. It's so easy to get popular support for the idea that printing money will cause inflation, and inflation means a fall in our real income. So it's much better to have high unemployment, low […]
Tightening money and widening Eurozone spreads
How do we know the Eurozone crisis has been getting worse over the last few days? The indicator that I watch most closely, and I think others watch most closely, is the yield spread between German government bonds and the bonds of other Eurozone governments. If those spreads widen, it means the crisis is getting […]
Instrument rules, target rules, NGDP, complexity and learning
At one extreme you have pure discretion. The central bank does whatever it thinks is best. At the other extreme you have an instrument rule. The rule specifies exactly how the central bank should set the monetary policy instrument, conditional on the indicators (i.e. conditional on its information). The Taylor Rule is an example of […]
The ECB’s internal contradictions
The Eurozone news is really depressing. I think things are going to be very bad very soon. I don't have much to say that I haven't already said in previous posts. But thought I would add this anyway, FWIW. The ECB doesn't like inflation uncertainty; it wants to keep inflation predictable and just below 2%. […]
Why isn’t NGDP targeting a lefty thing?
I don't have an answer to that question. The politics of NGDP targeting doesn't make any sense to me. I don't understand it at all.
Soldiers of fortune, department chairs, and CEO pay
Assume ten identical young men. One of them is needed to do a dangerous job which creates disutility for the person doing it. Assume they have diminishing marginal utility of consumption. Assume (though a weaker assumption can get the same results) that the utility function is separable in consumption and the type of job. There […]
Could the ECB become the central fiscal authority?
There is only one way to save the Euro now. The ECB acts as lender of last resort to the 17 Eurozone governments. But nobody would want to act as lender of last resort to a deadbeat, and the ECB wouldn't want to act as lender of last resort to a fiscal deadbeat. With the […]
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