Category Nick Rowe
The peanut theory of recessions
I've got three targets in this post: economists who say that recessions are caused by real wages being too high; economists who say that recessions are caused by real interest rates being too high; and economists who say that recessions can't be caused by an excess demand for money, because we can always go to […]
An upward-sloping IS curve
Brad DeLong's post on John Cochrane's upward-sloping IS curve triggered this post. But this is not about John Cochrane. It's about why tight monetary policy may cause real interest rates to fall, if monetary policy is expected to stay tight for long enough. The story of an upward-sloping IS curve I'm putting forward here isn't […]
When are there NO gains from trade?
OK you trade theorists. I've got a question for you. It's the exact opposite question to the one you normally ask. When are there no gains from trade? Biologists need to know.
The Wealth Curse — why we are almost always less wealthy than we think we are
Wealth is an expectation about the future. Absent a complete set of futures markets, our expectations won't aggregate up, because our plans for the future are interdependent and almost always mutually inconsistent. Other people aren't planning to do what fulfilment of our own plans requires them to do. Our plans are going to be disappointed, […]
Eurozone fallout preparations?
1. If/when the Eurozone collapses, how will that affect countries in the rest of the world, like Canada? 2. What, if anything, can those countries do about it?
The inverse function theorem and the monetary policy instrument
I'm not very good at math. So treat this post accordingly. [Ooops! As Kevin points out. I meant the *inverse* function theorem. I did say I was no good at math. I've edited it now. Can't find the strikeout function.]. The basic idea here seems rather obvious. But I don't remember anyone making this connection […]
The macroeconomics of doing nothing
Suppose there is an increase in desired saving, and the monetary and fiscal authorities do nothing. What happens? That's the most important practical question in macroeconomics over the last few years. And it's also a really stupid question. And understanding why it's a really stupid question, and changing the way that question is asked — […]
Headline and Core, again. And the ECB.
They are still at it! (Making totally irrelevant arguments about headline vs core.) How to kill this zombie? Here is a very simple model of inflation. Don't take it too literally. It's just for illustration. 1. H(t) = aH(t-1) + bC(t-1) – cR(t-1) + e(t) H(t) is headline inflation at time t; C(t) is core […]
Debt and bi-modal demographics
Young people borrow, to finance school, house, car, and kids. Their debt reaches a maximum, somewhere around age 35. Then they start to pay off their debt, and save for retirement, and so reach a maximum stock of savings somewhere around age 65. So, if there were a big bulge in the population at around […]
Canadian mortgage debt
I feel bad about writing too many abstruse theory posts. How many angels can dance on the head of a monetary pin? Here's something more practical. Think of it as a companion to Livio's post about Canadian house prices. Why would we worry if Canadian house prices are overvalued? One important reason (though not the […]
Worthwhile Canadian Initiative 
Recent Comments