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Tag Archives: Macro

Brad DeLong's Grasping Reality 2020-01-11 18:56:27

Note to Self: The Two Faces of Jean-Baptiste Say... https://www.bradford-delong.com/2010/04/the-two-faces-of-jean-baptiste-say.html: Say I (1803): A Treatise on Political Economy Book I, Chapter XV: To say that sales are dull, owing to the scarcity of money, is to mistake the means for the cause; an error that proceeds from the circumstance, that almost all produce is in the first instance exchanged for money, before it is ultimately converted into other produce: and the commodity,...

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Executive Summary of Obama Transition Economic Policy Work: Hoisted from the Archives

Hoisted from the Archives: Note that if 600 billion in fiscal stimulus would have reduced the expected unemployment rate as of the end of 2010 from 9.5% to 8%, 900 billion would still have left the economy with an expected end-of-2010 unemployment rate of 7.25%. And, of course, the memo ought to have highlighted that things had a 50% chance of being worse than expected—even considerably worse, which they were: the end of 2010 unemployment rate was 9.3%. To seek as your economic policy...

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Brad DeLong Says More…: Project Syndicate

Project Syndicate: [Brad DeLong Says More..(htt*PS*: //us10.campaign-archive.com/?u=9116789a51839e0f88fa29b83&id=646c7b19aa&e=a7192bc790): Project Syndicate: One forgotten lesson of the Great Depression, you wrote last month, is that “persistent ultra-low interest rates mean the economy is still short of safe, liquid stores of value, and thus in need of further monetary expansion”... ...Since then, the US Federal Reserve has cut the federal funds rate – a move that you argued...

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Stop Inflating the Inflation Threat: Project Syndicate

Project Syndicate: Stop Inflating the Inflation Threat https://www.project-syndicate.org/commentary/us-inflation-flat-phillips-curve-by-j-bradford-delong-2019-10: Given the scale and severity of inflation in America in the 1970s, it is understandable that US monetary policymakers developed a deep-seated fear of it. But, nearly a half-century later, the conditions that justified such worries no longer apply, and it is past time that we stopped denying what the data are telling us.: I...

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No, We Don’t “Need” a Recession

Project Syndicate: No, We Don’t “Need” a Recession https://www.project-syndicate.org/commentary/myth-of-needed-recession-by-j-bradford-delong-2019-10: Business cycles can end with a "rolling readjustment" in which asset values are marked back down to reflect underlying fundamentals, or they can end in depression and mass unemployment. There is never any good reason why the second option should prevail: BERKELEY – I recently received an email from my friend Mark Thoma of the University...

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Increased Price Flexibility is Destabilising in New Keynesian Models. (And a Price-Level Path Target is Stabilising)

Start with a very simple New Keynesian "IS" (or "Aggregate Demand") equation: y(t) = E[y(t+1)] - a[r(t)-r*(t)] The "real" (inflation-adjusted) interest rate r(t) is defined as the "one period" nominal interest rate, minus expected inflation for the following "one period". In order to stabilise output y(t), relative to expected future output E[y(t+1)], the central bank needs to ensure that the real interest rate r(t) always equals some "natural rate" r*(t), which varies over time as shocks...

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Time for Another Rate Cut by the Federal Reserve!: Wednesday Forecasting

My rule-of-thumb, the result of my degree in forecasting from Parker Brothers University, is that the best estimate of the current state of the labor market is to average the ADP number that came out this morning with the BLS number that will come out on Friday. And my rule-of-thumb is that the BLS number is likely to be 1/3 of the way from the current trend to the ADP number. With the current trend at about 130,000 jobs per month, and with today’s ADP number at 70,000, I now think...

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Brad DeLong's Grasping Reality 2019-12-04 04:39:29

...Part 1ers, by contrast, see Keynesian economics as being essentially about the refutation of Say’s Law–the possibility of a general shortfall in demand. And they generally find it easiest to think about demand failures in terms of quasi-equilibrium models in which some things, including wages and the state of long-term expectations in Keynes’s sense, are held fixed while others adjust toward a conditional equilibrium of sorts. They draw inspiration from Keynes’s exposition of the...

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Boiling Frogs – Slow Recoveries are Deep Recoveries, with Flatter Phillips Curves

Andy Harless' tweet (about the US economy) got me thinking. "There’s a frog-boiling aspect to this economy. The consistent lack of *rapid* improvement throughout the recovery is enabling us to reach levels of employment that might not otherwise have been attainable." It reminds me of my old post "Short Run 'Speed Limits' on recovery".  The basic idea is simple: actual inflation (relative to expected inflation) might depend not just on the level of employment (relative to some unknown...

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