Friday , April 16 2021
Home / Tag Archives: Monetary Policy

Tag Archives: Monetary Policy

Inflation levels

 March inflation is up. The CEA delivered a historic tweetstorm. It starts with temporary factors: base effects, supply chain disruptions, and pent-up demand, especially for servicesI'm glad for once to have nailed a forecast: That Fed and Administration's first response to inflation would be to invoke "temporary" factors, just as in the 1970s.  We'll see how that pans out. The CEA goes on to "base effects,"In the near-term, we and other analysts expect to see...

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Inflation options?

 From Torsten Slok at Apollo. Torsten explainsCurrent pricing for caps and floors shows that the market sees a 30% probability that inflation will be above 3% for the next five years, and a 5% probability that inflation will be below 1%, see chart below. A similar worry about high inflation can be seen in 5-year breakevens, currently trading at 2.5%, the highest level since 2008. A perpetual inflation worrier, I habitually confront the fact that bond prices don't signal inflation. I am...

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If you wanna run hot you gotta run steady

Canadian economist Richard Lipsey would always insist that the Phillips Curve is a curve, and not a straight line. Maybe because wages and prices are stickier down than up. Or maybe because unemployment can't go below 0%. Or both. Here's why that matters for macroeconomic policy: Suppose the central bank wants 2% inflation on average, over the longer term. One way to get that result would be to flip a coin, every year, or every decade, or whatever. If it's heads, the central bank "runs...

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Hoover Economic Policy seminar online

The Hoover Economic Policy working group seminars are now online for anyone who is interested. Follow the link and click "news and events." These happen on Wednesdays at noon, and are put up soon after. Interesting speakers, interesting discussion. Here's what's available so far:Michael Bordo and Mickey Levy Wednesday, March 10, 2021 “Do Enlarged Fiscal Deficits Cause Inflation: The Historical Record.”Chad Jones Wednesday, March 3, 2021 “The End of Economic Growth? Unintended Consequences of...

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Paper, silver, deficits and inflation — Chinese history version

A history of paper money and inflation in China, from Edward Chancellor's Wall Street Journal review of Jin Xu's Empire of Silver.  In these sparse paragraphs is most of monetary (and fiscal!) theory, along with a history I was not aware of.Paper money, Ms. Xu tells us, dates back to the Tang dynasty in the ninth century, when the authorities allowed merchants to exchange bronze coins for promissory notes, known as “flying cash.” Two centuries later, in the time of the Song dynasty,...

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Inflation outlook at NRO. 1970s all over again?

Essay on monetary policy in National Review Online. Short version: The Fed's monetary policy has returned to the intellectual framework of the late 1960s. At best "expectations" now float around as an independent force, manipulable by speeches, but not tied to patterns of action by the Fed as analysis since the 1980s would require. If you follow the conventional reading of how monetary policy works, that observation leads to a natural prediction:  we're on the verge of reliving...

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Fiscal theory of the price level draft

The Fiscal Theory of the Price Level is a book I'm writing on that topic. It now has a full draft, here. Comments, typos, suggestions, complaints, parts you find too easy, part you find too hard, things you think are wrong, parts you find repetitive, parts you find need better connection, things I should add, things I should delete are all most welcome! I also did a 2 hour video mini-course on FTPL for the Becker-Friedman Institute last summer, with slides/notes...

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Low Interest Rates and Government Debt

MathJax = { tex: { tags: 'ams' // should be 'ams', 'none', or 'all' } }; This is a talk I gave for IGIER at Bocconi (zoom, sadly) Jan 11 2021. Olivier Blanchard also gave a talk and a good discussion followed. Yes, some content is recycled, but on an important topic one must go back to refine and rethink ideas. This post has mathjax equations and graphs. If you don't see them, come back to the blog or read the pdf version Low Interest Rates and Government Debt John...

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Electronic-Commerce, Non-Store Sales and the Pandemic

Last week at the American Economic Association meetings, held online, many papers focused on Covid-19. A good example was the session organized by Dominick Salvatore which included Jan Eberly, Raghu Rajan, Carmen Reinhart, Joe Stiglitz, Larry Summers, and me. Most papers focused on the economic policy impact of the Coronavirus. I focused the “supply side” policies rather than on the “demand side” policies. Using a simple model, key facts naturally emerge if one simply divides...

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Loanable Funds Redux

Stop talking about "saving". Talk instead about "demand for assets". You will be happier, and your head will be clearer. Your students too will be happier, and their heads will be clearer. Demand for assets is a thing; saving is a non-thing (a residual). Things are clearer than non-things. Saving is the part of your income you do not spend on consumption. OK, so what do you do with your income, if you don't spend it on consumption? You buy/accumulate assets. Assets are things too. Like...

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