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Tag Archives: Monetary Policy

Macroeconomic Modelling of Pandemics at Warp Speed

A pressing research issue with deep policy relevance concerns how econometric models should be adapted, changed, or modified in light of the COVID-19 pandemic.  A new Webinar series–Macroeconomic Modelling and Pandemics–has been created to examine this issue, to exchange views among researchers, and to bring more attention to the policy questions. Here is a list of topics in the series on the Hoover website, including previews of coming attractions with more to come. You are welcome to...

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A Conference That Would Have Been and Still Will Be

Two months ago, on March 14, 2020, we cancelled our annual Hoover monetary policy conference at Stanford on “Central Bank Strategy Reviews and Their Global Impact” then scheduled for May 1, 2020. The reason was that Stanford declared that “university units should cancel or postpone events they are hosting that involve more than 50 participants.” We were all were disappointed, as the conference was to give a careful review of the monetary policy reviews of the European Central Bank and...

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Strategies for Monetary Policy

Strategies for Monetary Policy is a new book from the Hoover Press based on the conference by that name John Taylor and I ran last May. (John Taylor gets most of the credit.) This year's conference is sadly postponed due to Covid-19. We'll have lots to talk about May 2021.At that link, you can see the table of contents and read Chapter pdfs for free. You can buy the book for $14.95 or get a free ebook.The conference program and videos are still up.Much of the conference was about the...

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Treasury Liquidity

So just what was the "disruption" in the Treasury market that so spooked the Fed, that now the Fed is buying more than the Treasury is selling?A commenter on my last post on corporate bonds points to Treasury Market Liquidity during the COVID-19 Crisis by Michael Fleming and Francisco Ruela at the NY Fed, April 17Michael and Francisco nicely show us the facts. They make no editorial comment at all, except perhaps in the figure titles, so my questions about just how...

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Bond liquidity

When the Fed stepped in, were corporate bonds "illiquid," the market "dysfunctional," or were the prices just low, as they should be in advance of a Great Recession with larger bankruptcy risk? Did the Fed "liquefy" the market, "intermediate," grease the wheels, or is it just buying, and propping up prices so that bondholders can dump bonds on the Fed before things get really bad?I asked for evidence on bond market liquidity in my last post on the topic, "Bailout redux," and Pierre-Olivier...

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A Simple Micro/Macro Corona Tax Model

I want something you could teach to first or second year economics students. Using tools they already have in their toolkit. MICRO Start with a Demand and Supply model of the market for haircuts. If we put a $1 per haircut tax on buyers of haircuts, the demand curve shifts vertically down by $1, reducing Q* and P*. If we put a $1 per haircut tax on sellers of haircuts, the supply curve shifts vertically up by $1, reducing Q* and increasing P*. If we put a tax on both buyers and on sellers...

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Relative supply shocks, Unobtainium, Walras’ Law, and the Coronavirus

Here's the basic idea: A temporary 100% output cut in 50% of the sectors (what the Coronavirus does) is very different from a 50% output cut in 100% of the sectors (what our intuitions might expect from supply shocks in aggregate macro models). The former can easily lead to excess supply in the unaffected sectors; the latter leads to excess demand in all sectors. Here's the intuition: (As they say: "Shit just got real". And one of my daft old thought-experiments just got very real.) As...

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Strategic Review and Beyond: Rethinking Monetary Policy and Independence

March 4, I was honored to give the Homer Jones lecture at the St. Louis Federal Reserve. Link hereStrategic Review and Beyond: Rethinking Monetary Policy and Independence.I used the opportunity to put lots of thoughts together in condensed form, on how the Fed and other central banks should approach monetary policy, financial regulation, and ever-expanding mandates.  The link is to the html version. It will appear in prettier form in the April St. Louis Fed Review. The conclusionShould,...

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Fed Bombshell

The Fed just announced "extensive new measures to support the economy." What's this all about?The PMCCF will allow companies access to credit ... This facility is open to investment grade companies and will provide bridge financing of four years. ... The Federal Reserve will finance a special purpose vehicle (SPV) to make loans from the PMCCF to companies. The Treasury, using the ESF, will make an equity investment in the SPV.When the Fed buys a Treasury bill, it creates new money with which...

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Monetary policy and coronavirus — French edition

Vox-Fi put up an edited version of my monetary policy and coronavirus post, in French, La politique monétaire en réponse au coronavirusUn collègue et moi avons discuté de la question suivante : la Fed (Federal Reserve, la banque centrale des Etats-Unis) devrait-elle baisser ses taux d’intérêt en réponse au coronavirus?Plus généralement, supposons qu’une pandémie devienne grave et que, par choix ou par décret, une grande partie de l’économie s’arrête pendant quelques semaines ou mois....

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