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Tag Archives: Monetary Policy

A Neo-Fisherian Challenge and Reconciliation

 Lars Svensson has a very interesting challenge to the Neo-Fisherian view. (See link for slides.) What happens to inflation and unemployment when the central bank (for no good reason) raises the policy rate by 175 bp?...Sweden did, which provides  ..a natural experiment of the neo-Fisherian view: Does inflation really increase after a policy-rate increase? Despite roughly the same circumstances as many other countries, including the US, Sweden in 2010 raised rates 175 bp....

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AFR on the RBNZ

Harsh stuff from Grant Wilson at the Australian Financial Review ($):Even with the RBNZ flagging macro-prudential tightening next year, via the reimposition of loan-to-value ratios, house prices are now a de facto constraint on monetary policy. The "least regrets" formulation also assumes that the RBNZ’s approach to unconventional monetary policy, which was first articulated back in 2018, holds up. While we agree that the first round of LSAP, in conjunction with other measures announced in...

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1933 lessons for today

Nov 11, Eric Leeper presented "Recovery of 1933" with Margaret  Jacobson and  Bruce Preston, at the Hoover "Road Ahead for Central Banks" series, and it was my pleasure to discuss it. This is a really important and insightful paper.  Since Japan hit the zero bound more than 25 years ago, economists have been thinking about how to avoid deflation. The answer seems obvious -- "helicopter money," or "unbacked fiscal expansion." But this has proved remarkably hard to do. Jacobson,...

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Sumner review of Strategies for Monetary Policy

Scott Sumner posted an excellent  Review of Strategies for Monetary Policy (Book information and, yes free pdfs here). By "excellent," I don't mean he agrees with everything, especially that I wrote! He read the whole thing, including comments, and provides a concise summary along with insightful critique. I won't try to summarize his summary -- it's all good. The book summarizes last year's conference on monetary policy at Hoover, which focused on the Fed and ECB policy...

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Virtual finance theory seminar

I'm giving "A fiscal theory of monetary policy with partially-repaid long-term debt" at the virtual finance theory seminar, Wed Oct 28 at 1 PM EDT. Brett Green leads off with "Due Diligence" at 12 PM EDT. If interested, come join. Warning: this is an academic theory paper whose whole point is to look at equations. The link has an email address which I don't want to post here, email for a zoom invitation. This is an excellent seminar series and one of the first of the new...

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IMF, BIS, expanded mandates, climate and inequality

Last week I was pretty critical of the ECB's move to expand its mandate to take on climate policy. The ECB is not alone however. The Bank of England started down this direction. The IMF has also been a proponent, and the BIS is nodding assent. In short, the move that central banks, financial regulators, and their club of international institutions should to expand to general macroeconomic and financial dirigisme, and then take on climate, inequality, and other social causes far beyond...

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Two Price-setting Monopolists Meet in the Street

Two price-setting monopolists meet in the street. One says to the other: "I will buy 10 more of your overpriced bananas, but only if you buy 10 more of my overpriced apples in return. Deal?" The second monopolist accepts the deal. They meet in the street again the following day. One says to the other: "Instead of me buying those 10 more overpriced bananas today, could I just lend you those 10 more overpriced apples, at the central bank's newly announced overpriced rate of interest, and...

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Challenges for central banks.

On October 20, I was graciously invited to give a talk at the  ECB Conference on Monetary Policy: bridging science and practice. I survey six challenges facing central banks: 1. Interest rates and inflation; 2. Policy reviews; 3. Financial reform post 2008 4. New challenges to finance post covid; 5. The many risks ahead; 6. Central banks and climate.  For the whole thing, go here for a pdf. (The conference website will have video soon.) Items 1-5 are mostly interesting for...

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Debt podcast and reconciliation

 The Grumpy Economist podcast is back, with some thought on the debt issues from my last posts here and here.David Andofatto had some final thoughts at macro mania, with which I mostly agree. Yes a twitter/blog debate in macroeconomics produces agreement! Central points: 1) For these purposes a large sharp inflation and a default are not much different. In fact, the event I have in mind is most likely an inflation, as the US is likely to choose inflation over default. I don't...

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The Significance of Gold’s Record $2,000 Price

TweetAugust 24, 2020 — The price of gold reached an all-time record high of $2,000 per ounce this month.  Mainstream economic thinking has treated gold as a side-show since the world went off the gold standard. Nevertheless, the recent spiking in the price signals some important trends. It is not merely “sound and fury signifying nothing,” as sometimes seems true of financial markets. There are three ready explanations for the historic increase in the price of gold: (i) monetary policy,...

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