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(Needless to say, I do not necessarily agree with them or endorse them.)
Category Archives: Macroeconomics
Draghi says Hello and cuts the ECB interest rate
Today, new ECB president Mario Draghi led the Governing Council of the ECB in its meeting on monetary policy decisions. It turned out to be an interest cut, as the interest rate on main refinancing operations was decreased from 1.5% to 1.25%. The move was mainly motivated on falling inflation expectations and an expectation of dampened economic activity (with emphasis on downside risks). As such this is a move that is consistent with inflation targeting, and it appears that the ECB under Drahgi will continue the practice to let interest-rate decisions be guided by short-run developments in real economic activity, while securing that inflation expectations are held in check. Hence, … Continue reading
Posted in Economists, Macroeconomics, Monetary policy
Tagged European Central Bank, Mario Draghi
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Trichet says Goodbye and SMP peaks at 173 bn. €
Today marks the last day of Jean-Claude Trichet’s tenure as president of the European Central Bank. Bild am Sonntag interviews him on the occasion. In terms of being the main person responsible for the ECB’s mandate of price stability, he has been a success. The inflation measure used by the ECB has moved quite closely around the value which after some introductory opaqueness is stated as close to, but not above, 2%. Surely, during the peaks of the financial crises there were upward and downward swings, but on average you would not call Trichet a man that leaves a bank with little anti-inflation credibility. What he does leave is a … Continue reading
Don’t Fence Me In: Sargent rejects slogans
This is just a heads up for a recent interview with the new Nobel Laureate Thomas Sargent. In the New York Times article, “The Slogans Stop Here“, he explains the futility of trying to label economists as belonging to various theoretical or political “camps”. It is a great read, and I can’t help emphasizing the following: “If you go to seminars with guys who are actually doing the work and are trying to figure things out, it’s not ideological,” he said. “Half the people in the room may be Democrats and half may be Republicans. It just doesn’t matter.” These are simple, but great words. In my part of the … Continue reading
Sargent and Sims (2011)
Today, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (yes, this is the long and formal title for the Nobel in economics), was awarded to Thomas J. Sargent and Christopher A. Sims. The following caption summarizes the motivation: “for their empirical research on cause and effect in the macroeconomy” The longer motivation, and survey of the recipients’ academic contributions, can be found here (pdf 600 Kb). As a macroeconomist, I can only support this choice. These are definitely two of the profession’s “grand old men”, and it is difficult to write a modern paper without citing either of them, or both. Their influence in theoretical and … Continue reading
Posted in Economic Sciences, Economists, Macroeconomics
Tagged Christopher A. Sims, Nobel Prize, Thomas J. Sargent
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Krugman on “Republican Science”: Can we please make a trade barrier against that?
This is an endorsement. Paul Krugman’s recent Op-Ed in the New York Times describes in horrifying detail how some parts of America, and potential Republican Presidential candidates are turning their back against science. The piece, Republicans Against Science, is really scary. Read it and weep. The Wall Street Journal editorial by a Stephen Moore that Krugman mentions, can be found here. It is also a horrifying read. It basically says that economics is stupid, and common sense is better. Weep some more. It is scary right now for me, as my country have an election campaign where main issues are economic. And since American tendencies inevitably are imported in Europe … Continue reading
Posted in Economic Sciences, Macroeconomics
Tagged Paul Krugman, Stephen Moore, Wall Street Journal
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Commitment in action: Federal Reserve’s interest-rate “path”
It is a big shame that today’s FOMC meeting is one of those not to be followed by a press conference and a Q&A with Ben Bernanke. The policy decision is one of the more spectacular in recent times. Not because the Fed decided to keep the target for the Federal Funds Rate within the 0–0.25% range, where it has been since December 2008. The big news, however, is that the non-move is accompanied by an explicit commitment to keep it there for the next two years (if current conditions continue). This is very specific compared to previous talk about keeping rates low for “an extended period” (which has been … Continue reading
US of AA+
Rarely has a rating agency’s rating of a single country been met with such anticipation and followed by so much commentary. On August 5, Standard & Poor’s downgraded US long-term sovereign debt from the maximum of “AAA” to “AA+” adding an “Outlook Negative” to the picture. As mentioned all over the press, this is the first time to happen. What is particularly interesting about the downgrade is the motivation. Surely, United States has a huge public debt—of a size that causes even the most Keynesian-minded economists to take it seriously. But the motivation is barely economic at all. As seen in “Research Update: United States of America Long-Term Rating Lowered … Continue reading
Posted in Economics, Macroeconomics
Tagged forecasting, insider trading, Mike Konzal, Rating Agencies, Standard & Poor's, United States debt
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Steady as she goes: The ECB keeps policy rate unchanged again
After having raised the key policy interest rate in April (from 1 to 1.25 %), the ECB kept it unchanged on June 9, thus repeating their “non-action” of May. This is a somewhat bold and perhaps unconventional move by a central bank whose overriding legal mandate is price stability. Given their own definition of price stability as meaning an annual Euro-wide HICP-inflation rate not above 2%, you would have thought that the increase in April would have been followed by further increases. After all, HICP-inflation is currently above 2.5%, and unemployment is falling slightly (continuing the downward adjustment, which I have argued earlier could have been the trigger for the … Continue reading
Posted in Economists, Macroeconomics, Monetary policy
Tagged Andrew T. Levin, Benjamin K. Johannsen, Euro, European Central Bank, interest rate, Jean Claude Trichet, Meredith J. Beechy
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