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Recent Posts
- Are ECB’s Greek bond purchases really irrelevant for the private sector?
- Is Greg getting bailed out by his rich uncle?
- Taylor legislation? Rules versus discretion misunderstood
- Partisanship and dismal economics blogging
- Chris Auld’s 18 signs
- The case for negative nominal interest rates and how to attain them: Revisiting the Buiter-Eisler approach
- No Negative Rates in Euroland (yet)
- Reinhart and Rogoff’s coding mistake: Much Ado About Nothing
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(Needless to say, I do not necessarily agree with them or endorse them.)
Category Archives: Economics
Is Greg getting bailed out by his rich uncle?
I have an old friend, and he probably won’t mind I am telling you this, but for sake of anonymity, I will just call him Greg. He has had some economic difficulties recently, but his family has stepped in at different points. This, I thought, was great for Greg, but the whole sequence of events has led to a lot of animosity within Greg’s family. Even though I am biased, since Greg is my friend, I still can’t help thinking that he somewhat has to blame himself. But I’ll let you be the judge. The background is that Greg and his family found their dream house some years ago, and … Continue reading
Partisanship and dismal economics blogging
I haven’t been blogging much lately. Frankly, I got tired of it. Of course, very few read what I write, but I have no problems with that. I blog mostly to maintain some record of my thoughts. I mainly got tired of the whole so-called academic blogosphere. In particular the one originating from the US, which of course tends to be quite dominating. My problem is the reductive nature of much academic US blogging. Many bloggers are high-profiled academic economists, who through their blogging are simplifying arguments so as to set up a “Them versus Us” feeling in the mind of the reader. Paul Krugman, of course, excels in this. … Continue reading
Posted in Economic Sciences, Economics, Macroeconomics
Tagged blogosphere, politics
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Reinhart and Rogoff’s coding mistake: Much Ado About Nothing
This week saw a wide circulation of recent working paper by Thomas Herndon, Michael Ash and Robert Pollin, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff“, Working Paper Series Number 322, Political Economy Research Institute, University of Massachusetts Amherst. The authors challenge the findings in Carmen Reinhart and Kenneth Rogoff’s “Growth in a Time of Debt“, American Economic Review, Papers and Proceedings 100, 573-578. During their efforts to replicate Reinhart and Rogoff’s findings on the relationship between public debt and growth for 20 developed countries post-WWII, Herndon et al. received the original codes from Reinhart and Rogoff. Upon scrutiny, they discovered a coding error … Continue reading
Posted in Economic Sciences, Economics, Economists, Macroeconomics
Tagged Carmen Reinhart, economic growth, Kenneth Rogoff, Michael Ash, Public debt, Robert Pollin, Thomas Herndon
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QE3 and the FED: State-contingency and commitment emphasized
Today the Board of Governors of the Federal Reserve System published its decision to start a new round of quantitative easing and a revised announcement concerning the Federal Funds rate. Both legs of this decision have some interesting new aspects that show a central bank continually trying to expand the toolbox of monetary policy, and to be honest about its limitations when acting in an uncertain world. More specifically, the Fed re-introduces purchases of mortgage-backed securities (MBS) at a rate of $40 billion per month. No end date for the purchases is specified—at the contrary, it is emphasized that it will be extended if the economy does not pick up. … Continue reading
Posted in Economics, Monetary policy
Tagged Ben Bernanke, Federal funds rate, forward guidance, Michael Woodford, policy credibility, Quantitative easing, Unconventional monetary policy
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From SMP to OMT: ECB commits to destroy monetary transmission
This is not a humorous title, and this is not a funny post. A couple of days ago, the ECB announced after its Governing Council meeting that it would initiate a new program of sovereign debt purchases. The program is named Outright Monetary Transactions, which adds OMT to the endless list of acronyms that has emerged after the onset of the financial crisis. The program replaces the Securities Markets Programme (SMP), or, rather, extends it in a number of directions. As mentioned in my post on the last ECB policy meeting, its need for emphasizing that what it does is not illegal strikes me as odd if not suspicious. At … Continue reading
Posted in Economics, Macroeconomics, Monetary policy
Tagged Central bank independence, debt crisis, European Central Bank, European Union, government bail out, Government bonds, Jens Weidman, Mario Draghi, Outright Monetary Transactions, Securities Markets Programme, Treaty on European Union
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US Output Gap: Still negative
John Taylor recently showed how the United States is currently much farther away from returning to “potential output” compared with the recession of the early 1980s, where above-average output growth during the recovery secured a return to the potential output path. Apart from the obvious implications for the evaluation of the current US recovery, this has led to a deeper discussion about the dangers of extrapolating “potential” output from past values (e.g., maybe the 2007 value was just too high?). James Bullard of St. Louis Fed argues (pdf of speech) that the financial crisis lead to a very persistent negative wealth shock that has pushed potential output down. Hence, the … Continue reading
Posted in Economics, Economists, Monetary policy
Tagged David López-Salido, Financial crisis, James Bullard, John Cochrane, John Taylor, Jordi Galí, Mark Gertler, output gap, Paul Krugman, United States, University of Copenhagen, Zeuthen Lectures
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That strange feeling of Déjà Vu: EU’s New Fiscal Compact
The new “Fiscal Compact” of the European Union is now ready to be signed. The purpose of the compact is to strengthen fiscal discipline among member countries (at least those who sign). The desire for enhancing discipline is obviously triggered by the debt crises felt by many EU countries recently. It is, however, still an open question to which extent the current debt performance is due to the global recession or prior fiscal indiscipline. As debt is cumulated deficits it is hard to separate these matters. As seen in the data, it is nevertheless clear that the crisis itself is associated with a substantial worsening of the average government deficit … Continue reading
Posted in Economics, Macroeconomics
Tagged Euro, European Union, Fiscal compact, Fiscal rules, Stability and Growth Pact, Treaty on European Union
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New-Keynesian explosions: The Cochrane interpretation and explosive solution
John Cochrane has some interesting comments on New Keynesian economics in his latest blog post on “New Keynesian Stimulus“. The interesting is not the part of the blog-literature to which it also contributes; the part about mudslinging in fiscal stimulus discussions, about which prominent economist got basic theory wrong, about who is acting most disrespectful and whatnot. I.e., the extremely counterproductive style of “debate” that was basically initiated by he-who-shall-go-unmentioned for once. I normally find that Cochrane behaves quite academic and adhere to scientific arguments (which is not entirely unfair given that he is a professor of economics), but even he has to defend himself every once in a while, … Continue reading
