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- Are ECB’s Greek bond purchases really irrelevant for the private sector?
- Is Greg getting bailed out by his rich uncle?
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- 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
ECB buys public debt again: Otmar Issing voices strong critique
In a rare Sunday press release (August 7) , the President of the ECB, Jean-Claude Trichet (on behalf of the Governing Council), hailed the fiscal and structural measures of Spain and Italy and their commitments—along with other member countries—to strictly adhere to “fiscal targets”. Then he emphasized that countries are sovereign states that themselves should honor their own “signature as a key element in ensuring financial stability in the euro area as a whole“. (Oh, and he supports the joint statement of the same day by France and Germany, which is not surprising given the occasional word-by-word similarities.) Then he concludes that the Securities Markets Programme (SMP) will be activated. … 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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Economics as a Moral Science. American Economic Review: Papers & Proceedings 2011
The annual Papers & Proceedings issue of the American Economic Review is always a good read. It is literally full of papers from leading scholars on the newest “hot” topics in the profession as well as updates on the status of more enduring topics. The format of the issue is ideal for those who want a fairly quick introduction or refresher on a subject, since each is covered by three to four short papers that made up the corresponding session at the recent winter meetings of the American Economic Association. For those who think that economics is a narrow-minded science, it is recommended to pick up the latest issue to … Continue reading
Posted in Economic Sciences, Economics, Economists
Tagged Adam Smith, American Economic Review, animal spirits, Anthony B. Atkinson, Benjamin M. Friedman, Jagdish Bhagwati, John Maynard Keynes, Moral Science, Religion, Robert J. Shiller, Virginia M. Shiller, Worldly Philosophers
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Unemployment goes down and ECB raises policy rate
Today, the ECB raised its policy rate by 0.25 percentage point to 1.25%. This came hardly as a surprise, given the various statements from ECB officials in recent weeks. Many commentators have motivated this by the increasing HICP inflation. However, I would argue that there are other just as applicable, if not better, reasons. Namely that economic activity is picking up, and unemployment is crawling down. Indeed, in the press release following the rate increase, Governor Trichet states Let me now explain our assessment in greater detail, starting with the economic analysis. Following the 0.3% quarter-on-quarter increase in euro area real GDP in the fourth quarter of 2010, recent statistical … Continue reading
Posted in Economics, Monetary policy, Uncategorized
Tagged European Central Bank, interest rate, Jean Claude Trichet
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The Taylor Plot: A European View
January this year, John Taylor posted a scatterplot on his blog. He plotted quarterly US unemployment against fixed investment as a fraction of GDP for 1990q1-2010q3, and found a very strong negative correlation (jpg ). In contrast, the relationship between government spending and unemployment tended to be positive, albeit not so strong. On the latter finding he notes that “the correlation is not due to any reverse causation from high unemployment to more government purchases”. Overall, he therefore concludes that “Encouraging the creation and expansion of businesses should be the focus on government efforts to reduce unemployment” and further: “The recent compromise agreement to prevent the increase in tax rates … Continue reading
Posted in Economics, Economists, Macroeconomics
Tagged causality, correlation, European Union, Investment, John B. Taylor, Justin Wolfers, N. Gregory Mankiw, Paul Krugman, Unemployent
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Freakonomics: The Movie Review
In 2005, economist Steven D. Levitt and journalist Stephen J. Dubner published the book Freakonomics, which in a remarkable lucid manner demonstrated the power of economic thinking to a wide audience. Focusing on the importance of incentives, the authors guided the reader through a range of Levitt’s research on diverse topics as cheating in sumo wrestling, price setting in real estate markets, living habits of drug dealers, the potential importance of naming conventions for children’s future, and the probably most controversial topic (in practically any aspect): the potential impact of legalized abortion on crime rates. The book provided new and provocative insights into what economists can do with their toolboxes, … Continue reading
Posted in Economics, Movies
Tagged Alex Gibney, Eugene Jarecki, Freakonomics, Heidi Ewing, Morgan Spurlock, Rachel Grady, Seth Gordon, Stephen J. Dubner, Steven D. Levitt
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Gavin Davies on the Fed and the ECB
Gavin Davies has an interesting post on his Financial Times blog. It is entitled “Strange bedfellows – the Fed and the ECB” and it discusses the co-movements between the Federal funds rate and the Deutschmark/Euro policy rate since 1987. There seems to be a leader-follower pattern, in the sense that Europe has followed the Fed with a 6-12 month lag. Davies concludes that this “is one of the most well established rules in the analysis of monetary policy making“. This is perhaps a somewhat strong statement, and I would, based on visual inspection (upon which one should be VERY careful), conjecture that most of this correlation is driven by the … Continue reading
Posted in Economics, Macroeconomics, Monetary policy
Tagged European Central Bank, Federal Reserve, Gavin Davies, Inflation targeting, Taylor rule
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ECB, SMP (II): Direct vs. secondary purchases
In my recent post on the ECB’s Securities Market Programme (SMP), I noted that the programme was in violation of the Treaty of the European Union. I based this on Article 21.1, which states: “. . . overdrafts or any other type of credit facility with the ECB or with the national central banks in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.” – Article 21.1 of “ON THE STATUTE … Continue reading
Posted in Economics, Macroeconomics, Monetary policy
Tagged European Central Bank, Securities Markets Programme, Treaty on European Union
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