Category Archives: Economics

ECB, SMP, ETC. Who pays for what?

After the financial crisis hit in 2008, new acronyms have been appearing at a rapid pace around the globe. These mainly describe the various measures taken by the world’s central banks to offset the troubles caused by the crisis. Many took the form of liquidity provisions to aid “frozen” banking markets. The European Central Bank launched on May 14, 2010 a so-called Securities Market Programme (SMP), under which it – temporarily – allows itself to purchase Euro denominated government bonds. In its decision, the ECB motivated the move by “ . . . in view of the current exceptional circumstances in financial markets, characterised by severe tensions in certain market … Continue reading

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100 Years of the American Economic Review: The Top 20 Articles

It has been noticed by many already, but I thought I would “advertise” this Top 20 as well. In celebration of the 100 year anniversary of one of the economics profession’s top journals, a group of seasoned economists was asked to pick 20 of the best articles published so far in the American Economic Review. Most choices feel sort of self-evident and unavoidable when you see the list, and the group also notes that they quickly converged on 15 articles. The oldest paper is from 1928 (the birth of the Cobb-Douglas production function), and the youngest is from 1981 (Shiller’s paper on stock-price volatility). It is interesting that more than … Continue reading

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General Equilibrium Models are Not Utopian

Many are the times where use of general equilibrium methods is being met by harsh criticism. Mostly it happens when the associated model results concerning some policy reform do not provide politicians or voters with what they want or had expected. Sometimes it happens through more fundamentally-based reservations against the modeling strategy per se. Critics taking either point of departure support each other in envisaging general equilibrium models as fictional and idealized Utopian worlds. Hence, they are not to be taken seriously (and they are often claimed to be used merely to promote some free-market agenda). As I see it, the critics often overlook (deliberately or not) that general equilibrium … Continue reading

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