ECB, SMP, ETC. Who pays for what?

Posted on March 4, 2011 by Henrik Jensen

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 segments which are hampering the monetary policy transmission mechanism and thereby the effective conduct of monetary policy oriented towards price stability in the medium term, a temporary securities markets programme . . . should be initiated. (…) the ECB . . . may conduct outright interventions in the euro area public and private debt securities markets” (Official Journal of the European Union, ECB/2010/5, 2010/281/EU)

Elsewhere, I have questioned whether this is in accordance with the Treaty of the European Union, which outlaws any “purchase directly from them by the ECB or national central banks of debt instruments“ (Article 21.1 in the statutes, where “them” explicitly includes central governments). The ECB may also have had some doubts about the legality of the operation, since it in the above-quoted document is so keen on emphasizing that the initiative should be seen as a way of making the monetary transmission mechanism work to effectively secure the goal of price stability. On this, however, I am a little lost. I am quite convinced that these “certain market segments” are the markets for certain governments’ debt. And yes, some governments’ debt have been hard to sell, but for a reason. How it hampers the conduct of monetary policy, however, is not spelled out particularly clear. It may severely hamper the conduct of fiscal policy for some of the involved governments, but this is not the ECB’s problem.

Another way the ECB has tried to avoid that the SMP in any way could be seen as a monetization of some countries’ public debt obligations, is the emphasis that there would be no liquidity effects of the programme. ECB president Jean-Claude Trichet did from the beginning emphasize that “we are not embarking on quantitative easing” (incidentally, in this interview Trichet also states that the programme is not violating the letters of Treaty; I obviously don’t understand article 21 then). In that respect, the ECB has done what it can to live up to its statements: Continuously, the ECB has sucked up liquidity from the market by offering 1-week interest-rate bearing tender deposits up to an amount matching that of the purchased bonds (and with success most of the times). As of today this amount is around Euro 80bn.

The SMP is in relative numbers not a huge programme, but taking a look at the asset side of the ECBs balance sheet, one can see the jump in “Securities, General Government”, which from April to December 2010 increased by Euro 82bn:

ECB Balance sheet, AssetsNow, in order to address the question posed in the title of this post, things get blurry. The main fluctuations in the ECB’s balance sheet arise from transactions with the MFIs (Monetary and Financial institutions). On the asset side, these are predominantly the non-governmental loans (the reddish area). On the liability side of ECB’s balance sheet, these are the deposit liabilities (also the reddish area):

ECB Balance Sheet, LiabilitiesGiven the size of the stocks arising from these transactions, it is not visible where the funds from the purchase of the government securities are coming from. There is a big jump in deposit liabilities around May 2010, which could look as monetary financing. But that is deceiving, since the ECB as mentioned indeed has withdrawn liquidity arising from the purchases as immediately as possible.

I.e., it has “sterilized” the liquidity created by the asset purchases. If the SMP is to be neutral on the balance sheet (that would be one way of securing that it does not involve quantitative easing), some assets must therefore be correspondingly depleted. With the tender deposit schemes, the ECB is effectively borrowing funds from the MFIs. Hence, its net asset position in terms of non-government loans is going down (along with its deposit liabilities), parallel with the increase in government asset positions. Sufficiently many other transactions in that department, however, make this invisible in the figures.

So one answer to the question of who pays for what, is that the ECB is buying government bonds of unknown origin by taking very short-term loans from private MFIs; loans which are refinanced on a week-to-week basis. Whether this is a good idea is impossible to say, as the secrecy about which government bonds are purchased makes any judgment about the changes in the composition of ECB’s assets highly speculative. One could guess, however, that their assets have become riskier. The MFIs on the other hand, may accordingly have gotten rid of some “bad bonds”, and are even paid a premium in the process (the tender rate)! In any case, what the ECB is doing is clearly not monetary policy, but rather what Marvin Goodfriend is calling credit policy (see “Central Banking in the Credit Turmoil: An Assessment of Federal Reserve Practice”, Journal of Monetary Economics, forthcoming 2011). And in this case one that includes fiscal policy. I had never imagined that an independent central bank would be doing that.

Anyone who would have suggested the possibility of such a scenario at the onset of the Euro would have been called an ignorant at best, or a potential danger to the credibility of the Eurosystem at worst.

Share
Posted in Economics, Macroeconomics, Monetary policy | Tagged , , , , , , , , | Comments Off on ECB, SMP, ETC. Who pays for what?

Sveriges Riksbank raises rates again; Svensson dissents again

Posted on February 16, 2011 by Henrik Jensen

Yesterday, Sveriges Riksbank (central bank of Sweden) announced that it raised the main policy rate to 1.5%. This is the fifth consecutive 25 basis point increase since last summer. It also marks the twelfth time in a row that Executive Board Member, and Deputy Governor of the Bank, Lars Svensson dissents by voting for a looser stance (in this case he advocated an unchanged rate). The last time he agreed with an interest rate decision was in February 2009. The Inflation-Targeting Riksbank makes all this information publicly available on their web site (see the voting records here).

This high degree of transparency is not uncommon among inflation targeting central banks, and it is a pleasure to witness such public acknowledgment of the difficulties faced by policymakers. Some would probably argue that an image of a united board is what it takes to be a credible central bank (just think about all the fuzz the press could create from Axel Weber’s criticisms of the ECB’s bond purchasing programme). I don’t think so. The press in the inflation-targeting countries appears perfectly capable of understanding what is going on, and the transparency about policy deliberations makes the public aware that there is not one single truth out there.

Moreover, a couple of weeks after the decisions, the detailed minutes of the Executive Board’s policy meeting are published. These are interesting reads for policymakers and academics, and the minutes from the recent meetings demonstrate the productive atmosphere during the policy deliberations (given, of course, that the wordings haven’t been changed too much). So even though the public learns that Board members may disagree (big surprise), it learns that one has to come up with solid arguments for one’s position.

It is, of course, particularly intriguing for a monetary economist to follow Svensson when he presents his arguments against an interest rate increase. They are disarmingly simple and points to the fact that the staff forecasts conditional on an unchanged interest rate, point to CPI inflation being below the 2% target, and unemployment being above any sober guess of the natural rate. Not a situation in which a simple textbook exercise would call for an interest rate increase. Therefore, Svensson (and at the last meetings also Board member Karolina Ekholm) has voted for an unchanged interest rate, envisioning a gradual increase over the next couple of years. The interest rate increases actually implemented, were projected to entail steeper interest rate paths, which according to Svensson would lead to a too large appreciation of the Krona.

Prior to yesterday’s meeting, new data have pointed to more inflationary pressure building up (mostly from external sources, which may question whether CPI is the appropriate goal variable, but that is another story), and that some sectors are beginning to report labor shortages. But the CPI projection at an unchanged rate are still not above the inflation target, so I would imagine that Svensson’s arguments for yet another dissenting position are more or less unchanged. We must, however, wait a few weeks before we can see the precise reasons when the minutes are published.

Share
Posted in Economists, Macroeconomics, Monetary policy | Tagged , , , , | 1 Comment

Mankiw on Obama’s weak sports analogy

Posted on February 15, 2011 by Henrik Jensen

Most are aware that N. Gregory Mankiw is an outstanding economist and economics educator. So this post will merely be a recommendation of his recent article in the New York Times: “Emerging Markets as Partners, Not Rivals“. Inspired by Barack Obama’s recent State of the Union address, where the US president multiple times noted that the US should “win the future”, Mankiw obviously has felt a need to explain that economics is generally not a zero-sum game.

As usual, he does an excellent job!

Share
Posted in Economists, Macroeconomics, Trade | Tagged , , | Comments Off on Mankiw on Obama’s weak sports analogy

No Weber after Trichet: Politics 1, Treaty 0

Posted on February 14, 2011 by Henrik Jensen

Jean-Claude Trichet steps down as President of the European Central Bank this October. So much is certain, if things go according to the statutes of the ECB. Things do not necessarily go according to the statutes, but it seems a certain bet that Trichet will step down as planned.

A question of much concern is who will succeed him? There has been much speculation that the next President would have to come from Germany. (A common conclusion derived from the hypothesis that the Germans and French battle over ECB leadership and influence, with the first President Duisenberg, a Dutch promising to step down after a half term, being a compromise candidate before the French Trichet took over.) As a German candidate, the Governor of the Bundesbank, Axel Weber, seemed as a natural choice. A strong academic turned central banker.

Last week, however, Weber’s candidacy was buried. Weber announced his early resignation as governor of the Bundesbank, thereby automatically pulling out of the race for ECB presidency. Financial Times, among others, have given him a lot of flag for his decision(s) recently. Ralph Atkins wrote on February 10:

“As demonstrated this week, Mr Weber was not strong when it came to the self-discipline usually deemed essential for a central banker. He can act impulsively and is a poor communicator; he has still not declared formally that he will not run for the ECB, or how long he will stay at the Bundesbank, or whether he might take a job at Deutsche Bank.”

And he went on by criticizing Weber’s publicly stated concerns about the ECB’s decision last May to buy up bonds of financially troubled member states:

The ECB has 1,500 employees from 27 countries who speak 23 languages. It works through consensus-based decision-making by its 23-strong governing council. It allows internal dissent, but expects loyalty once a decision is reached.
Mr Weber clearly undermined that principle when last year he publicly criticised the the ECB’s government bond purchase programme. His candidacy alarmed at least some other council members.

Weber’s first public explanation of his decision to step down indeed points to conflicts over the bond purchase programme. According to Daniel Schäfer in Financial Times on February 13, Weber said that “These positions might not have always been helpful for my acceptance in some governments“. That statement is quite important, and in my opinion, a piece of very clear communication. It firstly shows that government approval is important for becoming president of the ECB. No surprises there, at it is governments who choose the President. But secondly, and this is alarming, it shows that governments, according to Weber, will not accept positions they don’t like. That is actually scary, as the appointment of the President should be based on the candidate’s qualifications for leading the ECB according to its mandates. Not according to what governments at a given point in time see fit and popular. It is in conflict with the idea of central bank independence, which is written into the Treaty of the European Union and the ECB’s statutes.

Moreover, and sadly ironical, the issue on which governments didn’t accept Weber’s opinions, was an issue where Weber lived up to the letters of the Treaty. He was, as I see it, not being “hawkish” in the sense that he opposed economic stimulation. What he probably opposed was that the ECB through its government bond purchases began to mix monetary and fiscal policy. And fiscal policy is not something the ECB is allowed to perform.  It is simply not allowed to buy up government bonds like it has done; at least not if I understand the Treaty, which says:

“. . . 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 OF THE COURT OF JUSTICE OF THE EUROPEAN UNION”, in “Treaty on European Union and Treaty on the Functioning of the European Union“, 2008.

So irrespective of Weber’s preference for birds, his stance was and is faithful to the treaty. Others seem to have been under governmental pressures; so they appear to lack the self-discipline the Financial Times thinks Weber was missing. The next President of the ECB will therefore probably be found among more politically impressionable candidates. This appears as yet another proof that Treaties, like any promise, only bind for as long as it is seen appropriate by the government.

Share
Posted in Economists, Monetary policy | Tagged , , , , , , | Comments Off on No Weber after Trichet: Politics 1, Treaty 0

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

Posted on February 13, 2011 by Henrik Jensen

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 half of the papers are published between 1968 and 1981. Maybe these years were the heydays of many of the members of the selection group? I don’t know, and probably one should not put too much emphasis on it. After all it is just a list, which may give you the urge to look a few of the papers up for a first read or a re-read.

This is indeed easy to do since The American Economic Association has made publicly available the paper motivating the Top 20. From the pdf of the paper, one can access each of the Top 20 articles in full text. The link to the AEA site is here. Happy reading!

The Top 20:

  1. Alchian, Armen A., and Harold Demsetz. 1972. “Production, Information Costs, and Economic Organization.”
  2. Arrow, Kenneth J. 1963. “Uncertainty and the Welfare Economics of Medical Care.”
  3. Cobb, Charles W., and Paul H. Douglas. 1928. “A Theory of Production.”
  4. Deaton, Angus S., and John Muellbauer. 1980. “An Almost Ideal Demand System.”
  5. Diamond, Peter A. 1965. “National Debt in a Neoclassical Growth Model.”
  6. Diamond, Peter A., and James A. Mirrlees. 1971. “Optimal Taxation and Public Production I: Production Efficiency.”
    “Optimal Taxation and Public Production II: Tax Rules.”
  7. Dixit, Avinash K., and Joseph E. Stiglitz. 1977. “Monopolistic Competition and Optimum Product Diversity.”
  8. Friedman, Milton. 1968. “The Role of Monetary Policy.”
  9. Grossman, Sanford J., and Joseph E. Stiglitz. 1980. “On the Impossibility of Informationally Efficient Markets.”
  10. Harris, John R., and Michael P. Todaro. 1970. “Migration, Unemployment and Development: A Two-Sector Analysis.”
  11. Hayek, F. A. 1945. “The Use of Knowledge in Society.”
  12. Jorgenson, Dale W. 1963. “Capital Theory and Investment Behavior.”
  13. Krueger, Anne O. 1974. “The Political Economy of the Rent-Seeking Society.”
  14. Krugman, Paul. 1980. “Scale Economies, Product Differentiation, and the Pattern of Trade.”
  15. Kuznets, Simon. 1955. “Economic Growth and Income Inequality.”
  16. Lucas, Robert E., Jr. 1973. “Some International Evidence on Output-Inflation Tradeoffs.”
  17. Modigliani, Franco, and Merton H. Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.”
  18. Mundell, Robert A. 1961. “A Theory of Optimum Currency Areas.”
  19. Ross, Stephen A. 1973. “The Economic Theory of Agency: The Principal’s Problem.”
  20. Shiller, Robert J. 1981. “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?”
Share
Posted in Economics, Economists | Tagged , | Comments Off on 100 Years of the American Economic Review: The Top 20 Articles

Simple Policy Rules or Simple Consumption Rules? A Semi-serious Comparison Based on Brain Usage

Posted on February 11, 2011 by Henrik Jensen

Let me start this post with a warning. As indicated by the title, it will involve semi-serious thoughts, which in this case is equivalent to semi-humorous thoughts. So the contents are intended as a sort of economists’ joke (which may not be funny to that many, if any, besides me). Also, in order to understand the fun, it will require some knowledge about graduate dynamic macroeconomics, more specifically the continuous-time Ramsey-Kass-Koopmans model. With this warning, I proceed.

In recent macroeconomic literature on monetary and fiscal stabilization policies, researchers often characterize the optimal stabilization policy in a conventional public-finance fashion. Then, many argue that such a policy is too complicated to understand for the general public, and as a consequence, they consider the performance of so-called simple rules. These are equations that relate the policy instrument(s) to some (preferable only a few, hence, “simple”) macroeconomic variables. A well-known example in monetary policymaking is the Taylor rule, which prescribes that the nominal interest rate should respond to inflation and an output measure only. The strength of the responses is determined by what mimics the nominal interest rate movements in the US in the late 1980s.

It is, of course, of interest to assess the performance of various simple rules for macroeconomic stabilization, and for example assess the robustness of their performance across different models. (Although I have always had the reservations that a) if a simple rule performs almost as well as the optimal policy, the model is probably unrealistically simple, and b) if a simple rule performs well across many models, then these models probably do not differ that much after all.) From one slightly deeper methodological perspective, however, I have problems with simple policy rules. In particular when they are applied to models with optimizing private-sector agents under rational expectations. Why is it that these agents presumably are unable to understand the properties of optimal policy, but “only” a simple rule? This is usually not spelled out clearly.

Indeed, in Lars Svensson’s critique of Taylor rules, “What is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules”, Journal of Economic Literature (2003), he argues that it is long overdue that researchers modeled policymakers as being as sophisticated as the private sector (the “targeting rules” referred to in his title are essentially optimality conditions for policy). I would stretch that argument by saying that if one loosely (very loosely) thinks about who is capable of doing dynamic optimization, then it should be the policymaker rather than the private sector. Therefore, why not turn everything upside down, and free the agents in the economy from solving dynamic optimization problems and just let them follow simple rules? Then, the policymaker could perform a policy that will result in optimality. Ideally, this will relieve the private agents from use of brain resources (which can then be spent on something else), and burden the policymaker with some extra computations. Or maybe not, because in the standard analyses, the policymaker actually does all the complicated math. Afterwards, however, it ties its hands and follow a simple rule. So, it could actually be a pure win-win situation.

I thought about this on a sunny afternoon during a beautiful conference in Spain in 2000, and I wrote down a small note that applies the Ramsey-Cass-Coopmans model. In the note, I free the private agents from intertemporal optimization exercises, and let them follow a simple Keynesian consumption function. The policymaker then takes on the task of choosing a tax policy that secures that the optimal allocation is attained. It works nicely!

The note was called “How to lift the burden of intertemporal optimization from consumers to the policymaker” and can be downloaded here (pdf, 80 Kb). Please note that it is meant as fun, but it nevertheless reflects my dissatisfaction with the arbitrariness, which in some instances, plagues the application of simple rules as a representation of public policy.

Share
Posted in Macroeconomics, Monetary policy | Tagged , , , , | Comments Off on Simple Policy Rules or Simple Consumption Rules? A Semi-serious Comparison Based on Brain Usage

A Credible Anti-Inflationary Central Bank Ignores Inflation

Posted on February 3, 2011 by Henrik Jensen

Today, the European Central Bank decided to keep its policy rate unchanged. I am not particularly surprised. In recent empirical work, Morten Aastrup and I estimate what determines the ECB’s interest-rate changes. It turns out that inflation or expectations thereof play no role. Instead, changes in economic activity as measured by Euro-area unemployment is an important determinant. Americans who cling to the idea that good monetary policymaking is characterized by an adherence to a variant of John B. Taylor’s rule that carries his name, may find this surprising.

However, consistent with modern New-Keynesian theory (cf. Michael Woodford’s Interest and Prices, Princeton University Press, 2003), a credible anti-inflationary central bank can keep inflation in check by managing inflation expectations. The correlation between interest rates and actual or expected inflation will therefore weaken. For example, if inflationary pressures are building up, and the central bank raises interest rates, then if the bank is credible, inflation expectations will move little. Instead, one may observe a significant response to business cycle indicators like the current unemployment rate, as this provides information about future inflation.

The ECB seems to have figured this out, as they state in their press release for today’s decision of doing nothing:

Taking into account all the new information and analyses which have become available since our meeting on 13 January 2011, we continue to see evidence of short-term upward pressure on overall inflation, mainly owing to energy and commodity prices. This has not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant horizon. At the same time, very close monitoring is warranted. Recent economic data confirm the positive underlying momentum of economic activity in the euro area, while uncertainty remains elevated. Our monetary analysis indicates that inflationary pressures over the medium to long term should remain contained. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The continued firm anchoring of inflation expectations is of the essence.

Indeed, if you anchor inflation expectations, your policy changes will reflect changes in real economic conditions that may pose threats to price stability. And the ECB currently sees no threats from the slow recovery of the Euro-area economy.

Share
Posted in Macroeconomics, Monetary policy | Tagged , , , , | Comments Off on A Credible Anti-Inflationary Central Bank Ignores Inflation

State-Subsidized Early Retirement? The Big Issue in Denmark

Posted on February 2, 2011 by Henrik Jensen

In turbulent times where people fight for democracy in Egypt and elsewhere, I feel privileged to live in a country where the most important issue on the political agenda is whether a state-subsidized early retirement scheme should be gradually removed or should remain. This is indeed THE BIG ISSUE in Denmark today, and one that will be viciously debated until the next general election (the date of that is not yet determined, so this could go on for at least half a year).

Yes, I know it is not appropriate to feel good about yourself when others suffer and fight for matters one takes as natural and given. But I am only human, and I suddenly found it downright comical that well-educated people could scream at each other on national TV over an issue, which compared to other problems, precisely reflects how spoiled we can become in the wealthier parts of the world. And in this case so spoiled that many refuse to see the general picture, and instead fight for their downright selfish and antisocial agenda.

Denmark has had an early retirement scheme since 1979, which essentially allows workers to retire 5 years before the regular pension age (with that currently being 65, you can retire at 60). During that period they receive a maximum of 90% of unemployment benefits. The only requirement is that they should be able to work(!). During the years, the reform has undergone changes, and since 1999 one has to be member of an unemployment insurance organization for 25 years, and pay some monthly fee in order to be eligible for early retirement (that change basically destroyed the then prime minister’s last bit of popularity: now people actually had pay for some of the benefits you could receive). It is, however, still the state that guarantees the pension payments. Originally, the background for implementing the early retirement scheme was two-fold. On the one hand, one wanted to help workers, who were worn out from a long life of hard work, to an early relief, on the other hand one wanted to reduce unemployment by freeing up jobs to younger workers. There was therefore both a social and a macroeconomic dimension to the scheme.

As for the social dimension, I am very sympathetic. If you are worn out after 40 years of hard physical work, I am all in favor for some relief. The problem is just that the way the scheme is constructed, one can go on early retirement also if you (as me) have been sitting on your butt for most of your working life. And we already have particular schemes for persons who for either physical or mental reasons are unable to work anymore. So, essentially the scheme is one of a state-subsidized reduction in labor supply. And this is why the government has proposed it should gradually be abandoned, since Denmark is facing severe fiscal problems in the not-so-distant future due to the aging population. We therefore need to increase the labor supply, or, as a minimum, counteract the demographically-induced decline. Otherwise, finances for other, and more basic, welfare measures could become endangered.

That brings me to the macroeconomic dimension, which is also what causes the most controversy. Most people simply refuse the logic of macroeconomists when these explain that changes in labor supply normally only have temporary effects on unemployment. So right now, where Danish unemployment has been steadily rising after the crisis – now peaking at around 6 % – most argue that abandoning the early retirement scheme, will increase labor supply and therefore increase unemployment. The result will be a worsening of the fiscal deficit (unemployed are more expensive to support that early retirees), and a first step towards a deterioration of the Danish Welfare State. If you claim otherwise (i.e., if you are an economist), you are told that you cannot do simple algebra.

I would say that this is an exceptionally short-sighted view on the world. A short-sightedness which does not serve a dynamic problem involving the evolution of debt and deficits in an aging population. At best it serves the current few who will miss out on an expected state-subsidized pension (and, yes, I would also be mad if this had hit me personally), at the expense of the future many. But the opposition has a wonderful case against the government, as arguments based on shortsighted “logic” always win over sensible, and scientifically based, arguments concerning a longer perspective. And indeed all mainstream economic models predict that the increase in unemployment following an increase in labor supply is temporary. Over time, the increase will be transformed into jobs (after wage and investment adjustments), and the end result will be higher GDP. I.e., a bigger cake for the same number of people to share. THAT is solidarity! Not insisting on paying people for doing nothing.

Here are some raw numbers covering the period 1978 to 2008 (so the latest surge in unemployment is not in the picture). As evident, there is quite a few people on early retirement; in recent years more than genuinely unemployed. One also sees that unemployment has its business cycle fluctuations, which appear largely unaffected by the reduction in labor supply caused by early retirement.

The other figure shows a scatter plot of the Danish labor supply and employment rate. I can’t see any clear negative pattern as early retirement proponents would seem to envision. Probably there is no pattern.

Labor supply and employment rate in DenmarkThese simple graphs prove nothing in themselves, but they do, hopefully, show that being in total denial about the employment effects of labor supply is probably not the most productive approach to this issue.

Share
Posted in Macroeconomics | Tagged , , , | Comments Off on State-Subsidized Early Retirement? The Big Issue in Denmark