Some thoughts on Eggertsson and Mehrotra (2014), the first formalization of the “secular stagnation” thesis. Nothing innovative here, I just wanted to collect my thoughts all in one place.
First, a brief review of Eggertsson and Mehrotra’s model for easy reference. (Simon Wren-Lewis has a short summary of the math.)
In 2008, Christina and David Romer published an interesting paper demonstrating that FOMC members are useless at forecasting economic conditions compared to the Board of Governors staff, and presented some evidence that mistaken FOMC economic forecasts were correlated with monetary policy shocks.
I’ve updated their work with another decade of data, and find that while [...]
I’ve updated the Romer and Romer (2004) series of monetary policy shocks. The main takeaway is this graph of monetary policy shocks by month, since 1969, where the gray bars indicate recession:
When the two published their paper, they only had access to date up through 1996, since Fed Greenbooks – upon [...]
From Matt Rognlie, an interesting point:
"A few years ago, I read an aside in Stiglitz’s Nobel autobiography that really shook me:
Economists spend enormous energy providing refined testing to their models. Economists often seem to forget that some of the most important theories in physics are either verified or refuted by a single [...]
When Larry Summers was still a candidate for Fed Chair, and the econoblogosphere was still debating whether or not he ought to be nominated, it became oddly fashionable to argue that it would be a good thing if Summers were to be confirmed and subsequently was not politically independent.
See, for example, Matt [...]
Ashok Rao has a post highlighting JOLTS data that shows that despite a steady rise in job openings since 2009, hiring has pretty much been flat. In particular, this graph (blue is openings, red is hiring):
What we see is a “V-type” recession for openings. That is, [...]
The future of Fannie Mae and Freddie Mac is in the news with a speech by the President last week outlining his proposed reforms for the pair of housing finance giants.
What role should the government play in the housing market in the aftermath of the second collapse of the American housing finance sector in [...]
One of the most important ideas to emerge from market monetarist writing in the blogosphere, in my opinion, is the “Sumner critique.” This critique named after Scott Sumner has been worded many different ways, but I would state it like this:
If the Fed is successfully stabilizing a nominal anchor – e.g. [...]
Ben Bernanke’s term as chairman of the Fed ends in January, and it is widely expected that he will not stay on. Speculation has recently heated up over as to who his successor will be.
The conventional wisdom is that current Vice Chairman Janet Yellen and former Treasury Secretary Lawrence Summers are the most [...]
This week, Senators John McCain, Elizabeth Warren, Maria Cantwell, and Angus King introduced legislation to essentially reinstate the Glass-Steagall Act of 1933, which was repealed in 1999. It would force financial institutions to be either pure commercial banks or pure investment banks.
Glass-Steagall was wrong and indeed harmful the first time around, and it is [...]