Edit: The critique in this post – that NGDP targeting cannot achieve zero inflation in the long run without discretion – is somewhat tempered by my 2017 follow-up here: perhaps zero long-run inflation would be inferior to a long-run Friedman rule; which in fact can be naturally implemented with NGDP targeting.
NGDP growth [...]
I found an interesting 1970 AER paper that adds land to the Solow model in continuous time and verifies the result, discussed last week, that as the rate of return on capital approaches the growth rate of the economy the price of land will approach infinity. The paper is a mess – the [...]
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. [...]
- NGDP futures via blockchain: Market monetarism meets cryptocurrency (And: how to set up a prediction market on Augur)
- The "Efficient Restaurant Hypothesis": a mental model for finance (and food)
- Behavioral biases don’t affect stock prices
- Yes, markets are efficient – *and* yes, stock prices are predictable
- NGDP targeting and the Friedman Rule