Update: see important caveat at the bottom of this post.
This post continues the discussion from Scott Sumner’s thoughtful reply to my critique of NGDP targeting from 2015. (Note to frequent readers: I previously published a reply to Scott, which I have since deleted.)
Some economists see zero inflation as optimal [...]
I. Marx vs. Smith and food banks
When Heinz produces too many Bagel Bites, or Kellogg produces too many Pop-Tarts, or whatever, these mammoth food-processing companies can donate their surplus food to Feeding America, a national food bank. Feeding America then distributes these corporate donations to local food banks throughout the country.
Until very recently – see last month’s WSJ survey of economists – the FOMC was widely expected to raise the target federal funds rate this week at their September meeting. Whether or not the Fed should be raising rates is a question that has received much attention from a variety of angles. What I [...]
I comment on Josh Hendrickson's interesting post. While it certainly is hard for me to believe that the natural rate of interest could be negative, it's difficult to find a satisfying alternative explanation for the sustained output gap of the past seven years coexisting with the federal funds rate at the zero lower [...]
JP Koning makes the case that even if Greece were to leave the Eurozone and institute a new currency (call it the New Drachma), Athens would still not have independent monetary policy: if households and firms continue to post prices in Euros rather than New Drachmas, Greek monetary policy would not be able to [...]
NGDP growth is equal to real GDP growth plus inflation. Thus, under NGDP targeting, if the potential real growth rate of the economy changes, then the full-employment inflation rate changes. New Keynesians advocate that the Fed adjust the NGDP target one for one with changes in potential GDP. However, this rule would be extremely [...]
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 [...]