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Savings Glut meets the Great Recession
Ken Rogoff writes a very interesting article on the mystery of low interest rates. He starts by going back to 2005 when Ben Bernanke blamed the "Global Savings Glut" for the unusually low (by...
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Targeting the Price Level?
Eric Rosengren, president and CEO of the Boston Fed, opened today the conference I am attending with his views on the challenges of monetary policy in the current environment. Here is a slide that I...
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Single mandate or fear of inflation demons
During the Boston Federal Reserve conference on Fulfilling the Full Employment Mandate, there was a panel discussion on the importance of the dual mandate for the US Federal Reserve. The panelists were...
View ArticleThe never-ending recovery
Most people refer to US business cycles in terms of the recessionary episodes identified by the NBER business cycle dating committee. Their dating of cycles which goes back to the original work of...
View ArticleAdd 3% and some bad accounting
Via Mark Thoma, the Financial Times reports on the expected changes to US GDP accounting rules that are likely to raise the GDP level by 3% when they are implemented in July. I am not an expert on all...
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The cost of austerity and slow recoveries
What are the economic costs of business cycles? Economists tend to approach this question in a way that is very different from the way most people think about economic crises. The academic literature...
View ArticleDo interest payments on government debt matter?
In an Econbrowser blog post that reflects on what we have learned from the challenge of Reinhart and Rogoff results, James Hamilton argues that we cannot forget that there are costs to government debt....
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Undoing central bank balance sheet expansions
A common question about the recent large expansions in balance sheets among central bank in advanced economies is about the exit strategy. How easy will it be for central banks to go back to balance...
View ArticleMe not working hard?
Reading a footnote from a blog post written by Noah Smith comparing GDP per capita across countries led me to look back at statistics on how labor markets and effort matters for cross-country...
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Let's get real about the stock market.
As reported by the financial press, the stock market continues to hit fresh record-high levels in many advanced economies. The Dow Jones passed the 15,000 mark, the Nikkei just went over 14,000, and...
View ArticleTime travel in Euroland
Unfortunately, this is not news by now, but the president of the Euro group, Jeroen Dijsselbloem in an interview with CNBC yesterday dismissed the role that fiscal policy and monetary policy can have...
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The myth of liquidity and bubbles in financial markets
Gillian Tett at the Financial Times wonders today about how long the stock market rally will continue. Her argument is that we see data that are at odds with historical norms: the stock market goes up...
View ArticleSearch for yield
More on the issue of bubbles in the stock market. Here is a chart from Google Trends on the worldwide trends for the search of the term "stock market rally". An upward trend but still below the levels...
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Looking forward to the end of QE
Good piece in the FT online today by Gavyn Davies on what wil happen to markets when QE (quantitative easing) ends. As we have witnessed last week, comments on the potential end to QE can generate...
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QE and Stock Markets: Boom or Crash?
Here is a follow up to my previous post about what to expect when Quantitative Easing is reversed. The point I made earlier is that the more likely scenario for tightening of monetary policy is that...
View ArticleThe power of statistics (Ferguson and the WSJ)
Dean Baker complains about the high number of inconsistencies and mistakes that Niall Ferguson manages to put together in a Wall Street Journal piece written three days ago. There seems to be a pattern...
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BIS: Bank for Inconsistent Studies
The BIS just published its annual report (and some of its arguments are also presented in a lecture that Raghuram Rajan gave at the BIS at the time of the launch). Paul Krugman has posted a reaction to...
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Central Banks: powerful or powerless? Make up your mind.
In my previous blog post I criticized the latest annual BIS report on several grounds. One of them was their analysis of monetary policy. Let me extend some of the arguments I made yesterday because I...
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The New Normal is to forget economic history
Mohamed El-Erian in the Financial Times today puts forward again the argument that quantitative easing has generated little benefits and is now creating unnecessary volatility in financial markets. He...
View ArticleShow me the model
Most of the commentary one reads these days about the negative consequences of the policies set by central banks (low-interest rate and quantitative easing) are not backed by any economic model that I...
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