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China getting close to hit the Great Wall
In a New York Times column Paul Krugman makes the point that the Chinese economy is going to have difficulties continuing growing with its current model. He uses the expression that China is about to...
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Emerging markets and commodity prices
There is an increasing debate about the ability of emerging markets to continue growing at the pace at which they have been growing over the last years. The last decade has been remarkable for emerging...
View ArticleClose encounters with the third phase (of the business cycle)
Macroeconomists analyze business cycles in two different ways:1. Using a model where crises and booms are driven by shocks (unexpected events).2. In terms of a a succession of phases (expansions and...
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Teaching about inflation is fun (but dangerous)
Teaching about inflation is fun. Most people who have never been exposed to macroeconomics before are surprised when you show the correlation between inflation and money growth in a large sample of...
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What $3.4tn will not buy you.
Paul Davies at FT Alphaville argues that the $3.4tn in foreign reserves that China holds cannot be used to address with their problems of bad debt. The article follows a series of reports by the FT on...
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The Euro counterfactual
Since the financial crisis started we have heard many commentators telling the Euro countries: "I told you so, this was a very bad idea". The argument is that the Euro area is not an optimal currency...
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The only uncertainty is why some cannot see facts.
The idea that policy uncertainty is the main reason why advanced economies and Europe in particular are not recovering fast will not go away. Marco Buti and Pier Carlo Padoan in Vox bring back this...
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Does competition get rid of waste in the private sector?
It is very common to hear comments about the waste of resources when referring to governments and the public sector. Paul Krugman does his best to argue against this popular view by showing that most...
View ArticleIgnorance and bias in economic models
Greg Mankiw's latest post discusses the potential effects of increasing the minimum wage. He refers to a recent paper by Lee and Saez that argues that increasing the minimum wage can be optimal (for...
View ArticleUnderestimating economic potential as a justification for inaction
The narrative about the 2008 financial crisis is about the notion that several economies were following an unsustainable path before the crisis started. We talk about excessive spending, exploding debt...
View ArticleWait a (second) moment...
Marco Buti and Pier Carlo Padoan reply to the criticism that I had raised in an earlier blog post to their previous article on how to strengthen the European economy recovery. I can see that their...
View ArticleEvidence on the (limited) power of exchange rates
The benefits and costs of different exchange rate regimes is one of the most debated topics in international macroeconomics and it is crucial for a very important decisions that policy makers regularly...
View ArticleThe wrong reading of the money multiplier
Via Barry Ritholtz I read the analysis of Lacy Hunt about how recent Federal Reserve policies have been a failure to lift growth. I am somehow sympathetic to the argument that Quantitative Easing has...
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Ben Bernankepoulos
Paul Krugman responds to my earlier post about how exchange rate regimes do not matter much (I was referring the work of Andrew Rose). Krugman has a different view on the issue and argues that...
View ArticleDealing with a sudden stop
My post yesterday on how the US economy would have performed if it was going through the crisis as a member of the Euro area was an attempt to explain that the perspective of a small Euro country with...
View ArticleSudden stops and exchange rates (again)
I did not realize that some of my earlier posts on sudden stops and the Euro area would be so controversial, I thought I was making a simple point. And this time those who disagree with me are the ones...
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Party like it's 1995?
For some it is clear that the all-time record levels in the stock market are supported by loose monetary and the day policy starts changing, stock markets will suffer a sharp drop. While I also worry...
View ArticleWhy Sinn was wrong to write this FT article
When I teach these days about the negative performance of the Euro economies over the last six years I always get asked about how policy makers could get it so wrong. The answer can be found in the...
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Europe: lack of reforms or austerity?
In a recent Vox article, Lorenzo Bini Smaghi raises some questions about the argument that austerity is the main reason why European countries' growth rates have been so low since 2008. To be fair, he...
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Bubbles, interest rates and full employment.
The presentation of Larry Summers at a recent IMF conference has generated a good amount of comments. While some of what he said was not completely new, the way he put together some of these ideas to...
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