Recently I’ve been trying to get my head around the difference between a “sterilized” asset purchase by a central bank and an “unsterilized” purchase. Here is where I’ve gotten to – happy for any comments or clarifications!
Read moreAlthough GDP is a good measure of what it is supposed to measure, there are always questions about whether it is the right measure when asking a given policy question. This was the driving motivation behind the Living Standard’s Framework and the development of a suite of measures to inform our views on wellbeing, as I’ve previously written (with Anita King and Nairn MacGibbon).
The focus of this post is on digitization. In an era of digitization, economists have become more and more concerned about whether the conventional way of calculating GDP is appropriate for asking questions about changes in consumer welfare (surplus) through time.
Read moreWhy uncertainty matters?
The OECD has been warning everyone (Economic outlook 2019) , that the trade policy tension and uncertainty around it hit global economy hard. My question is, how can we think about uncertainty and its influence on monetary policy?
Read moreForward guidance and unconventional monetary policy
I recently noticed that swap rates purchases were discussed as an unconventional monetary policy tool are discussed in Reserve Bank’s bulletin “Aspects of implementing unconventional monetary policy in New Zealand”.
Namely, they state:
“Purchasing interest rate swaps could be a way to signal that the Reserve
Bank expects to keep the OCR low for a prolonged period. Swap rates
comprise the expectations of future policy rates, the term risk premium,
and margin for bank credit risk.”
So why would we want to keep OCR persistently low in long-term? Let’s have a closer look at this.
Let us talk about this.
https://twitter.com/Noahpinion/status/1041714463060049920
I will be using this model myself next week to talk about migration (opps post timing changed and that was already up), so lets have some fun talking about this.
The link between migration and wages is complex and confusing – especially when it is often communicated about in different ways (eg are we talking about wage growth now with regards to monetary policy, wages in specific industries due to the changing make-up of the economy, or long-run real wages?). And I can’t be much help here.
However, I think this is one place where carefully using the macroeconomic model taught in ECON101 can help us to think about the issues a little bit – especially if we are narrowing the question to only “what is the monetary policy consequences of changes in migration flows“. Now this model is wrong, assumptions in it are wrong, the outcomes it describes aren’t forecasts – but it clearly articulates tendencies we observe following a change in economic circumstances which will hold in more realistic models, and clarifies assumptions that may make these tendencies false. We have pointed at this before for monetary policy – but lets outline a bit more now.
It is a model for thinking about the potential consequences of something in a critical way – not something that we accept uncritically as truth. To me this is pretty damned useful as a way to start thinking about something, so let’s do it!