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I’ve heard the arguments that secular stagnation refers to a situation with low long-term interest rates – reaching the zero lower bound on nominal rate often – low inflation and low output growth. But what does this really mean?
In my previous posts on the liquidity trap and about US Treasury bond purchases I have mentioned that central banks and governments should coordinate their policies as a part of unconventional monetary policy when the interest rates are near the zero lower bound and inflation is persistently low. However, there are costs and benefits associated […]
Did you follow the NGDP targeting debate with interest but bemoan the lack of theoretical arguments? Then you’ll love the latest iteration of the debate, in which ex-Bank of England macroeconomist, Tony Yates, takes on Oxford’s Simon Wren-Lewis. Tony’s initial swings at NGDP targeting focus on the sub-optimality of weighting inflation and output equally: I don’t see […]
Yesterday the Fed pirouetted neatly, simultaneously beginning to taper its quantitative easing and suggesting that policy will not tighten until well beyond its guidance threshold for unemployment. The sum impact has been a loosening of policy but what interested me is the sequencing of its actions.
Oliver Hartwich of the NZ Initiative revisits the broken window fallacy: “Natural disasters and wars never generate prosperity. They always destroy it, by definition.” He is absolutely right. It’s good to see this revisited. Even though the “seen benefits, unseen costs” principle was articulated by Bastiat in an 1850 essay. Wikipedia article on the broken […]
Brian Fallow writing in his normal clear and intelligent manner has come out discussing the government budget. As he says, a slump is not the time for “austerity” in terms of cutting back the size of government, and we should allow temporary deficits to help ease the blow – the point of automatic stabilisers is […]