In a recent post I discussed 4 possible interpretations of Tyler Cowen’s post on risk-based recessions: Perhaps the claim is that we might have a recession this year due to risk, despite 3% plus NGDP growth.  If so, I very strongly disagree.  (This could be viewed as a version of real business cycle theory.) Perhaps […]

Vaidas Urba sent me a very nice speech by Mario Draghi.  Here he points out that monetary policy remains effective at the zero bound: “Some argue that today the situation is different; that whereas Volcker could raise rates to 20% to tame inflation, central banks fighting disinflation are inhibited by the lower bound on interest […]

Stephen Williamson has a very good post on the Canadian austerity of the 1990s. But in the comment section I think he misunderstands the concept of “fiscal offset.” First an anonymous commenter says: Canada has offset the contractionary effects of austerity via monetary policy… And Williamson responds: That’s part of the point. It doesn’t look […]

Here’s Paul Krugman, in his pessimistic mood: You might think that it’s a fundamental insight that doubling the money supply will eventually double the price level, but what the models actually say is that doubling the current money supply and all future money supplies will double prices. If the short-term interest rate is currently zero, […]

Lots of people have pointed me to an article on the zero bound by Eric Swanson: According to traditional macroeconomic thinking, once monetary policy hits the zero lower bound, there is nothing more the Committee can do to stimulate the economy – monetary policy is essentially ‘stuck at zero’. A corollary of this observation is […]