The wealth illusion
Is the stock market wealth effect a “wealth illusion”?
In “Beyond Doughnuts” I argue that when interest rates are already low, further cuts may raise desired saving - the opposite effect to what most macro mod...
Beyond doughnuts
Two equations at the heart of all macro models have the wrong sign. This is the first one (in the clearest form I can find):
If you don't like equations at all, ignore it. If you do, the following from the R...
Bond bubbles, MMT, and the limits to fiscal policy
Some reflections on this discussion between Brad DeLong and Noah Smith.
Most people who believe in a bond bubble hold inconsistent beliefs. A 10-year Treasury yield of 2% is obviously a bubble, right? After al...
Money in Europe
The ECB caused the crisis, and ended it. An extract from Money, published by Routledge, read more....
A short reply to Tony Yates (on helicopters)
Tony Yates is a superb economist and has a great blog. He also tends to be relentlessly logical. But his argument against helicopter drops is a rare exception. He makes three points:
“I’m against helicopter dr...
The “Pigou effect” is smarter than you think, and more relevant than ever
I was taught to dismiss the Pigou effect. Arthur Cecil Pigou (or “Pig” if you believe spell-check) was a great Cambridge economic theorist, known to most of us as the object of Keynes’s repeated ridicule in the...
Microfoundations: a brief reply to Brad
The question of microfoundations raised by Brad DeLong, and discussed by Simon Wren-Lewis is more relevant to the current policy failures in monetary policy than it appears. Simon, who’s blog is a breath of fre...
Was Milton Friedman the last economist?
Macroeconomics can lead policy-making or it can follow it. Since Milton Friedman, and Robert Lucas, it has been following.
Friedman was an important macroeconomist because he diagnosed what was failing in the ...
Eurozone QE clears the way for tax cuts
In a very clear analysis, Paul de Grauwe shows how QE could work in the Eurozone. National central banks, or the ECB, would buy government bonds in proportion to member states’ share of ECB capital. National go...
The Constant Reserves Multiplier
Central banks should pursue simpler, less costly and more effective policies. If policymakers want higher spending, they should transfer cash directly to households.
Some advocates of helicopter drops have arg...