Monthly Archives: November 2015

Reply to PK: Financial frictions pushed against deflation

Here Paul Krugman muses on how well standard macro models did at predicting the after-effects of the crisis.  He highlights how the prediction that the expansion of central bank balance sheets would NOT lead to runaway inflation was encoded in … Continue reading

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Tayloring a criticism of Fed policy

Adam Posen and John Taylor have exchanged posts on the Fed Oversight Reform and Modernization Act.  The AP criticism of the Act, in a nutshell, is that discretion is better than rules:  that the Act would constrain the Fed to … Continue reading

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What’s good for 100s of fiscal plans is good for monetary policy too

Today we saw the Government release its plans for a multitude of spending and tax instruments, conditional on a forecast of the economy produced by the Office for Budget Responsibility. Imagine, instead, that the Chancellor simply announced today’s values for … Continue reading


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Monetary and financial stability tools: Why is the ‘first line of defence’ metaphor always the first line of defence?

In the Treasury Committee hearing today [this is a cross-party committee of the UK Parliament that monitors the Bank of England], BoE Monetary Policy Committee members several times made recourse to the ‘first line of defence’ metaphor. For example, in … Continue reading

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Central banks and their interest rate plans

Ben Broadbent’s speech on the Bank of England’s Inflation Forecasts, and the yield-curve based interest rate trajectories on which they are based, is as lucid account of the issues as you will find, compulsory reading for interested observers. Currently, the … Continue reading

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NK2 and whether it matters if his knowledge of NK macro<NK1.

Paul Krugman has been worrying about the appointment of Neel Kashkari to the FOMC as President of the Federal Reserve Bank of Minneapolis as replacement for Narayana Kocherlakota. The Wall St Journal circulated a summary of NK2’s recent tweets on … Continue reading

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Commitment and risk management motives for inflation target overshooting

Yesterday I posted following the BoE Inflation Report press conference, agitated by the repeated emphasis on avoiding an overshoot of the inflation target.  A private response to the post made it clear that I should write again and disentangle two … Continue reading

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Inflation overshooting should not be a major concern.

Mark Carney was at pains to stress several times that the BoE’s Monetary Policy Committee did not want loose policy to produce an inflation overshoot. It’s puzzling why this concern is stressed so much. If we were well away from … Continue reading

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Monetary policy hypotheticals

At today’s Inflation Report press conference, BoE Governor Mark Carney dismissed one question by refusing to say whether the MPC might have cut rates in the hypothetical situation in which the yield curve had not flattened and provided stimulus. It’s … Continue reading

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Is monetary policy adventurism by politicians ok?

Two instances. Today, the spectacle of Donald Trump, competing for the Republican nomination in the 2016 US Presidential election, accusing Janet Yellen’s Fed of skewing monetary policy deliberately to help out President Obama. Or John McDonnell, expressing the view that … Continue reading

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