by Peter Dorman Re posted from Econospeak It’s the Political Economy, Stupid! Sometimes living in the world of ideas makes it harder to understand the real one. If you happen to be an economist, and the time is now, that is true in spades. Take Paul Krugman, for instance. After bemoaning the terrible policy […]
by Joseph Joyce (is a Professor of Economics at Wellesley College and the Faculty Director of the Madeleine Korbel Albright Institute for Global Affairs. His book, The IMF and Global Financial Crises: Phoenix Rising?, was published in 2012 by Cambridge University Press.) Recovery in Europe? Greece has returned to the bond market, issuing $4.2 billion […]
David Zetland just published Living with Water Scarcity. Ed Dolan at Economonitors reviews the book…(the review is re-posted with permission of the author). Living with Water Scarcity: A Refreshing Take on a Hot-Button Issue by Ed Dolan (is an economist and educator with a Ph.D. from Yale University. Since 2001, he has taught at several universities […]
Low inflation in an atmosphere of low nominal interest rates brings up the issue of the Fisher Effect. Here is the long run Fisher equation for a “steady-state” nominal interest rate… Inflation rate = steady-state nominal interest rate – natural real interest rate The steady-state means that the nominal interest rate is projected to […]
Japan has had its discount rate in the zero lower bound range for many years. If the Fisher effect had any truth to it, we should have seen the real interest rate return back to its natural level of 1% or so. What do we see? (link to updated graph) The graph shows Japan’s central […]
The Fisher effect is defined by Paul Krugman & Robin Wells in their textbook… Economics, 3rd Editon 2013, page 721. “The expected real interest rate is unaffected by changes in expected future inflation. According to the Fisher effect, an increase in expected future inflation drives up the nominal interest rate, where each additional percentage point […]
Noah Smith brought up the issue of the long run Fisher effect. Yet, he wants to see micro-foundation models. “Specifically, what I’d be interested to see is for someone to find some micro-foundations for the Neo-Fisherite result that don’t depend on fiscal policy reaction functions.” He found a paper written by Stephanie Schmitt-Grohé and Martín […]
Last week there was an 1.5 hr discussion with the following participants: Joseph Stiglitz (Columbia University), Paul Krugman (Princeton University), and Steven Durlauf (University of Wisconsin–Madison) participated in a panel moderated by LIS Senior Scholar Branko Milanovic. The Center just posted it yesterday on their youtube channel.
World Trade weakens in Early 2014, Wall Street Journal: Weakening world trade is something to watch according to Michael Pettis. “… redistributing income downwards is easier said than done in a globalized world, especially one in which countries are competing to drive down wages. The first major economy to attempt to redistribute income will certainly […]
How low can you go? No… this is not a post about Limbo. It is a post about low interest rates, low inflation, and economic growth. The question is… Can low inflation stay low as the economy heats up around full employment? Let’s look at Europe. Low interest rates and falling inflation are not stopping […]