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James Alexander/Jan 25, 2016 Of course we welcomed Mr Draghi’s willingness to ease monetary policy announced with at the January ECB meeting last week. And we recognised the positve impact on markets and therefore on NGDP expectations. But was this just a stopgap response to a poorer negative trend? The fight over the direction of US monetary policy between the Fed and the markets will continue to dominate the news. The fight within the ECB will also continue, weakening the credibility of Mr Draghi’s easing bias and the current QE efforts. We think he should open a new front against… Read More

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Marcus Nunes/Nov 29, 2015 Brad DeLong writes “The Trouble With Interest Rates”, where he strongly and rightly critiques views of John Taylor and concludes: There is indeed something wrong with today’s interest rates. Why such low rates are appropriate for the economy and for how long they will continue to be appropriate are deep and unsettled questions; they call attention to what MIT’s Olivier Blanchard calls the “dark corners” of economics, where research has so far shed too little light. What Taylor and his ilk fail to understand is that the reason interest rates are wrong has little to do… Read More

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James Alexander/ Nov. 27, 2015 In mid-2015 Mark Carney stated that the next move in UK rates would be up and that it would come into sharper focus at the turn of the year. This was interpreted as monetary tightening by Market Monetarists and some others. Market prices moved: Sterling, bond prices, UK domestic stock markets as monetary policy impacted future expectations immediately and precisely (ie not in any long and variable fashion). The playing out of the flight path that Carney set in motion is now being seen in the backward-looking actual data. NGDP does not get released in… Read More

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Marcus Nunes / November 24, 2015 In 1997, Bernanke (with Gertler and Watson) wrote: THE PRINCIPAL OBJECTIVE of this paper is to increase our understanding of the role of monetary policy in postwar U. S. business cycles. We take as our starting point two common findings in the recent monetary policy literature based on vector autoregressions (VARs).’ …Put more positively, if one takes the VAR evidence on monetary policy seriously (as we do), then any case for an important role of monetary policy in the business cycle rests on the argument that the choice of the monetary policy rule (the… Read More

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