Wednesday, December 2, 2020
Sunday, November 29, 2020
Tuesday, November 24, 2020
Scott Sumner asked a few questions about Modern Monetary Theory (MMT) (link), and this article is a short response to some of them. The issue at hand is the effect of open market operations, in particular, in the pre-2008 U.S. system (where reserves paid not interest).
Sunday, November 22, 2020
None of the comments I saw were particularly interesting, so I will not bother responding to any in detail. I just want to point out it makes no sense to float such concerns in November 2020.
Wednesday, November 18, 2020
One of my concerns about mainstream economic methodology is the dependence upon hidden variables that are estimated with techniques like the Kalman Filter. The issue is that the resulting methodology is non-falsifiable: it will always end up being consistent with any observed data (admittedly, some outright bizarre behaviour might be rejected).
Although this might appear to be my own hobby horse, I just want to note that I was not the first person to make such a complaint. Various heterodox authors have levelled similar complaints, but my feeling they have done so in such a long-winded fashion that non-heterodox readers like myself have a very hard time picking out what is a straightforward -- but important -- point. In reading Prosperity for All: How to Prevent Financial Crises by Roger E. Farmer (Amazon affiliate link), he makes the same point with respect to the natural rate of unemployment.
Wednesday, November 11, 2020
As I have noted a few times previously, more interesting behaviour can be obtained by nonlinear DSGE models. However, this flexibility comes at the cost of increasing the difficulty of fitting the model to data. There is an infinite number of models one can use to tell stories with.
Monday, November 9, 2020
The first is that if these news holds, policymakers are in a position to outline rollout strategies, and so we finally have a timeline for "normalisation." This will hopefully reduce the carping about the cost of support packages, since we can start to put an upper bound on costs. (The political situation in the United States might inject some uncertainty.) We should see a decent-sized snap-back in activity, the concern is that if support is withdrawn too soon, we have a wave of business/household failures hitting first.
A related point is the situation for airline travel and high profile tourist venues. My working assumption is that international travel is likely to be tied to vaccination status (if not legally, at least by traveller caution). My largely uneducated guess is that it might not take that long for the numbers of vaccinated would-be travellers to meet the capacity constraints for air travel. This would greatly help reduce the really big dollar amounts associated with air industry support.