ALL BLOG POSTS
Peter Dorman has a blog post that have gotten quite a bit of attention in the blogosphere on the AS-AD model and why he thinks it is not a useful framework. This is Peter:
Yesterday I was surfing the internet for some information on events in 1937 - the year of the Recession in the Depression. While doing that I found a great lecture Scott Sumner did at Oxford Hayek Society in 2010.
This is from OECD's Economic Outlook report published earlier today:
US bond yields are spiking today. You might expect me to celebrate it and say this is great (while everybody else are freaking out...) Well, you are right - it doesn't worry me the least bit.
The developments in the Japanese financial markets over the past week has caused a lot of debate about the sustainability of the "Kuroda shock". It is particularly the rise in nominal bond yields, which seems to have shaken some Japanese policy makers.
A key critique of monetary easing in Japan is that Japan's real problem is not monetary, but rather a supply side problem. I strongly agree that the Japanese economy is facing serious structural challenges - particularly an old-age population and a declining labour force. However, I also think that there often is a tendency for commentators to overstate these problems compared to supply side problems in other developed economies.
I have no doubt that Milton Friedman would have congratulated Bank of Japan governor Haruhiko Kuroda on the fact that Japanese bond yields continue to rise.
The Japanese stock market dropped more than 7% on Thursday and even though we are up 3% this morning there is no doubt that “something” had scared investors.
I have been reading the reports on the Japanese trade data for April, which have been published this morning. The reporting is extremely telling about how most journalists (and economists!) fail to understand what is going on in Japan (the markets understand perfectly well - Nikkei is nicely up this morning).
I think there is a bubble in bubble fears. This is particularly the the case for central bankers and institutional monetary institutions.