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Please keep "politics" out of the monetary reaction function

Please keep "politics" out of the monetary reaction function

During the Great Moderation it was normal to say that the Federal Reserve and the ECB (and many other central banks for that matter) was following a relatively well-defined monetary policy reaction function. It is debatable what these central banks where actually targeting, but there where is no doubt that both the Fed and the ECB overall can be descripted to have conducted monetary policy to minimize some kind of loss function which included both unemployment and inflation.

The Jedi mind trick - Matt O'Brien's insightful version of the Chuck Norris effect

The Jedi mind trick - Matt O'Brien's insightful version of the Chuck Norris effect

Our friend Matt O'Brien has a great new comment on the Atlantic.com. Matt is one of the most clever commentators on monetary matters in the US media.

"Free to Choose" now republished in Danish

"Free to Choose" now republished in Danish

This is mostly for my Danish readers. The Danish translation of Milton Friedman's classic "Free to Choose" (Det Frie Valg) has now been republished by the Danish Free Market think thank Cepos. I am honnored to have written the preface for the new edition of the book.

The spike in Kenyan inflation and why it might offer a (partial) solution to the euro crisis

The spike in Kenyan inflation and why it might offer a (partial) solution to the euro crisis

The euro zone is suffering from deflationary pressures and there is an obvious a need for monetary easing. On the other hand Kenya do not have that problem. In fact Kenyan inflation (and NGDP) has risen sharply since 2009. In some sense you can say that Kenya has what the euro zone needs and it is therefor interesting to examen why Kenya inflation has risen in recent years. I should of course stress that I don't think the the euro zone need Kenyan monetary policy, but monetary developments in Kenya in recent years might nonetheless tell us how we could get monetary easing in countries like Greece and Spain - even if the ECB maintains it's "do-nothing" stance (in fact the ECB is passively tightening monetary policy on a daily basis these days).

Believe it or not, but Berlusconi makes sense on the euro
The Sumnerian Phillips curve

The Sumnerian Phillips curve

In my previous post ”Dude, here is your model” I suggested to model the supply in the economy with what I called a Sumnerian Phillips curve in a attempt to help Scott Sumner formulate a his ”model” of the world.

"The gold standard remains the best available monetary mechanism"

"The gold standard remains the best available monetary mechanism"

< UPDATE: See an updated version of this piece here >

Jens Weidmann, do you remember the second pillar?

Jens Weidmann, do you remember the second pillar?

Today the ECB is very eager to stress it's 2% inflation target. However, a couple of years ago the ECB in fact had two targets - the so-called two pillars of monetary policy. The one was the inflation target and the other was a money supply target - the so-called reference value for the growth rate of M3.

Hear, hear!! Beckworth's and Ponnuru's call for monetary regime change

Hear, hear!! Beckworth's and Ponnuru's call for monetary regime change

When you are blogging you will often find yourself quote other bloggers and commentators. Mostly just four or fives lines. However, this time around I am not going to quote anything from David Beckworth's and Ramesh's latest article in National Review. So why is that? Well, I simply agrees strongly with EVERYTHING the two gentlemen write in their article and I can't quote the whole thing. It is simply an excellent piece on why the Federal Reserve and the ECB should switch to NGDP level targeting. If this will not convince you nothing will.

Dude, here is your model

Dude, here is your model

Here is Scott Sumner:

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