Sunday , March 18 2018
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Tony Yates: Long and Variable

Long and Variable is a blog about monetary policy and central banks. Authored by Professor Tony Yates (University of Birmingham), this blog is quite detailed and knowledgeable about global monetary policy.

1p/2p/…/£50 = a/b/…/c as a nominal anchor that does not require measuring the price level

Here is a new post on FT’s Alphaville blog on this topic. It is somewhat crackpot. If anyone knows whether this has already been formalised please let me know.  Asking for a friend. One thing that did not make the editor’s cut there is this…. Recapping, the basic idea is to get the central bank to target the voluntarily held denomination ratio, which I think is equivalent to it targeting the price level. Why do this?  I don’t know.  Maybe the whole monetary framework is just not...

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MPC not as split over £ as they made themselves out to be

Wednesday’s Treasury Committee hearing with the Bank of England’s Monetary Policy Committee featured an apparent squabble over whether exchange rate depreciations ‘worked’ or not.  It reads like something we could set students.  ‘OK who is wrong here, if anyone, and why?’ Andrew Haldane said, uncontroversially:  “A combination of the weaker pound, and a stronger global economy, has worked its magic…..  Depreciations work.  And that’s how they work.” Prompted by MP Alistair Jack,...

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Changing unconditional BoE forecasts don’t mean we should take Brexit impact studies with a pinch of salt

This tweet from Laura Kuenssberg, the BBC’s Political Editor, was the latest example of how misunderstandings about the nature of forecasting have clouded the debate about the costs and benefits of Brexit. Today [Feb8[ the BoE released its latest inflation forecast.   Unsurprisingly, there has been economic news, and the forecast has changed a bit.  Doesn’t that mean that this forecasting business, including estimating the impact of Brexit, is a bit fishy?  Can’t we therefore just set...

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Monetary policy insurance from the Trump tax cut / Corbyn splurge

Jason Furman, former Chair of the Council of Economic Advisors under Obama, lately lamented the lack of a macroeconomic justification for the Trump tax cut.  This tax cut, as he and others have observed, has many flaws. Notable are:  the manifest intent to redistribute to the wealthy who need it least;  the accompaniment of this with amateurish appeals to Laffer-curve notions that it would somehow provide for a new era of much enhanced growth;  and the mendacity of the publicity around...

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Greenspan Putlessness

In the 1990s, there was the idea that equities were made safe because activist monetary policy would always be able to respond to a plunge, saving the real economy, and thus expectations of a sharp recession were thereby stabilised in the first place, making crashes less likely. The recent days’ trading takes place in a different world. First, the tools to back up the threat implicit in the put are not there to the extent that they once were.  Monetary policy in the West is still at...

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Would a 2nd referendum be more likely to be won by Remain

Danny Finkelstein enumerates some reasons why not in his Times column today, and they are pretty convincing.  But I think he misses some factors out, so I list them here, repeating Tweets sent earlier.  Leave were able to unite – sort of – around the ‘Leave’ box on the Referendum ballot paper because the ambiguity about the end state cast a wide net over their very different views of what that end state should be.   In a second referendum, the ambiguity disappears, and not only does...

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Brexit and the analysis of its economic consequences: iteration 2

Alberto Nardelli at Buzzfeed broke the story that government economists have undertaken a new analysis of the consequences of different variants of Brexit.  And come up with the unsurprising conclusion that they would all be costly. In one sense, this should not be news.  Nothing has changed.  A few economists have studied the same question and got the same answer as before.  Apart from a few on the fringes, everyone who has looked at this accepts the basic logic.  For a brief recap,...

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