A blog of the NYU Colloquium on Market Institutions and Economic Processes
by Jerry O’Driscoll
In today’s Wall Street Journal, there is an article titled “Returning Workers Face Steep Pay Cuts.” The article cites research by Kenneth Couch of the University of Connecticut that returning workers are taking on average a 40% pay cut from their old jobs. This is first and foremost a personal tragedy for those affected. The question we must ask as economists is why? Read the rest of this entry »
by Andreas Hoffmann and Gunther Schnabl*
With central bank balance sheets and government debt levels exploding, discomfort about future inflation arises. A discussion about the appropriate exit strategy from low-interest rate policies has started. The standpoints of central banks are different. The ECB seems more decisively in favour of an early exit. The Federal Reserve discusses the technical aspects rather than an early timing (see Mario’s earlier blog entry). The Bank of Japan is said not to exit earlier than in five years. What situation are we facing? A return to monetary policies that are neutral to inflation and bubbles is unlikely for four reasons: Read the rest of this entry »
by Mario Rizzo
As we have been saying here, the claims that the fiscal stimulus has saved or created X number of jobs is not a simple empirical question. It must be an inference from a model that tells us what would have happened in the absence of that stimulus. Collecting reports from various firms or local governments about their job situations will not do. At best these individual reports are based on pop-theories on the part of the reporters about what would have happened. Read the rest of this entry »
by Mario Rizzo
The Gross Domestic Product (GDP) is growing again at an annual 3.5% rate for the third quarter of 2009. Some people say this means that the recession is over. Apart from the much-touted stubborn unemployment problem, does this make sense? Read the rest of this entry »
by Mario Rizzo
Continuing the Stimulus Watch (HT Greg Mankiw)
Greg Mankiw continues to trace the unemployment rate as predicted by the original calculations of the effect of the fiscal stimulus as against no-stimulus. My advanced “eye-ball” extrapolations suggest that we are following the same path as the no-stimulus projection BUT at a higher level of unemployment throughout.
Dare I suggest (ever so tentatively and with all scientific humility given the nature of the data) that the stimulus has done harm?
By Mario Rizzo
Paul Krugman’s latest opinion piece in The New York Times is one big non-sequitur. Read the rest of this entry »
by Mario Rizzo
In an interesting opinion piece for the Wall Street Journal, Robert Barro and Charles Redlick give empirical evidence supporting the claim that stimulus spending doesn’t work. By “doesn’t work” they mean that the government spending multiplier is less than 1. This means that stimulus spending increases national income by less than the amount of new spending. Why? Barro and Redlick are vague on the reasons. Read the rest of this entry »
by Mario Rizzo
In a recent post I criticized the extension of the Fed’s policy of buying mortgage-backed securities. Then I was told by a quite-knowledgeable economist that I may have misread the report in the Wall Street Journal. The first sentence states:
The Federal Reserve, in a move aimed at keeping interest rates low for home buyers through early next year, decided to extend and gradually phase out its purchase of mortgage-backed securities. (Emphasis added)
So while it is true that the Fed is extending the program, it also plans to phase it out. I replied (in private email) that I preferred to pay attention to what the Fed is actually doing rather than to what it is promising to do. Read the rest of this entry »
by Mario Rizzo
The Fed has decided to extend, at least through early next year, its program of purchasing mortgage-backed securities. The Wall Street Journal reports:
“The Fed’s action signals its belief that the economy, while in recovery, remains fragile and that housing, which has seen some improvement in recent months, has only started to pull out of its slump.”
What is the objective of their action? When will they know they have succeeded? Read the rest of this entry »
by Gene Callahan
Let’s say you are suffering from a moderately severe cold; you’re operating at, say, 90% of your peak energy level, and so you go the doctor to see if he can help get you back to 100%. After examining you, the doctor says:
“The point of our therapy is to approach the current malady in the spirit that we’ll do whatever it takes to turn things around; if what has been done so far isn’t enough, do more and do something different, until health starts to flow and the patient starts to recover.”
Wouldn’t you be inclined to sprint out the door? Read the rest of this entry »
