Federal Reserve U-Turn and the Phillips Curve

In February 2019, the US Federal Reserve stopped worrying about inflation that might come from economic growth (and reduced unemployment) and instead focused on the possibility of stagnant growth. That shift in focus led the Fed to stop talking about raising interest rates to reduce inflation, and instead talk [...]

Federal Reserve U-Turn and the Phillips Curve2020-05-10T09:57:21-04:00

Bank of Canada Cuts Rates as Coronavirus Delivers ‘Negative Shock’

The Bank of Canada cut interest rates dramatically in March 2020 in attempting to counter the depressing effects of COVID-19 on economic activity. But the Bank makes clear that monetary policy will not be enough and the government must respond with aggressive fiscal policy spending. [...]

Bank of Canada Cuts Rates as Coronavirus Delivers ‘Negative Shock’2020-05-09T16:49:06-04:00

Bank of Canada Models as Art and Science

The Bank of Canada is changing the sophisticated models it uses to forecast the economy because those models failed to predict "the deep and persistent aftershocks of the global financial crisis" of 2007-2009. This is a perfect example of the quote from Keynes that "Economics is a science of [...]

Bank of Canada Models as Art and Science2020-05-10T07:55:12-04:00

A Balance Sheet Recession

Richard Koo (Chief Economist, Nomura Research Institute) did a 10 minute video in 2010 for the Institute for New Economic Thinking (INET) that is the clearest and most succinct, yet comprehensive, explanation of balance sheet recession.  I have shown this video 10 times in different courses, and students are spellbound [...]

A Balance Sheet Recession2020-05-09T11:22:09-04:00
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