Economic Logic

IS-LM models have always left me puzzled. To me, they are the equivalent to a reduced-form regression with omitted variables and endogeneity...

Academics are in their ivory tower and have little real world or policy impact. That is the view that is often conveyed by those who do not ...

One important characteristic of Economics is that it is very difficult to conduct a clean experiment. While one may run little laboratory ex...

In macroeconomics, one distinguishes between non-durable and durable consumption goods. This distinction is important, as the cyclical natur...

The Lucas Critique in 1976 has been a major motivation behind the building of RBC models, the folow-up DSGE models as well as the structural...

It is not uncommon to find theory papers that assume quadratic utility or loss functions. They are the most tractable functions that allow t...

An easy trick question to ask students about factors of production is whether money is one. Of course it is not, unless you consider burning...

Whether you think the Fed's actions have been successful or not in pulling the US out of a deeper recession, you have to admit that the ...

If you manage to get a labor economist and a macroeconomist to talk to each other, invariably the conversation will turn to the fact that ma...

Fiscal policy being in complete disarray and unpredictable in the United Sates, economic policy is currently limited to monetary policy. But...

The last recession has lead to a lot of questioning about the economics profession and in particular macroeconomics. Sadly, a lot of this is...

The United States have interest rates close to zero, and it will stay like this of a few more years according to the Federal Reserve. This h...

Some recent research has shown that there is a free lunch lying there for fiscal policy when interest rates are constrained by the zero lowe...

It should by now be obvious to anybody who has been following this blog that I do not like time-dependent pricing (aka the Calvo fairy) beca...

Whether prices are sufficiently rigid to matter is an somewhat unsettled debate I have occasionally discussed on this blog. This is mostly a...

Are prices flexible or not? There is no doubt that there is some rigidity. But does it actually matter? This debate in the macroeconomic lit...

Any good research reports qualifications and uncertainties about the results. Unfortunately, the non-scientific reader is not interested in ...

These are times where policy coordination between central banks and fiscal authorities seems to be particularly welcome. For one, monetary p...

The current doctrine in monetary policy is that central bank need to be very clear about their policy rule so that economic agents can form ...

When it comes to teaching, nobody likes revamping lecture notes and reforming a curriculum. This is especially true when one is oneself not ...