Economic Logic

Economies may need to be stimulated sometimes, through tax reductions or public expenditures. The problem is that this costs. Opposition to ...

Inflation rates across industrialized economies have been remarkably low in the past decades, and at the same time these economies have been...

Nominal wage downward rigidity is a feature of many macro-models that help justify positive optimal inflation rates. In fact, that is pretty...

Much has been written, including here, about how policy uncertainty is bad for business. Firms do not want to invest much when it is not cle...

China has been heavily criticized by western politicians and policy-makers for its exchange rate policy that favors its export industry. Som...

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

I have always found the empirical monetary policy literature rather frustrating. It is entirely based on the premise that one can identify m...

The social fabric of a country has a lot of inertia. It takes generations for norms to change, in large part because people rarely change du...

Large Scale Asset Purchases (LSAPs) of mortgage-backed securities have been a major component of recent monetary policy. It is not without c...

One thing we have learned from the last recession is that the financial sector is quite important, that its dysfunction can have important c...

The theory of optimal currency areas initiated by Robert Mundell states that a monetary union should be beneficial between regions that have...

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...

When a central bank adopts a monetary policy target, such as a targeted inflation rate, should it absolutely adhere to this goal, or are dev...

In countries where inflation is high and highly variable, you would not expect that monetary policy is optimal in a social-welfare sense. Af...

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 ...

Why is gold valued? is year in year out one of the most visited posts on this blog. For some reason that I still cannot fathom people care ...

There was a time where central banks liked to surprise markets. Macroeconomic theory dictated then that central banks should be secretive an...

If you have traveled across Europe before the introduction of the Euro, you have certainly been annoyed by the frequent changing of currenci...

71 years today, Japan attacked Pearl Harbor and opened a new front in its global war. Why would a relatively small country take on a much la...

If you divide the amount of US dollars in circulation by the number of people living in the United States, you get an amount in the order of...