tag:blogger.com,1999:blog-2546602206734889307.post5039427429422854801..comments2024-03-29T12:16:15.785+00:00Comments on mainly macro: Taylor rules: the ZLB and Euro DiversityMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2546602206734889307.post-76743723866165845692014-07-08T19:21:52.215+00:002014-07-08T19:21:52.215+00:00Any evidence The Netherlands would follow a differ...Any evidence The Netherlands would follow a different fiscal policy if they had their own currency? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-20170562690279453512014-07-05T12:28:45.616+00:002014-07-05T12:28:45.616+00:00Good point Nick: Good well thought out policy bea...Good point Nick: Good well thought out policy beats a simple rule every time but the financial talking heads need simplicity. I can remember BOC research that stated unequivocally that the natural rate was 8%. Nicely, the Bank has learned from its mistakes.<br />One challenge is that the unemployment rate does not really measure the pricing power of labour or of employers in any broad sense. It also does not measure pricing power in the market place (hence the retail results we are seeing).jciconsulthttps://www.blogger.com/profile/15543764129179547519noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-6775188418282418472014-07-05T12:13:47.216+00:002014-07-05T12:13:47.216+00:00Yep. Apologies for plugging my own research: 10 ye...Yep. Apologies for plugging my own research: 10 years ago David Tulk and I did a grid search over simple rules (like the Taylor Rule, but trying different parameter values, and throwing in the exchange rate too). We could not find one that outperformed the actual policy of the Bank of Canada. The Bank knows that the natural rate will vary over time, and uses more information than is available in the simple rule. http://www.bankofcanada.ca/2003/10/working-paper-2003-31/Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-14174172310454412232014-07-04T19:59:36.956+00:002014-07-04T19:59:36.956+00:00There’s nothing very natural about the “natural ra...There’s nothing very natural about the “natural rate of interest”. In contrast to Simon’s definition, my jaundiced definition of the natural rate of interest is: “the rate of interest that closes the output gap on the very questionable assumption that in a recession, demand should be raised PURELY by boosting lending based forms of economic activity (i.e. primarily investment)”.<br /><br />By the same token I would question the assumption (which is possibly made in some parallel universe) that demand should be adjusted purely by adjusting car, baked beans and lollipop sales.<br /><br />In a free market (i.e. a market where wages are not sticky downwards) a recession causes wages and prices to fall, which raises the real value of the monetary base and national debt (the Pigou effect). That induces holders of the latter assets to spend more on a WIDE VARIETY of stuff: not just investment goods. Doesn’t that make more sense and thus shouldn’t we imitate that “sensible” solution to the problem by upping a WIDE VARIETY of different forms of spending, public and private, in a recession?<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-6877977001021337782014-07-04T10:51:39.273+00:002014-07-04T10:51:39.273+00:00An additional factor in the Netherlands: the Dutch...An additional factor in the Netherlands: the Dutch pension system, executed by De Nederlandsche Bank, de facto requires pension funds to raise fees (part of wage income) during recessions, which is of course totally pro-cyclical. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-45298380498789120332014-07-04T09:54:02.792+00:002014-07-04T09:54:02.792+00:00Great post. Excellent ungated references. I have c...Great post. Excellent ungated references. I have circulated to a number of cdn bankersjciconsulthttps://www.blogger.com/profile/15543764129179547519noreply@blogger.com