viernes, 31 de agosto de 2012

Paper de Michael Woodford en Jackson Hole

'Methods of policy accomodation at the interest rate lower bound'

Resumen

Anàlisis de David Beckworth

Paul Krugman aca y aca

Gavyn Davies sobre el discurso de Bernanke y el paper de Woodford: US monetary policy at an important turning point

David Glasner sobre el discurso de Bernanke

"The reductions in long-term interest rates reflect not the success of QE, but its failure. Why was QE a failure? Because the only way in which QE could have provided an economic stimulus was by increasing total spending (nominal GDP) which would have meant rising prices that would have called forth an increase in output. The combination of rising prices and rising output would have caused expected real yields and expected inflation to rise, thereby driving nominal interest rates up, not down. The success of QE would have been measured by the extent to which it would have produced rising, not falling, interest rates."

Relacionado: Mainstream economists do not understand how monetary policy is transmitted

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John Taylor

Cullen Roche

Scott Sumner critica a John Cochrane. Bill Woolsey tambien

Nick Rowe

Simon Wren-Lewis. Bill Woolsey le responde

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Más de Scott Sumner

James Hamilton

John Cochrane, Michael Woodford, and the efficacy of monetary policy

Joseph Gagnon: Michael Woodford’s unjustified skepticism on portfolio balance

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The negative unnatural rate of interest

Aca

"The word natural is always used to hide the constructed context in which an outcome occurs, to disguise human institutions as immutable facts and thereby exclude them from controversy."

...

"Ultimately, the words are meaningless. The level of interest rates that prevails in the market will be the result of a mix of institutional choices and economic circumstances."

Was money easy or tight during the Great Depression?

Scott Sumner

martes, 28 de agosto de 2012

Sobre economía neoclásica

Matias Vernengo critica a Krugman

Daniel Kuehn

Money, loans and economics

Crítica de Lars Syll a la economía neoclásica

MMT y la crisis europea

Debate. Parte II

The very short run

Nick Rowe

Brad DeLong: The keynesian multiplier and the monetary hot potato

"From my perspective the Old Monetarist story doesn't make much sense: people are not often surprised to find that they sold more bonds for cash than they had expected because people do not usually quote a price at which they offer to sell whatever quantity of bonds people want to buy. By contrast, the Old Keynesian story does seem to me to make sense: people do often quote a price at which they offer to sell whatever quantity of newly-produced goods and services people want to buy."

lunes, 13 de agosto de 2012

The veil of opulence

Aca

Sobre la crisis de Grecia

Ryan Avent

"The details of this particular depression are obviously a bit different from those of the 1930s contraction. But the themes are the same. The Greek economy clearly suffers from all sorts of real problems—labour market rigidities, overregulation, corruption, etc—but such problems afflict lots of countries without sparking a massive economic implosion. No one has bombed Greece and blown up a fifth of its economic infrastructure. No one has erased the memories of a quarter of the Greek workforce, leaving people unable to speak or type or tend machinery. The Greek economy is imploding for no other reason than that the prices are wrong.

The prices are wrong. When the crisis hit demand fell. People stopped shipping money into Greece to buy its goods or invest in its properties or visit its tourist hot spots. Prices needed to adjust to keep resources employed. If Greece had retained its own currency, falling demand should have led it to weaken, bringing prices down economy-wide. Since it was stuck using the euro, nominal wages and prices had to fall, a slow process, especially in an economy with a highly regulated labour market. And so Greece fell into a deep recession. Capital outflow and recession led to an explosion in debt which shook market confidence. The resulting crisis generated two nasty developments—panic capital outflows and government austerity—which led demand to weaken further. Even if the Greek economy had been much more flexible, wages and prices would have struggled to chase demand downward and adjust sufficiently quickly. Collapsing output and employment were inevitable."

miércoles, 8 de agosto de 2012

No more growth miracles

Dani Rodrik. Más

Ryan Avent està en desacuerdo

Economics by invitation: Is the age of emerging-market growth miracles at an end?

The Fed giveth and the Treasury taketh away

Falla de la política económica en EEUU

Relacionado: When monetary and fiscal policy collide

Tasa interbancaria y tasa de los bonos

How does the Fed Funds Rate affect Treasury yields?

"Treasury bills are more predictably influenced by the fed funds rate than notes and bonds because Treasury bills and the fed funds rate are competing investments in the money market. The money market is the market for high-quality, short-term debt instruments. Just as individuals put uninvested cash into money market mutual funds, where they can earn interest without putting principal at risk, institutional investors for the same purpose invest directly in the money markets by buying instruments like fed funds and Treasury bills.

As investments, fed funds and Treasury bills generally offer comparable yields. Note and bond yields are less closely tied to the fed funds rate because their longer maturities (from two to 30 years) mean more can happen during their lifetime. That gives them the potential to undergo big price changes. In general, the longer the maturity of a debt security, the greater the potential price changes."

Interest rates for beginners

"When the Federal Reserve changes the Federal funds rate, its effects ripple out through the economy, but with all sorts of lags and dampening effects. Broadly speaking, interest rates can differ from the Fed funds rate for two reasons: maturity (the amount of time you are lending money for) and credit risk (the risk that you won’t get paid back). We’ll talk first about U.S. Treasuries, because “by definition” they involve no credit risk.

The Treasury Department raises money by issuing bonds that range in maturity from a few days to 30 years. At the low end, there is virtually no risk of any sort, so the yield is purely a function of supply and demand; if a lot of people have money and nothing else to do with it, yields will be low. There was an auction today for 4-week Treasury bills, and the yield was exactly zero; people are lending money to the government for free.

With a longer maturity, however, there is risk, even when lending to the U.S. government. The main risk is inflation. Because all the payment stream of a bond is fixed in nominal terms, the higher inflation is over the maturity of the bond, the less it will be worth to you in real terms. What matters here is not the current rate of inflation, but investors’ expectations of what inflation will be over the maturity of the bond. If investors expect inflation to go up, they will demand higher yields to compensate; even if they expect inflation to remain steady, they will still demand a higher yield for a longer-maturity bond, because the longer maturity means there is more time in which inflation could increase. Paul Krugman. Y aca

Notas II

Ok, esta claro que las OMAs mueven el mercado de base monetaria. Y por consiguiente mueven el precio de ese mercado, el Fed Funds Rate. La pregunta es cual es la relacion de ese mercado con el mercado de bonos (de deuda) y con el precio de ese mercado, la tasa de interes de los bonos


Según lo describe la Fed de NY:

  • En el mercado de base monetaria, los bancos prestan sus reservas y piden prestadas reservas de otros bancos. El precio al que estos prestamos se llevan a cabo es la Fed Funds Rate. Listo, perfecto
  • Ahora entra en escena el mercado de dinero. El 'money market' en el que se transa deuda menor a un año. Es decir se transan bonos de corto plazo que pagan interes y que son muy liquidos

Andy Haldane critica a la econommia y los economistas

Aca

Notas

Una OMA expansiva mete base monetaria y saca bonos de circulacion. Con tanta base monetaria disponible, los bancos se la prestan entre si a una tasa muy barata (esta es la Fed funds rate, que esta en 0%). La idea es que esto reduzca la tasa a la que los bancos le prestan a la gente

Al aumentar la compra de bonos esta aumentando la demanda por ellos (se puede decir que disminuye la oferta de bonos, sacandolos de circulacion?). Al aumentar la demanda, aumenta su precio es decir baja la tasa.

El objetivo de la estrategia es desincentivar la compra de bonos. Que la gente invierta en otras cosas.

Lo que esta pasando es que no se ha logrado desincentivar la compra de bonos. La gente sigue comprando bonos. Es decir la demanda esta aumentando. Si la demanda aumenta el precio aumenta, es decir baja la tasa (esta seria la tasa de los bonos del Tesoro; la que esta en 1,66% a 10 años)

No hay una contradiccion ahi? Si el problema es que hay una demanda muy alta de bonos, el problema no lo agrava el banco central elevando aun mas la demanda?
No, al aumentar mas la demanda esta elevando el precio con la esperanza de alcanzar el punto en el que se desincentive su compra.

LIQUIDITY TRAP: EL TRADICIONAL METODO DEL BANCO CENTRAL DE QUITAR BONOS ES METER BASE MONETARIA. CUANDO EL PRECIO DE LA BASE MONETARIA ES CERO, NO PUEDE QUITAR MAS BONOS. EL PRECIO DE LA BASE MONETARIA ES EL LIMITE DE LA COMPRA DE BONOS. CON OTROS METODOS PODRIA MAS. EL BANCO CENTRAL ESTA ATRAPADO POR SU PROPIO METODO

Por que? Para que el banco central pueda comprar bonos y dar a cambio base monetaria, los PRIMARY DEALERS (instituciones que compran bonos del gobierno) tendrían que estar dispuestos a tomar el otro lado de la transaccion, es decir vender sus bonos y tener mas base monetaria. Eso estan dispuestos a hacerlo mientras que prestar base monetaria les resulte rentable. Si el precio de la base monetaria es cero, ya no les resulta rentable y ya no venden mas sus bonos.

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Sobre la industrializacion de Alemania

lunes, 6 de agosto de 2012

The surplus approach and institutions: Diamond vs. Acemoglu & Robinson

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The Fed should buy stocks instead of bonds

Aca

The danger of repo

Felix Salmon

This is exactly wrong. Repos are a form of informationally-insensitive asset: they epitomize the paradoxical and ultimately destructive desire on the part of people with money to lend out money but to take no credit risk while doing so. Informationally-insensitive assets are a bad idea in general, for reasons which are probably familiar at this point to most readers of this blog: they breed complacency, tail risk, and deluded, magical thinking. But repos are a particularly bad species of the genus, because they are a direct replacement for old-fashioned unsecured credit.

Lending money in return for interest on that money is a form of investing: one entity, with money to spare, invests that money in a venture which can put it to good use and profit from it. If all goes according to plan, both win. The borrower might be poor but has ideas, and the ability to make money in the future; the investor makes such profits possible.

When you move from a credit-based system to a repo-based system, however, all that changes. At that point, future profitability isn’t enough to get you cash: instead, you need to be rich already, and you need to be able to hypothecate your existing assets to some lender. If we’re talking about the banking system, here, we’re talking about a world in which banks simply cease to trust each other at all, and the answer to all interbank credit questions is “no”. The only way for banks to lend to each other is to either go through some central counterparty, hub-and-spoke style, or else to retreat to the world of repo, where banking prowess counts for nothing and all that matters is collateral quality.

The implications of such a world are already being seen: Tett says that “collateral arbitrage” has now become a profit center at some banks. Far from trying to lend out money to creditworthy borrowers, banks are beginning to make money by gaming inconsistent repo rules. No good can come of this.

And in times of crisis, a reliance on repo markets makes all banks incredibly fragile, and vastly increases the risk to taxpayers should a bank fail. Once upon a time, banks had equity, they had debt, and then they had deposits. If a bank failed, the bank’s equity would be wiped out first, and then its debt. The depositors were senior, which meant there was relatively little chance that the FDIC would have to bail them out.

Now, however, bank debts are shrinking, replaced with repo operations. As a result, when a bank fails, the equity gets wiped out first — and then there’s no cushion any more before the depositors start losing money and need to be bailed out. The rest of the finance world is senior to depositors: they have repo collateral, which makes them secured creditors, and secured creditors are senior to unsecured creditors, even when the unsecured creditors are just mom-and-pop depositors.

The more that the world of finance relies upon repo, the less it relies upon relationships and trust and underwriting and all the other ties which bind. The financial sector can’t afford those ties to be severed: the cost of breaking them, in terms of foregone growth and profit, is far too great. But we seem to be doing exactly that.

Nick Rowe: Why does repo exist?

Modern supply chains are making it easier for economies to industrialise

The Economist

Debate sobre Japon

Aca

jueves, 2 de agosto de 2012

The epic failure of central banking

Aca

Their failure to act in the midst of the ongoing crisis amounts to a passive tightening of global monetary policy. This is because their inaction raises the global demand for safe assets while allowing existing ones to be destroyed. Since these safe assets effectively act as money, the central banks are worsening the excess money demand problem that underlies the global aggregate demand shortfall. This passive tightening has been going since mid-2008

Ryan Avent: The way forward

The evolution of treasury and muni bond yields

Aca

What’s depicted below is the 10 year US Treasury versus the 10 year muni bond index. As you can see, the yields have an extremely high correlation – muni bonds practically ARE treasury bonds. So why are yields surging in Italy, Spain, Greece and Portugal, but they’re remaining so tame in the muni market? Simple – the US government, which can always procure funds via taxes and bond sales therefore making solvency a non-issue, provides substantial federal aid to the states every year.  While this doesn’t eliminate the solvency issue at the state level it certainly helps reduce it substantially. Europe has no such mechanism in place so what you basically have is a bunch of US states in an environment where they’re left to fend for themselves.  They can’t print their own currency, they can’t devalue their own currency and they can certainly run out of Euros.  The result is bond investors who are terrified about default and end up selling bonds which only exacerbates the budgeting process.

Review de 'The wealth and povery of nations' de David Landes

Brad DeLong

miércoles, 1 de agosto de 2012

Milton Friedman's contributions to macroeconomics and their influence

David Laidler

Bill Gross sobre los precios de las acciones

Comentarios de Brad DeLong y Michael Mandel

Lachmann and Postkeynesianism on prices

Aca

"In Classical economics (from Smith to Mill), the equilibrium value of prices in the long run was essentially the cost of production. With the marginalist revolution, value was held to be subjective, and prices a consequence of the marginal utilities of market participants (Lachmann 1994: 165).

Yet, with the existence of “fixprices” in many markets, it is obvious that cost of production plus the profit markup must explain how prices are set in the real world.

That nobody can sell a product for which there is no subjective demand is obviously true, but after that the subjective theory of value has its limitations."

While economic “value” defined simply as the pleasure, utility or satisfaction we derive from commodities is subjective, it is a mistake to think that prices are therefore all subjective, or just determined by subjective utilities. One has to distinguish “price theory” from “value theory,” but curiously modern neoclassical economics has largely dispensed with “value theory.”

Trade-offs between inequality, productivity, and employment

Interfluidity y Tyler Cowen