Ricardo vs Heckscher-Ohlin

Here is an academic, but also policy-relevant, question. Which model is more useful in thinking through issues in trade policy: the Ricardian model or the Heckscher-Ohlin model?...more>> and more

What Caused the Great Inflation?

Recently, we've had quite a bit of discussion about the types of models and policies used by monetary and fiscal authorities during the 1960s and 1970s (see the bottom of this post for links to the entire discussion), and the debate that follows between Allan Meltzer and Christina Romer on the causes of the Great Inflation of the 1960s and 1970s discusses these issues in some detail (e.g., see Table 1 for a brief summary of the policy frameworks used in various eras)...more>>>

New estimates of macroeconomic effects of tax changes

How can one use historical data to estimate the effects of tax changes on GDP? The simple idea of looking at how the two series are correlated obviously won't do, since tax revenues would necessarily rise during an economic boom as an immediate consequence of the fact that, with a given tax schedule, people would owe more taxes if they earn more income. The correlation between tax revenues and GDP would then be telling us the effect of GDP on tax revenue rather than the effect of tax rates on GDP. The common method of calculating cyclically adjusted tax revenue could correct for this, but only partially. For example...more>>

I Trust Bruce Bartlett Understands Crowding-out

Bruce’s contention that a mix of tight money and easy fiscal policy is good for long-term growth is relevant today as the Federal Reserve increased interest rates as the economy got closer to full employment. But this strikes me as absurd as it appears to be saying lower national savings and higher interest rates somehow encourages growth. Bruce should go revisit the Solow growth model if he believes this...more>>