Greg Mankiw's Blog: Behavioral Macroeconomics

Greg Mankiw's Blog: Behavioral Macroeconomics

The Implications of Behavioral Research for the Phillips Curve

San Francisco Fed President Janet Yellen discusses the use of behaviorally based macroeconomic models incorporating features such as money illusion, rules of thumb, and concern for issues such as fairness and equity to improve the ability of the New Keynesian Phillips curve to explain macroeconomic data:..more>>

Alex Cukierman: The Revolution in Monetary Policymaking Institutions

What factors explain the movement toward increased central bank independence over the last twenty years?:

The Revolution in Monetary Policymaking Institutions, by Alex Cukierman, Vox EU: Twenty years ago and earlier, most central banks in the world functioned as departments of ministries of finance. They were expected - by law, custom, or both - to utilise their policy instruments to achieve a myriad of objectives, including high levels of growth and employment, provision of funds to government for the financing of public expenditures and addressing balance-of-payments problems.[1] They also were expected to maintain financial and price stability, but the price stability objective was one among several other objectives in the charter of the Bank and had no particular status. In some cases, like Spain and Norway, it did not even appear in the charter.[2] Paralleling this state of affairs, economic theory did not attribute particular importance to central-bank independence and the concept of credibility of monetary policy was in early stages of development. Furthermore, a notable legacy of the Keynesian revolution was the belief that a certain amount of inflation is conducive to economic growth...more>>

The Trade Advantage Argument

Robert Driskill wrote a good Paper(pdf), and I decided to read it, because of the Thoughts of Dani Rodrik and Arnold Kling. It will inevitably led me into trouble, as I feel I must place my own impress upon the Issue. The confusion of the Issue resides in usage of the Ricardian Two-Good model in the first place. Understand that the Ricardian model is a formalization of an efficiency model which expounds methodology for compressing Production inputs in the Production process, in order to attain a higher rate of Output at less Cost. It works equally as effectively internally as externally, and will carry over into the arena of technological advance theory as well. One does not understand that the Ricardian model will work in the periphery of Trade Advantage, though Most assume that it will work effectively...more>>

The Nation As A Whole Gains, But...

Dani Rodrik has a great post discussing Robert Driskill's excellent new paper, Deconstructing the Argument for Free Trade. Among many other things, Driskill asks a fundamental question that applies to both trade and immigration:

What does it mean for a change in economic circumstances to be "good for the nation as a whole", even when some members of that nation are hurt by the change?

The textbook economic model proves that...more>>

Economics and...: Keynes (quoted by DeLong) on Liquidationism

Economics and...: Keynes (quoted by DeLong) on Liquidationism