tag:blogger.com,1999:blog-2499715909956774229.post5698766506457503032..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: Where has Tobin Gone?Stephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2499715909956774229.post-15593469220867122472014-02-25T18:56:03.772-08:002014-02-25T18:56:03.772-08:00Tobin is a better economist than all the listed on...Tobin is a better economist than all the listed ones together as he had the betterintuition. Fancy models are useless when they do not match the facts or help policy (macroeconomists as engineers).<br /><br />People who use models that deal with financial frictions but do not understand the grave implications (Stiglitz and Greenwald) and remain laissez-faire Chicago boys (even ditching their Friedman and whining about too expansionary monetary policy) simply do not get it. Oh, perhaps they get the details but not the bigger picture.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-76439771513988611292014-02-17T08:32:36.736-08:002014-02-17T08:32:36.736-08:00Actually, I had read enough of that paper to appre...Actually, I had read enough of that paper to appreciate the aspects you were focussing on, because I looked at it when you linked to it last year in your "deflationary QE" posts.<br /><br />Anyway, thanks for the references. I'll have a look through those.<br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-57638348326696707202014-02-17T06:22:51.436-08:002014-02-17T06:22:51.436-08:00In the paper on QE I wrote, I take the approach th...In the paper on QE I wrote, I take the approach that I'm not going to think about preferred habitat or market segmentation, but focus instead on liquidity premia and collateral to get an effect from QE. That's not saying that market segmentation is not important - it could be. In any case, Tobin would have said that we start at the level of preferences over assets, which isn't very helpful if we want to think about QE. A Tobin framework would say that QE works, and the effect depends on how substitutable long bonds are for T-bills, which doesn't get you any further down the road. So, my work just looks at one aspect of the problem, and takes this a step deeper. It says that the effect depends on (i) how scarce collateral is in the aggregate (in a well-defined sense); (ii) how long-maturity bonds are valued as collateral relative to short-maturity bonds. So, my argument is that that's much more informative, but of course it's only a piece of the puzzle.<br /><br />For market segmentation, there is a whole literature on asset market segmentation and the effects of open market operations (Grossman and Weiss, Rotemberg, Lucas, Alvarez, worked on this). That idea could be used to think about QE. OG works, and Lagos-Wright shares some OG features, with some other benefits I think. Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-33854589490200391062014-02-17T06:08:30.926-08:002014-02-17T06:08:30.926-08:00Although I'm probably a bit of an old Keynesia...Although I'm probably a bit of an old Keynesian, I'm very interested in thinking about the micro-foundations for asset allocation. One of the areas where I have previously used Tobin's framework for insight is in relation to preferred habit explanations for the term structure. Casual observation suggests to me that the different spending horizons that people have is an important factor here (pension funds account for a lot of term debt holdings). To develop some micro-foundations for this, I would imagine that you would need a model with agents with different tolerance of return risk at different maturities so, at the very least, some kind of OLG framework. I have had a brief look through the linked papers of your own (and I intend to work through these in more detail), but neither appears to incorporate this (apologies if I missed this). Is there any work you can refer me to that specifically looks at this? Thanks.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.com