tag:blogger.com,1999:blog-2499715909956774229.post4251588627002678250..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: New Keynesians and New MonetaristsStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-2499715909956774229.post-62021467853735849702010-07-16T01:31:59.994-07:002010-07-16T01:31:59.994-07:00Wow, if one asset is swapped for another asset and...Wow, if one asset is swapped for another asset and within the banking system Treasuries are the most easily swapped asset with or without central bank then why does it all matter?Игры рынкаhttps://www.blogger.com/profile/12001273098690387194noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-87972575017056965252010-07-14T13:28:36.877-07:002010-07-14T13:28:36.877-07:00Actually, I'd like to think about this questio...Actually, I'd like to think about this question more before I ask it, but then it may be a long time before I ask it, so I think it's worth asking now:<br /><br />For economists not specialized in this area, and for well educated laypeople, why would increasing the amount of liquid assets (amount in what? principle value? market value?) increase GDP and/or employment?<br /><br />How would this work? What mechanism? More liquid assets (with higher interest rates if the Fed is selling them into the market) leads to what, which leads to what,..., which leads to higher GDP and/or employment?Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-26882457543244557172010-07-13T10:31:19.524-07:002010-07-13T10:31:19.524-07:00Ok, but assuming the problem is not enough liquid ...Ok, but assuming the problem is not enough liquid assets in the economy, then why have the Fed only sell treasuries; that exchanges one kind of liquid asset (treasuries) for another kind of liquid asset (cash).<br /><br />Why not increase both kinds of liquid assets? in addition to selling treasuries, create new money and use it to buy non-liquid (less liquid) private securities, like longer term private bonds.Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-25478608057317161712010-07-12T15:25:54.050-07:002010-07-12T15:25:54.050-07:00agentcontinuum:
Some New Monetarists are Randy Wr...agentcontinuum:<br /><br />Some New Monetarists are Randy Wright (Wisconsin), Ricardo Lagos (NYU), and Guillaume Rocheteau (UC Irvine). Go to their academic web sites and mine, and read the recent publications and working papers.<br /><br />last anonymous:<br /><br />The type 1 and type 2 comes from a paper I'm writing - you can go deeper than that. Empirical work is the next step, and that is in reach. Nobu Kiyotaki I would call a new monetarist. His work with Moore and with Gertler is certainly related. Sometimes he's somewhat cavalier about where the financial constraints come from though.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-62391080362347928012010-07-11T09:24:58.136-07:002010-07-11T09:24:58.136-07:00Not sure how useful this type x liquidity categori...Not sure how useful this type x liquidity categorization is going to be. So there are type 1 and type 2 assets. Type 1 is outside money and type 2 definitely contains treasuries. A bit unclear what else is in type 2. Looks as if agency MBS are part of type 2, except when they are not. So the financial crises made agency MBS illiquid and pushed them into type 3? That is debatable. Once 'liquidity' becomes an important concept it would be useful to have an operational measure for that. Does the New Monetarism have anything to say about measurement? <br /><br />The Fed selling treasuries is then good monetary policy because it increases liquidity. How about the Fed buying agency MBS? I suppose if buying them increases their liquidity it is also good policy. But at some point agency MBS will again become type 2 assets and any further purchases of agency MBS are then reducing liquidity in the system? Would be good to know when that happens. What if agency MBS never really were that illiquid? As I said it would be nice to have operational measures of asset liquidity, if that is possible at all.<br /><br />Finally, I may be wrong, but this particular New Monetarist position on liquidity doesn't look that different from what Kiyotaki has been doing lately with various coauthors. They might be a step ahead of you, already synthesizing the New Monetarists with the New Keynesians.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-89708257739135930062010-07-11T09:19:30.786-07:002010-07-11T09:19:30.786-07:00But surely somewhere in a new monetarist model the...But surely somewhere in a new monetarist model there must be something like an Euler equation that drives the consumption-saving decision at the individual or household level?<br /><br />And if, in the consumption-savings decisions and the corresponding firm level investment decisions the real interest rate that supports full employment (the natural rate) is negative would the new monetarists still say the answer is to make the real rate even higher?Adam Phttp://canucksanonymous.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-87682359981396656432010-07-11T07:03:20.722-07:002010-07-11T07:03:20.722-07:00The Triumph of Monetarism?
J. Bradford DeLong
htt...The Triumph of Monetarism?<br />J. Bradford DeLong<br /><br />http://www.j-bradford-delong.net/Econ_Articles/monetarism.htmlMax Manusnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-22538058466926667772010-07-10T23:34:44.123-07:002010-07-10T23:34:44.123-07:00@Jeff: the basic logic behind the swap facilities ...@Jeff: the basic logic behind the swap facilities with foreign central banks is:<br />-They are lender of last resort for their banks.<br />-Those banks have liabilities (and hopefully assets) in dollars as well.<br />-Those liabilities periodically need to be refinanced (rolled over), and the consequences of running short of dollars might be severe. Think of it as a localized bank run if you wish, but in a foreign currency.<br />-Those local central banks cannot 'print' dollars, and can only get dollars to lend their banks by selling (home country) currency. If they do this all at once on the open market, consequences may be severe.<br />-Swap facilities with the US Fed gives those local banks access to US$ for such situations, reducing overall risk.<br />-In 'such situations', they would provide liquidity facilities in US$ to their local banks (as they would do in local currency by simply crediting reserve accounts).<br />-Arguably, there's a possibility that the existence of these facilities means they will never have to be used - because counterparties of those foreign banks now know their central bank has US$ to lend, straight from the source. (But never say never)<br />-For the Fed, the counterparty risk of (at least some) foreign central banks is low and consistent with its mandate and powers.<br /><br />That's the argument. You can make your own judgment about how severe consequences might be, how far-reaching, how consistent, etc.<br /><br />But it's enough to look at the BIS reports to see that foreign banks have lots of foreign currency (e.g. US$) assets and liabilities, and the markets are big enough to be - potentially - quite disruptive should they stop functioning.<br /><br />Oh, and yes, there are other ways for foreign central banks to deal with these things - like capital controls, legally mandating payment delays in foreign currency liabilities, etc. Those might be worse solutions.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-45002962418295704032010-07-10T12:38:10.473-07:002010-07-10T12:38:10.473-07:00Thanks, this was a helpful post to those of us who...Thanks, this was a helpful post to those of us who are not professional economists. <br /><br />Any chance you could do an old monetarist vs new monetarist post? <br /><br />thanks again.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-73086056065128854952010-07-10T12:31:59.777-07:002010-07-10T12:31:59.777-07:00I'm dense.
So the Fed is providing dollars ...I'm dense. <br /><br />So the Fed is providing dollars in exchange for Euros which will then be unwound at some point in the future. <br /><br />Accounting:<br />The Fed holds the Euros as assets which I assume are classified as reserves. The liability is the obligation to return the Euros.<br /><br />Question #1:<br />Why do the foreign central banks want the dollars? <br /><br />(a) Are they just buying mortgage backed securities from the local banks that made the mistake of buying them?<br /><br />(b)Just managing the exchange rate by selling dollars for Euros in an environment where everyone wants dollars?<br /><br />(c) Something else?<br /><br />Question #2:<br />Why is the Fed doing this? Just because they are countries friendly to the US?<br /><br />Basic questions I'm sure but I'd sure like to understand.Jeff in Madisonhttps://www.blogger.com/profile/03323791386736817421noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-48839086537169296912010-07-10T10:42:21.416-07:002010-07-10T10:42:21.416-07:00And the recommended policy for New Monetarists is?...And the recommended policy for New Monetarists is?:<br /><br />1. Fiscal deficits, financed by issuing money and/or Tbills, to reduce the scarcity of types 1 and 2 liquid assets?<br /><br />2. The Fed buys illiquid assets, in exchange for types 1 and 2 liquid assets, which would reduce the scarcity of types 1 and 2 liquid assets, and also make the illiquid assets a bit less liquid because the Fed is creating a market in them?<br /><br />3. Any others?<br /><br />This post is useful to me, even if it might give me some sort of identity crisis.<br /><br />By the way, some of the stuff that Brad DeLong writes is not so dissimilar to this. There's a monetarist somewhere inside that Keynesian shell.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-78111400763908575582010-07-10T09:00:14.874-07:002010-07-10T09:00:14.874-07:00Who are the New Monetarists? Name names! What are ...Who are the New Monetarists? Name names! What are their favorite journals? Do they like Justin Bieber? The public needs to know more.<br /><br />Also, what are some good papers with models of liquidity in general equilibrium?Anonymousnoreply@blogger.com