Joe Weisenthal has been causing a stir on Twitter discussing "yield bugs": people who have an ideological belief that bond yields out to be positive. This Bloomberg opinion piece discusses this, as well as some other comments on negative yields coming to the United States. I have not followed that debate too closely, as I initially assumed that there was not a whole lot of people who believed that bond yields ought to be positive. This is because bond yields are essentially determined by...
Read More »Origin of the 2 Percent Inflation Target — J. Barkley Rosser
So it was 1990 that the New Zealand central bank became the first in the world to impose an inflation target of 0-0.002.... EconospeakOrigin of the 2 Percent Inflation TargetJ. Barkley Rosser | Professor of Economics and Business Administration James Madison University
Read More »Brian Romanchuk — No More Neutral Rate?
A bit wonkish (but no math), but interesting if you are into interest rates and how they affect the economy.Bond Economics No More Neutral Rate?Brian Romanchuk
Read More »Brian Romanchuk — Japan And The Costs Of Bond Yield Control
The dangers of distorting free market interest rates is one of the bits of market folklore that keeps getting passed around. There is actually not a whole lot of data to defend this view; it is best viewed as faith-based reasoning. This topic is particularly interesting in the case of Japan. I am somewhat agnostic on this issue; I do not see particular risks from manipulating the yield curve in the current environment, yet I can see some plausible dangers. This article was triggered by the...
Read More »Bill Mitchell — Bank of Japan once again shows who calls the shots
On August 1, 2018, the 10-year Japanese government bond yield, shot through the roof (albeit a very low one). Yields shifted from 0.05 per cent on July 31 to 0.129 on August 1, which was the largest one-day rise since July 29, 2016 (when the yield rose 0.101 per cent). The Financial Times article (August 1, 2018) – Japanese bond market jolted as traders test BoJ resolve – wrote that “traders wasted no time in testing the Bank of Japan’s resolve to loosen its target range for the debt...
Read More »Brian Romanchuk — The Yield Curve Provides Limited Economic Information
The relentless flattening of the Treasury yield curve has been a topic of ongoing debate -- is this a signal that a recession is near? The key to interpreting the flattening is that bond market participants are not paid to to anticipate economic outcomes (outside the corner case of the inflation-linked market), rather to anticipate the path of short-term rates (and the term premium). The flattening yield curve tells us that market participants (on average) believe that we are near the end...
Read More »Brian Romanchuk — Initial Comments On Zero Rate Policy And Inflation Stability
This article represents my initial comments on the question of the stability implications of locking interest rates at zero. Martin Watts, an Australian academic, had an interesting presentation at the first Modern Monetary Theory (MMT) conference (link to videos of presentations). Although MMT fits within a broad-tent definition of "post-Keynesian" economics, there are still sharp debates with other post-Keynesians. One topic of debate is the effect of permanently locking the policy...
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