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Tag Archives: Monetary Policy

Bill Mitchell — A former UK Chancellor attempts to save face and just becomes confused

On May 6, 1997, just 4 days after coming to office in what was to become Tony Blair’s retrogressive regime, the then British Labour Chancellor Gordon Brown announced that Labour would legislate the so-called independence of the Bank of England. The BBC claimed this was the “most radical shake-up in the bank’s 300-year history”, which gave “the bank freedom to control monetary policy”. Gordon Brown’s legacy to the British people, of course, is in his famous ‘light touch’ regulation, which he...

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Bill Mitchell — Mainstream macroeconomics credibility went out the window years ago

The Vice President of the European Central Bank, Vítor Constâncio, gave the opening speech – Developing models for policy analysis in central banks – at the Annual Research Conference, Frankfurt am Main, on September 25, 2017. Last time I heard Constâncio speak in person, in Florence 2015, he was in typical Europhile central bank denial. He thought the Eurozone was fine, a great success given the low inflation, inferring that the ECB’s conduct had something to do with that. He didn’t talk...

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Brian Romanchuk — The Price Level Does Not Exist

It appears to be a mistake to refer to the price level when discussing the theoretical properties of an economy; at best, there are a few price levels in play at a given time. If we are referring to the measured level of a price index, such as the Consumer Price Index (CPI) there is no difficulty, however this aggregate price index should not be expected to correspond to any useful theoretical construct. This article explains my logic, and then looks at the practical implications of what...

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Do Phillips Curves Conditionally Help to Forecast Inflation?

AbstractThis paper reexamines the forecasting ability of Phillips curves from both an uncon- ditional and conditional perspective by applying the method developed by Giacomini and White (2006). We find that forecasts from our Phillips curve models tend to be unconditionally inferior to those from our univariate forecasting models. Significantly, we also find conditional inferiority, with some exceptions. When we do find improvement, it is asymmetric – Phillips curve forecasts tend to be...

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Edward Harrison — The limits of monetary policy in today’s fiat currency world

First, let me say that two primary goals of macro policy everywhere and always should be full employment and stable prices. Why? I am looking at this purely through the lens of the political economy – thinking about how our fellow citizens live and breathe the economy and how government should be designed to respond to their needs. On the jobs side, we have seen that high unemployment leads to political instability, economic turmoil and conflict. When you have masses of people unemployed or...

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The Libor witch hunt

Since I wrote my post about the Bank of England's alleged manipulation of Libor before and during the financial crisis, something of a witch hunt seems to have developed. Certain people with axes to grind have jumped on the bandwagon set in motion by the BBC's Andy Verity and are aggressively promoting their view that the Bank of England's behaviour was fraudulent. Their argument is that the Bank of England has no business attempting to influence market rates, that those at the Bank who...

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The Alternative Federal Budget 2017

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Finance Minister Bill Morneau on the Dangers of Bank of Canada Funding

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