Finance Basic To Advance Level Knowledge

The IMF reports in the latest WEO that the world has a low inflation problem: By 2015, inflation rates in more than 85 percent of a broad sample of more than 120 economies were below long-term expectations, and about 20 percent were in deflation—that is, facing a fall in the aggregate price level for goods and services (Figure 3.2). While the recent decline in inflation coincided with a sharp drop in oil and other commodity prices, core inflation—which excludes the more volatile categories of food and energy prices—has remained below central bank targets for several consecutive years in most of the major advanced economies. Here is the IMF's figure that nicely summarizes this development: This figure shows this trend toward low inflation started around the time of the Great Recession and has only grown. Given its global nature, I am going to call this development the loflation pandemic . So what is behind it? Here is the IMF's explanation: Economic slack and chang...

My latest Macro Musings podcast is with Morgan Ricks. Morgan is a law professor at Vanderbilt University where he specializes in financial regulation. Between 2009 and 2010, he was a senior policy adviser at the U.S. Treasury Department where  he dealt with financial stability initiatives and capital markets policies related to the financial crisis. Before joining the Treasury Department, Morgan was a risk-arbitrage trader at Citadel Investment Group, a Chicago-based hedge fund. He previously served as a vice president in the investment banking division of Merrill Lynch & Co., where he specialized in strategic and capital-raising transactions for financial services companies. Morgan is also the author of a new book “ The Money Problem: Rethinking Financial Regulation ”. He joined me to discuss his new book and its implications for policy. His book is timely and adds some needed perspective to understanding the Great Recession. I happened to review his book for Nati...

The New Abenomics Program The Bank of Japan (BoJ)  just launched  a new phase in its monetary easing program popularly known as Abenomics. It is doing so in the hopes of shoring up economic growth. This monetary program until today had involved a targeted expansion of the monetary base at ¥80 trillion a year matched by ¥80 trillion in government bond acquisitions. There were also targeted purchases of ETFs and REITs on a smaller scale. 1 The new phase unveiled today consist of three key developments. First, the BoJ will target the 10-year government bond interest rate at zero percent. Second, it will aim to overshoot its 2% inflation target so that it is truly symmetric. Third, it will drop its quantity target for the monetary base and simply make its expansion conditional on the inflation overshoot. Everything else in Abenomics remains roughly the same.  So has the Bank of Japan finally mastered its monetary conditions in a way that will spur economic gr...

My latest Macro Musings podcast is with Ryan Avent. Ryan is a columnist at The Economist magazine. He has previously been the news editor, economics correspondent, and online economics editor for The Economist . He is the author of The Gated City . His work has appeared at the Journal of Economic Geography, the New York Times, the Washington Post, the New Republic, Bloomberg, Reuters, and many other places. Ryan has a new book that just came out titled “ The Wealth of Humans: Work Power, and Status in the 21st Century ” He joined me to talk about his new book, his work, and some of the pressing macroeconomic issues of the day. We begin our conversation by covering what it is like to be a journalist at The Economist . We then move on to his new book, which makes the case that the economy is undergoing a transformative change because of the digital revolution. Ryan notes that while this change is ultimately a plus for the longrun, over the short-to-medium run it present c...

   My latest Macro Musings podcast is with Michael Bordo. Michael is a Professor of Economics at Rutgers University and a distinguished visiting fellow at the Hoover Institution at Stanford University. He has been a visiting scholar at numerous central banks and is a research associate of the National Bureau of Economic Research. Michael has published widely in the field of monetary economics and monetary history. Michael  joined me to talk about both recent and historical cases in monetary economics.  We began by reviewing the Great Recession and what contributed to it. Among other things, we address whether growing inequality contributed to the recession. We also considered the evidence for the claim that recessions caused by financial crises necessarily lead to slow recoveries. The discussion then turned to Canada and why it did not have a banking crisis during the Great Recession and why its contraction was far milder than the one in the United States. ...

My latest Macro Musings podcast is with Peter Ireland. Peter is a professor of economics at Boston college, a research associate at the National Bureau of Economic Research, and a member of the shadow open market committee. Peter has also been a visiting scholar at numerous Federal Reserve banks. Peter has published widely in monetary economics and has been on the editorial board of a number of top journals. Peter joins me to talk about monetary policy. We begin our conversation by talking about his journey into macroeconomics. Peter did his graduate work at the University of Chicago where he studied under Bob Lucas, John Cochrane, and Michael Woodford. He shares how the spirit of Milton Friedman was very much alive during his time there and what that meant for learning macroeconomics.  We then discuss the operational side of central banking by reviewing the meaning and role of the instruments, intermediate targets, and ultimate goals of monetary policy. Among other thi...