I have consolidated my blog and my website on squarespace. If all goes according to plan: you will be able to find new and existing blog posts HERE as well as a link to my updated shiny new website. Fingers crossed: this should be up and running in the next 72 hours if all goes according to plan. 😎
I have just completed a new working paper, ”Asset Prices in an Economy with Two Types of People”. You can find it as an NBER
working paper here, as a CEPR discussion paper here, or directly from my website here. The paper shows how asset price volatility may be driven by non-fundamental shocks.
The paper constructs a formal mathematical model to capture the idea that free trade in capital markets does not lead to optimal outcomes.[1] We would all be better off if national governments were to regulate the capital markets through counter cyclical trades of debt for equity.
In a second new working paper, "The Theory of Unconventional Monetary Policy" coauthored with Pawel Zabczyk of the Bank of England, we show how those regulations would work in a simple two-period general equilibrium model. As Ben Bernanke said in the aftermath of the Great Recession; "Quantitative Easing works in practice but not in theory". We show in this paper why it works in theory. The paper is available from the NBER here, CEPR here and from my website here.
This is my first post for a while: so, sorry if you missed me. I've been busy writing books and papers. I received the final galley proofs this week for my new book, Prosperity for All: How to Prevent Financial Crises. You can pre-order it from OUP or Amazon and it will ship on September 1st.
I also finished three new working papers that I will say more about in future posts.
I've been consistent in my criticisms on this blog of attempts by Paul Krugman to revive the IS-LM framework. That's not because I'm opposed to IS-LM as it appeared in its earliest incarnations; the papers by John Hicks and Alvin Hansen. It's because of the bastardization of the Keynesian agenda by what my friend and teacher David Laidler referred to as North American Keynesianism. In my view, articulated in Prosperity for All, macroeconomics went off the rails in 1955 when Samuelson introduced the neoclassical synthesis in the third edition of his textbook, Economics: An Introductory Analysis. (See Pearce and Hoover for a great discussion of the influence of Samuelson's text and my book How the Economy Works).
