February 19, 2012
A post by Dave Backus and Tim Kehoe
We talked last night about how differently the crises played out in Mexico and Greece. The question, of course, is why, but we’ll leave that one for you. Here are some of the specifics — and keep in mind that Mexico’s economy is roughly five times the size of Greece’s.
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Posted in Global Economy, International business | Leave a Comment »
Tags: euro, greece, Mexico, debt, crisis, bailout
February 3, 2012
The European Union is one of the grand experiments of our time,with countries that had been at war earlier in the 20th century agreeing to closer economic ties. These ties have included, so far, free trade, free mobility of labor, and even (for some) a common currency. The question, then and now, is which activities to manage centrally, and which to leave up to local control.
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Posted in Global Economy, Current events, International business | Leave a Comment »
Tags: European Union, bailouts, fiscal policy
January 31, 2012
A post by Stan Zin
I saw in the news today that Starbucks has entered a joint venture with Tata, one of India’s most respected business groups, to open coffee shops in India. I don’t know if India has an urgent need for coffee, but it reminded me that international ventures often run across obstacles that wouldn’t cross your mind. One of my favorite stories concerns Starbucks’ ill-fated attempt to enter the Norwegian market.
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January 31, 2012
A post by Larry White
Paul Romer’s post about the differences between the FAA and financial regulators got me thinking. Are the latter so bogged down in detail that they miss the point? Do they lack bottom-line responsibility?
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Posted in Current events, Firms and Markets, Global Economy | Leave a Comment »
Tags: banks, FAA, Federal Reserve, financial markets, financial regulation, institutions, markets, safety, soundness
January 26, 2012
A post by Paul Romer
Tyler Cowen recently pointed to a paper of mine on financial regulation and the dynamics of rules that I wrote for the IMF. Dave Backus and John Cochrane then blogged their thoughtful reactions. I take up the discussion about financial regulation in a separate post, but here I want to focus on the role of the blogosphere in the scientific process.
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Posted in Global Economy | 6 Comments »
January 26, 2012
A post by Paul Romer
I suggested in a recent paper that regulation of financial institutions could look less like the legalistic regulation at OSHA and more like the regulation at the FAA. Dave Backus asked what it would look like in practice. John Cochrane, the Chicago Booth financial economist and accomplished glider pilot, expressed doubt based on his own experience with the FAA.
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Posted in Current events, Global Economy | 3 Comments »
January 26, 2012
A post by Kim Schoenholtz
Today, the U.S. Federal Open Market Committee (FOMC) announced a major update of its framework for setting monetary policy. While the FOMC emphasizes its “dual mandate” (regarding inflation and employment), the new framework is fully consistent with an inflation-targeting central bank.
Posted in Global Economy, Uncategorized | Leave a Comment »
Tags: Bernanke, dual mandate, fed, FOMC, inflation targeting, monetary policy, Taylor rule
January 23, 2012
Monty Hall, of
Let’s Make a Deal fame, aimed for suspense, but he knew that a little transparency could add to the tension of a game show. So he told contestants what prize was behind the winning door, but not which door it was. As they selected among the three doors, anxious contestants provided titillation for TV voyeurs. [Unintentionally, Monty provided a great lesson in probability: See
herewhy it’s optimal for a contestant to switch the door selection after Monty (raising the suspense) reveals that an unselected door does not contain the prize.]Monetary policy should not be designed to heighten suspense, nor should it be aimed at voyeurs. Yet, as central bankers around the world now affirm, transparency usually is desirable because it makes policy more effective.
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Tags: monetary policy, fed, FOMC, Bernanke, transparency, credibility, forecast, interest rate
January 22, 2012
“If we persist with a legalistic rule setting process, the opportunists will thrive. We will settle into a fatalistic acceptance of systemic financial crises, flash crashes, and ever more exotic forms of opportunism.”
Posted in Global Economy, Original Research | 4 Comments »
Tags: FAA, financial regulation, OSHA, Paul Romer, regulation, rules