Brian Romanchuk — NGDP Futures Convertibility -- Unworkable?

Wonkish and only interesting if you are aware of the proposals and controversy. But if you are, it's a must-read. Sumner and Woolsey are economists and don’t have a good trip on finance and how it works, as Mike Sankowski has pointed out previously. Brian follows up on the latest proposal.

Bond Economics
NGDP Futures Convertibility -- Unworkable?
Brian Romanchuk

John Barrdear and Michael Kumhof — The macroeconomics of central bank issued digital currencies

Abstract

We study the macroeconomic consequences of issuing central bank digital currency (CBDC) — a universally accessible and interest-bearing central bank liability, implemented via distributed ledgers, that competes with bank deposits as medium of exchange. In a DSGE model calibrated to match the pre-crisis United States, we find that CBDC issuance of 30% of GDP, against government bonds, could permanently raise GDP by as much as 3%, due to reductions in real interest rates, distortionary taxes, and monetary transaction costs. Countercyclical CBDC price or quantity rules, as a second monetary policy instrument, could substantially improve the central bank’s ability to stabilise the business cycle.

Key words: Distributed ledgers, blockchain, banks, financial intermediation, bank lending, money creation, money demand, endogenous money, countercyclical policy. 

  Bank of England
Staff Working Paper No. 605: The macroeconomics of central bank issued digital currencies
John Barrdear and Michael Kumhof

Brian Romanchuk — The Yield Curve And The Cycle

The slope of the yield curve is a topic of wide interest in bond market economics. It can be viewed as an economic indicator, or an instrument to be traded. Within this report, the focus is on how and why yield curve slopes act as economic indicators. The advent of ultra-low interest rates has made some interpretations of the yield curve untenable, but the yield curve is still useful as an indicator. (This article is an excerpt from Interest Rate Cycles: An Introduction.)

Bond Economics
The Yield Curve And The Cycle

Brian Romanchuk

Brian Romanchuk — Ending The "Neo-Fisherian" Debate

One of the stranger spectacles of mainstream macro is the inability to agree on what should be obvious -- will inflation rise or fall if the central bank raises the (nominal) interest rate? If it were possible to cleanly find the solutions for Dynamic Stochastic General Equilibrium (DSGE) models, this could easily be determined by applying a level shift to a sensible central bank reaction function (such as a Taylor Rule).
(As many of my readers are post-Keynesian, I will note that this article follows the convention of mainstream economics, and ignore the insights of post-Keynesian analysis. As a result, I am just writing here about the analysis of DSGE models, and not how economies in the real world might operate.)

If this can't be decided empirically in a compelling way using the operative models, the entire debate is pretty clearly bonkers.

Bond Economics
Ending The "Neo-Fisherian" Debate
Brian Romanchuk