What is Payment on Reserves Process?

The payment on reserve process proposed by Robert Hall and Ricardo Reis is a way of remunerating reserves which would give the central bank better control over the price level.The basic intuition is that...

What is the Saturated Level of Reserves?

The above figure portrays the market for Reserves. On the vertical axis is the real price of reserves, which is not the nominal interest rate paid by the central bank, but the relative opportunity...

Central Bank’s Balance Sheet and the Rise of Reserves

The above figure shows the balance sheet of four major central banks from 2005 to 2015. Above the horizontal axis is the asset side of the balance sheet, below is the liability side. All...
Raghuram Rajan at AFF 2017

Rajan on what “New Rule for Monetary Game” actually means

Raghuram Rajan, former Governer of Reserve Bank of India and now Professor of Finance at Chicago Booth, visited Hong Kong and gave a keynote speech in Asian Financial Forum last week. I am lucky...

ECB’s Praet on Eurozone’s Secular Stagnation

Peter Praet, Executive Board Member of the ECB:Central to this debate is whether the slow growth can be attributed to cyclical – and hence ultimately transitory – factors related to the financial crisis,...

Blanchard’s “Policy Model” v “Theory Model”

Back in November last year, Professor Olivier Blanchard discussed with me about his view that there should be four types of macroeconomics, and "theory models" like DSGEs is just one of them. Here is...

Bernanke on Trump’s Fiscal Policy 

Ben Bernanke has a new blog post on Brookings. The focus of the post is to explain "the large difference between the reactions of the Fed and the markets to the change in fiscal prospects since the election"

What is Hysteresis?

Hysteresis is referred to the hypothesis that recessions may have permanent effects on the level of output relative to trend.In a recent research “Inflation and Activity – Two Explorations and their Monetary Policy Implications”,...

What is New Keynesian DSGE Models?

DSGE stands for “dynamic stochastic general equilibrium.”. As Blanchard described in his note “Do DSGE Models Have a Future?” , DSGE Models have three major modeling characteristics.As its name suggested, one important aspect...
Where is the General Theory of the 21st Century Cover

What Macroeconomists seems to agree with each others… according to Blanchard

After a round of hot debate on the problem of DSGE model and the trouble of macroeconomics initiated by Paul Romer, heavyweight macroeconomist Olivier Blanchard comment on the usefulness of DSGE model, again.[getty...