tag:blogger.com,1999:blog-6837159629100463303.post1561038462349661597..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: A neo-Fisherite rebellion? Yes, please.Jason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-6837159629100463303.post-6048347608436007802014-05-07T16:21:53.999-07:002014-05-07T16:21:53.999-07:00Because in ITE** there isn't so much of a clif...Because in ITE** there isn't so much of a cliff. The response of the price level to monetary policy <a href="http://informationtransfereconomics.blogspot.com/2014/03/the-diminishing-effect-of-monetary.html" rel="nofollow">just kind of fades away</a> (becoming ever so slightly negative) when the base is large compared to NGDP. I like to imagine it as saturating an economy with money so changes in the amount of money (up or down) don't do very much. Flooding the engine may be another good analogy.<br /><br />The only things that are deflationary in that case are <a href="http://informationtransfereconomics.blogspot.com/2014/02/extracting-shocks-again.html" rel="nofollow">NGDP shocks</a> (I don't have a specific model, but large changes in government spending and financial crises could play a role).<br /><br />**I've used that acronym before referring to the "framework" so that's fine -- I also use ITM (for Model) for the specific model of the price level, interest rates, etc.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-79688167618504957082014-05-07T15:33:06.098-07:002014-05-07T15:33:06.098-07:00When Williamson first brought to the fore what bec...When Williamson first brought to the fore what became "neo-Fisheritism" last Winter, Nick Rowe, Brad DeLong and Paul Krugman all wrote exasperated posts wondering what was wrong with how macro was being taught (that's when Krugman and DeLong brought up the stability issue). Rowe made an interesting statement in his post saying "he didn't know" why we haven't fallen off a deflationary cliff (essentially), and so when this whole business came up again this spring, I asked him again if he still didn't know. He confirmed that's the case:<br />http://macromarketmusings.blogspot.com/2014/04/the-cure-for-neo-fisherism-history.html?showComment=1398728940143#c614044474476052306<br />Does Information Transfer Economics (do you mind if I call this ITE?) have an explanation?Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-83623510062088550772014-05-03T23:27:08.782-07:002014-05-03T23:27:08.782-07:00Thanks Jason.Thanks Jason.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-9930745032591696452014-05-03T15:12:10.094-07:002014-05-03T15:12:10.094-07:00Movement along either axis tends to follow the tim...Movement along either axis tends to follow the time variable fairly well (NGDP and the monetary base are log-linear functions) so yes, but as indicated by the years on the blue line in the graph above, this is not perfect. I actually had to do some old school differential geometry to take the time derivatives with respect to the blue path (I discussed it <a href="http://informationtransfereconomics.blogspot.com/2013/10/the-1970s.html" rel="nofollow">here</a>).<br /><br />Regarding the red/white surface in the upper right corner, you can click on it an it takes you to the reference post. The relative vertical position of the two surfaces is not relevant (they measure different things, interest rate and price level); the curve of intersection is not meaningful. However, the domain (MB, NGDP) is common to both so they can both be projected onto the same graph shown in the post above.<br /><br />I realized there is no explicit "M0" in the US, which is why I have tended to call MB without reserves (the <a href="http://research.stlouisfed.org/fred2/series/MBCURRCIR" rel="nofollow">currency component of the base</a>) "M0" in quotation marks -- it's called notes and coins in the UK. It represents actual printed currency, but there is no official monetary aggregate name for it in the US.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-48999143376533727782014-05-03T15:00:18.253-07:002014-05-03T15:00:18.253-07:00I discussed the stability of equilibrium stuff at ...I discussed the stability of equilibrium stuff at the time in this two-parter:<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2013/12/a-delicate-balance-part-1.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2013/12/a-delicate-balance-part-1.html</a><br /><a href="http://informationtransfereconomics.blogspot.com/2013/12/a-delicate-balance-part-2.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2013/12/a-delicate-balance-part-2.html</a><br /><br />Overall, I have an issue with what is meant by equilibrium in that discussion. I buy the Krugman argument and his take on Williamson on the basic economics (inside that model). In the information transfer model, any state with a given NGDP and monetary base is "stable" in the sense that small perturbations around it leave you nearby. But a given growth rate r and inflation rate i cannot be sustained over any period of time (the second post above).<br /><br />Here is some more information:<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2013/12/deflationary-monetary-expansion.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2013/12/deflationary-monetary-expansion.html</a><br /><br />I'm sympathetic to Williamson opening the possibility to deflationary monetary expansion, but it's one of the more controversial aspects of the information transfer model.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-83682064310244171692014-05-03T14:43:23.582-07:002014-05-03T14:43:23.582-07:00Mathematica. Actually I was trying to find a good ...Mathematica. Actually I was trying to find a good repository for all the codes/data I use in the blog ... Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-8956875865442396412014-05-03T13:30:24.841-07:002014-05-03T13:30:24.841-07:00"** This graph is just the 2D projection of t..."** This graph is just the 2D projection of the 3D graph that is at the upper right of every blog page. The red lines are the level curves of the red "interest rate surface" r = r(M0, NGDP) and the gray lines are the level curves of the white "price level surface" P = P(M0, NGDP)."<br /><br />Thanks for explaining that.... I always wondered what that was. Now in the 3D version the red surfaced intersects the white price level surface along.... what curve? The current (nominal?) interest rate?<br /><br />"Holding interest rates low runs runs you into low inflation faster than holding rates higher."<br /><br />Faster? wrt to what? movement from left to right along the log(M0) axis?k<br /><br />Also, I found out recently that Wikipedia is wrong (see their article on the "Money Supply"): there is not such thing as M0 in the United States and apparently there never has been: there's MB (monetary base) and M1 and M2 etc. I can give you a reference if you're interested.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-3225104897912564552014-05-03T13:23:41.187-07:002014-05-03T13:23:41.187-07:00Jason, how do you read this?:
http://everydayecon....Jason, how do you read this?:<br />http://everydayecon.wordpress.com/2014/04/28/on-pegging-the-interest-rate/<br />Williamson backing away from the Neo-Fisherite stance? I found it here:<br />http://macromarketmusings.blogspot.com/2014/04/the-cure-for-neo-fisherism-history.html<br /><br />What about the stability analysis argument that Krugman, DeLong, Rowe and Beckworth put forward? I'll find the links if you're not familiar with those arguments. Basically they're saying that Williamson's equilibrium analysis was flawed because he wasn't considering the stability of the equilibrium.<br /><br />Edward Lambert, however, seems to be arguing that Williamson's equilibrium is stable here:<br />http://angrybearblog.com/2014/04/is-the-fisher-effect-stable-or-unstable.htmlTom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-49068301281133730992014-05-03T13:06:51.043-07:002014-05-03T13:06:51.043-07:00Jason, what do you do your simulations/calculation...Jason, what do you do your simulations/calculations with? Matlab?Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.com