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You think economists at the Federal Reserve don't know all of those things?
by AngrySkillzz 11y ago
You think economists at the Federal Reserve don't know all of those things?
- gutnor 11y agoIsn't that the point of the article ? They had a nice curve that didn't need to include those elements because everything else followed so they ended up with a nice equation with only money supply and interest rate in it that controlled the key to heaven. Now they need a new model, probably one or more extra variable in the existing one. However we are at macro-economic level, that's not obvious how to put parent observation in a number. But the Bank of Japan former director is more or less saying something like that: not all money is equal, money from saving does not trigger the same boost to the economy as money from wage. Or maybe it is just a moral stuff like they suggest too - inflation is a measure of optimism - pessimistic player money just drive inflation down.
- AngrySkillzz 11y agoIt's naive to think that the Fed just uses some simple Taylor rule or Philips curve model in their policy decisions. Along with having a full staff of economists and research assistants doing econometrics, they have sophisticated microfoundational computational models like the NY Fed's DSGE model[1] (that they recently open-sourced in Julia[2]). There's a lot more to macroeconomic prediction than just "adding another variable." [1] http://libertystreeteconomics.newyorkfed.org/2014/09/forecasting-with-the-frbny-dsge-model.html http://libertystreeteconomics.newyorkfed.org/2014/09/forecas... [2] https://github.com/FRBNY-DSGE/DSGE.jl https://github.com/FRBNY-DSGE/DSGE.jl