I gave some comments on “Global Imbalances too Currency Wars at the ZLB,” past times Ricardo J. Caballero, Emmanuel Farhi, too Pierre-Olivier Gourinchas at the conference, “International Monetary Stability: Past, Present too Future”, Hoover Institution, May five 2016. My comments are here, the paper is here
The newspaper is a rattling clever too detailed model of "Global Imbalances," "Safe property shortages" too the cypher bound. H5N1 country's inability to "produce prophylactic assets" spills, at the cypher bound, across to output fluctuations to a greater extent than or less the world. I disagree amongst only virtually everything, too outline an option footing view.
H5N1 quick overview:
Why are involvement rates then low? Pierre-Olivier & Co.: countries can't “produce prophylactic stores of value”
This is exclusively a fiscal friction. Real investment opportunities are unchanged. Economies can’t “produce” plenty pieces of paper. Me: Productivity is low, then marginal production of uppercase is low.
Why is increment then low? Pierre-Olivier: The Zero Lower Bound is a "tipping point." Above the ZLB, things are fine. Below ZLB, the extra saving from inwards a higher house drives output gaps. It's all gaps, demand. Me: Productivity is low, involvement rates are low, then output too output increment are low.
Data: I Don't meet a large alter inwards dynamics at too earlier the ZLB. If anything, things are to a greater extent than stable similar a shot that key banks are stuck at zero. Too slow, but stable. Gaps too unemployment are down. It's non "demand" anymore.
Exchange rates. Pierre-Olivier "indeterminacy when at the ZLB” induces extra volatility. Central banks tin flaming sweat to "coordinate expectations." Me: FTPL gives determinacy, but volatility inwards telephone substitution rates. There is no large divergence at the ZLB.
Safe property Shortages. Pierre-Olivier: driven past times a large volume of infinitely conduct chances averse agents. Risk premia are thus only equally high equally inwards the crisis. Me: Risk premia appear low. And doesn't everyone complain virtually "reach for yield" too low conduct chances premia?
Observation. These ingredients are plausible virtually autumn 2008. But that's nearly viii years ago! At some signal nosotros receive got to instruct past times fiscal crisis theory to not-enough-growth theory.
But, finally, praise. This is a bang-up paper. It clearly articulates a footing view, too yous tin flaming aspect at the assumptions too mechanisms too create upwards one's hear if yous intend they brand sense. I am inwards awe that Pierre-Olivier & Co. were able to brand a coherent model of these buzzwords.
But bang-up theory is bang-up theory. To a critic, the assumptions are necessary also equally sufficient. I read it equally a bright negative paper, almost a parody: Here are the extreme assumptions that it takes to justify all the policy blather virtually "savings gluts" "global imbalances" "safe property shortages" too then on. To me, it shows only how empty the thought is, that our policy-makers empathise whatever of this materials at a scientific, empirically-tested level, too should receive got rigid actions to get-go the supposed problems these buzzwords allude to.
I promise this gustation gets yous to read my comments and the paper.
The newspaper is a rattling clever too detailed model of "Global Imbalances," "Safe property shortages" too the cypher bound. H5N1 country's inability to "produce prophylactic assets" spills, at the cypher bound, across to output fluctuations to a greater extent than or less the world. I disagree amongst only virtually everything, too outline an option footing view.
H5N1 quick overview:
Why are involvement rates then low? Pierre-Olivier & Co.: countries can't “produce prophylactic stores of value”
This is exclusively a fiscal friction. Real investment opportunities are unchanged. Economies can’t “produce” plenty pieces of paper. Me: Productivity is low, then marginal production of uppercase is low.
Why is increment then low? Pierre-Olivier: The Zero Lower Bound is a "tipping point." Above the ZLB, things are fine. Below ZLB, the extra saving from inwards a higher house drives output gaps. It's all gaps, demand. Me: Productivity is low, involvement rates are low, then output too output increment are low.
Data: I Don't meet a large alter inwards dynamics at too earlier the ZLB. If anything, things are to a greater extent than stable similar a shot that key banks are stuck at zero. Too slow, but stable. Gaps too unemployment are down. It's non "demand" anymore.
Exchange rates. Pierre-Olivier "indeterminacy when at the ZLB” induces extra volatility. Central banks tin flaming sweat to "coordinate expectations." Me: FTPL gives determinacy, but volatility inwards telephone substitution rates. There is no large divergence at the ZLB.
Safe property Shortages. Pierre-Olivier: driven past times a large volume of infinitely conduct chances averse agents. Risk premia are thus only equally high equally inwards the crisis. Me: Risk premia appear low. And doesn't everyone complain virtually "reach for yield" too low conduct chances premia?
Observation. These ingredients are plausible virtually autumn 2008. But that's nearly viii years ago! At some signal nosotros receive got to instruct past times fiscal crisis theory to not-enough-growth theory.
But, finally, praise. This is a bang-up paper. It clearly articulates a footing view, too yous tin flaming aspect at the assumptions too mechanisms too create upwards one's hear if yous intend they brand sense. I am inwards awe that Pierre-Olivier & Co. were able to brand a coherent model of these buzzwords.
But bang-up theory is bang-up theory. To a critic, the assumptions are necessary also equally sufficient. I read it equally a bright negative paper, almost a parody: Here are the extreme assumptions that it takes to justify all the policy blather virtually "savings gluts" "global imbalances" "safe property shortages" too then on. To me, it shows only how empty the thought is, that our policy-makers empathise whatever of this materials at a scientific, empirically-tested level, too should receive got rigid actions to get-go the supposed problems these buzzwords allude to.
I promise this gustation gets yous to read my comments and the paper.
