The Kuroda recovery will be about domestic demand and not about exports

There has been a lot of focus on the fact that USD/JPY has now broken above 100 and that the slide in the yen is going to have a positive impact on Japanese exports. In fact it seems like most commentators and economists think that the easing of monetary policy we have seen in Japan […]

The exchange rate fallacy: Currency war or a race to save the global economy?

This is from CNB.com: Faced with a stubbornly slow and uneven global economic recovery, more countries are likely to resort to cutting the value of their currencies in order to gain a competitive edge. Japan has set the stage for a potential global currency war, announcing plans to create money and buy bonds as the […]

Guido Mantega be careful what you hope for

A friend wrote this on Facebook (I paraphrased it slightly): It’s a bit ironic that the large emerging markets countries, which complained about monetary easing in the US (Brazilian Finance Minister Guido Mantega called it ‘currency war’) now these countries are the hardest hit when talks about tapering are now hitting the headlines… Be careful […]

Mussolini’s great monetary policy failure

Benito Mussolini is known for having been a horrible warmongering fascist dictator. However, he was also responsible for a major failed monetary experiment – the so-called Battle of the Lira. Hence, in 1926 Mussolini announced a major revaluation of the Italian Lira as part of his general plan to revive the greatness of Italy. This […]

The root of most fallacies in economics: Forgetting to ask WHY prices change

Even though I am a Dane and work for a Danish bank I tend to not follow the Danish media too much – after all my field of work is international economics. But I can’t completely avoid reading Danish newspapers. My greatest frustration when I read the financial section of Danish newspapers undoubtedly is the […]

The Cuban missile crisis never happened (or at least the stock markets didn’t care)

According to the history books one of the most scary events during the Cold War was the so-called Cuban missile crisis, where according to the history books the world was on the brink of nuclear armageddon. However, the history books might be wrong – at least if you look at what happened to the US […]

Is Karnit Flug jeopardizing Stan Fischer’s “straight line policy”? Not yet, but…

It is no secret that I think that Stanley Fischer did a good job as governor of the Bank of Israel from 2005 to 2013. He basically saved Israel from the Great Recession by essentially keeping Israeli nominal GDP “on a straight line”. During his time in office the Israeli NGDP level diverged no more […]

Confused central banks and the need for an autopilot

For somewhat more than a decade I have regularly been watching monetary policy decisions from different central banks around the world. Most ‘modern’ central banks in the world announce changes to monetary policy once every month. Mostly these events are pretty much none-events – the central banks do not surprise markets much. However, over the […]

The ZLB – not the BoJ – should worry the BoK

The continued sharp weakening of the Japanese yen is beginning to worry policy makers (and commentators) in South East Asian and that is especially the case in South Korea. Just see this comment from Andy Mukherjee over at Reuters Breakingviews: Japan’s weak yen policy could be South Korea’s biggest economic enemy this year. The strengthening won, […]

A framework for applied macroeconomic forecasting (part 2)

In my previous blog post I outlined a four-equation model to be used for real-world macroeconomic forecasting. In today’s post I will look a bit closer at one of these equations – or rather I will discuss how we can think about forecasting the supply side of the economy. So we basically want to understand […]