Economic Policy

The Institute for New Economic Thinking takes a broad view of economic research and supports it in many ways: through its main grant program, through working groups it organizes, and via conferences, panels, and other smaller gatherings of scholars across the globe.

Institute scholars normally publish their work in journals and books. While many – but far from all – of this work appears in working papers sponsored by the Institute and other leading research forums, the Institute also attempts to make its research results accessible to a wider public on its website. Below is a sampling of interviews featuring Institute scholars explaining the significance of their research in non-technical terms.

INET Spotlight: Rob Johnson - The Coming Crisis in Municipal Bankruptcy

Where’s the next economic crisis?

Look to cash-strapped state and local governments, Tom Ferguson and INET’s Rob Johnson write in today’s Los Angeles Times. Read more

Maynard's Revenge: A Review



Below is a revised version of a talk I gave at the New School University, at a conference to launch Lance Taylor's latest book.  The date of the event was April 28, 2011, more than a year ago, and the delay in revision was entirely my fault--overcommitment and pressing deadlines on many fronts.  Sorry about that. 

Lance Taylor, Maynard’s Revenge:  The Collapse of Free Market Macroeconomics (Harvard 2010). Read more

The Clash of Economic Ideas: A Review

When Paul Krugman paints John Maynard Keynes as a pioneering critic of dominant free-market economics, he exaggerates wildly, both about the rigidity of orthodoxy and about the pioneering character of Keynes’ critique.  So says Larry White in his book The Clash of Economic Ideas and, speaking as a sometime historian of economic thought, I am inclined to agree.   It's less black and white than Krugman makes it out to be. Read more

@INET Berlin: Doing the actual work

While yesterday presented a number of frontrunning scientists discussing current economics and state of the economy in general, academic terms, today starts with ECB executive board member Asmussen. Interstingly, the ECB is quite a bit more positive about the development of the crisis and about the measures taken by politicians. But maybe that's just politics. It also gets more technical. Key message: 1) LTRO bought time, it is not the solution, 2) Now politicians should adjust budgets to "sustainable paths" - but no timeline given. Who could disagree?
But then, briefly and only at the end, a plea for fiscal and political integration, addressed at Germany principally. Nice.

UK Budget Appeals to Adam Smith's Approach to Taxes... Sort of

Yesterday the Chancellor of the Exchequer (or UK 'finance minister') gave his annual budget speech where UK fiscal policy is set for the coming years. In announcing his tax changes he name-dropped Adam Smith as the inspiration for his objectives on tax:

Two hundred years ago, Adam Smith set out the four principles of good taxation - and they remain good principles today. Taxes should be simple, predictable, support work, and they should be fair. The rich should pay the most, and the poor least.  George Osbourne, 21 March 2011

Overview of PBoC Instruments

As a seminar focusing on China’s monetary policy, we’ve always been interested in the use of monetary instruments by People’s Bank of China (PBoC). In this posting, we’d like to wrap up the core elements of our past discussions on PBoC instruments.

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Interday and Intraday Movement of USDCNY

Suggested by our instructor Logan, we draw the following chart, which decomposes onshore USDCNY price movements into two parts, interday and intraday.


            Source: Bloomberg. Data as of Dec 16, 2011.

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Foreign Exchange Purchases: A Burden for Chinese Banks

Chinese FX reserves have reached $3.2 trillion. The majority of the FX reserves are accumulated through financial institutions, such as commercial banks, purchases of dollars from corporations and households. As an article in September 26th edition of the South China Morning Post puts it:

Let's look at one of these assets "left on bank balance sheets", an item obscurely classified in the official statistics as "financial institutions position for forex purchases". This category of assets now amounts to 25.3 trillion yuan.

Foreign Exchange Reserves: A Double-Edged Sword

The recent currency bill passed by the US Senate has once again drawn attention to the Sino-US trade issue and the colossal foreign exchange reserves accumulated by the PBoC, China's central bank, as a result of years of Chinese surplus. Chinese FX reserves have increased by 17.2 times from 166 billion USD in 2000 to 3.2 trillion USD in September 2011, an annual growth rate of 29.5% from 2000 to 2010. The pile of reserve assets on PBoC’s balance sheet is impressive, but is it good policy for China keep such a high foreign reserve?


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NGDP target, in practice

By Daniel H. Neilson

Last week Goldman Sachs published a note in favor of the Fed's adopting a formal nominal GDP target, while Fed-watchers caught a whiff of a possible change in policy in the works. The proposal, specifically, is for the Fed to announce a target level for nominal GDP over the next 12 months, and to commit to undertaking asset purchases if it seemed that NGDP would come in too low. Scott Sumner, who has long advocated such a policy, felt vindicated, and other market monetarists also voiced their support. Even Paul Krugman seemed to think it might do some good. Read more