Archive for May 24th, 2011

Should we borrow in US Dollar?

May 24, 2011

A nice speech from Lars Nyberg of Riksbank. He discussed the banks’ funding in foreign currency and the risks and costs associated with this dollar funding.

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Core inflation is rotten

May 24, 2011

Says James Bullard of St Louis Fed in this provocatively titled and insightful speech. The list of readings on headline vs core just keep rising. This ppt gives a nice overview as well

In this speech, Bullard clarifies why core inflation is not the right measure for inflation. By focusing on core we are going to underestimate inflation. Instead of looking at headline vs core debate, Fed should fix headline inflation as its target inflation and announce it like the inflation target central banks:

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Taylor’s Rule versus Taylor Rules

May 24, 2011

Taylor’s rule means the original rule proposed by John Taylor in 1993. Taylor rules means various versions of the rule that have come up since the original rule.

What is the right Taylor rules has been a topic of great interest in the crisis (see this for an overview). John Taylor on his blog has been suggesting to look at his original rule not the other variants which have people have been looking into. Choice of Taylor rule variants is critical as it leads to following policy choices

Taylor Rule says:

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