March 23, 2008
Here are a couple of nice summaries of the credit crunch and the Fed's response.
If you took a college course on monetary policy more than six months ago, what you learned has already been rendered out of date by the big changes Bernanke has implemented in how monetary policy can be used. Looking for a 5-minute introduction to monetary policy and the Fed that's actually current? Then check out Francisco Torralba's very nice summary.
And if Francisco's college-level treatment is too much for you, you might instead prefer Steve Waldman's credit crisis for kindergarteners.
Posted by James Hamilton at March 23, 2008 06:01 PMdigg this | reddit
Who's Jim hamilton? =D
Posted by: Kevin A at March 24, 2008 02:12 AM
Just what I've been looking for.
Nice, on both accounts.
Posted by: JS at March 24, 2008 06:25 AM
Thank you both: James Hamilton and Francisco Torralba. Bookmarked (and forwarded to colleagues teaching this material).
Questions on credit at the private lending window: The monetary base stays roughly the same, but confidence declines and the economy slows; so the money multiplier drops (at least mechanically) and the monetary aggregates (various definitions of Money Supply) decline.
This must the first time in living memory that a Central Bank has tried to manage a recession-bound economy by holding pat on the Monetary Base.
Does that move not risk reinforcing the credit rationing already observed in the marketplace?
Or as some of the New Classical persuasion might argue, should the Central Bank passively supply liquidity to the market place and allow the private market place to do the rest?
Question for macro researchers: Bernanke just supplied the profession with a number of surprise data points. What will the challenges be to combine these data points with past data when in the past these kinds of shocks were always accompanied by an expansion of the monetary base?
Posted by: E. Poole at March 24, 2008 08:31 AM