tag:blogger.com,1999:blog-122860087135730716.post5941179419281147332..comments2019-08-20T04:06:26.971-07:00Comments on Richard H. Serlin: Want to Understand the Intuition for Wallace Neutrality (QE Can't Work), and Why it's Wrong in the Real World?Richard H. Serlinhttp://www.blogger.com/profile/09824966626830758801noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-122860087135730716.post-53224067396492707332012-09-21T08:23:52.074-07:002012-09-21T08:23:52.074-07:00This is an extremely useful post. Thank you !This is an extremely useful post. Thank you !Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-122860087135730716.post-39860421302143372822012-09-13T17:39:19.609-07:002012-09-13T17:39:19.609-07:00Richard
Really appreciate your effortsRichard <br /><br />Really appreciate your effortsAlexander Hamiltonhttps://www.blogger.com/profile/07904132869021579763noreply@blogger.comtag:blogger.com,1999:blog-122860087135730716.post-88767175529386677812012-09-12T14:54:15.925-07:002012-09-12T14:54:15.925-07:00It's impossible to understand inflation withou...It's impossible to understand inflation without having a better understanding of economic growth. Alex Gheg has a new consumer theory that gives us a scale for growth that measures previously hidden thoughts. We can measure utility growth using the body clock. Quantity, quality, variety and convenience in one equation. http://www.youtube.com/watch?v=u6tFLGpcOpEMrIlirhttps://www.blogger.com/profile/11613313452071283534noreply@blogger.comtag:blogger.com,1999:blog-122860087135730716.post-31136563292251268072012-09-11T08:19:08.748-07:002012-09-11T08:19:08.748-07:00Thanks for enlightening us. I've tried to work...Thanks for enlightening us. I've tried to work through that paper but haven't had much luck.<br /><br />The idea of Wallace neutrality as you've outlined is really quite interesting. But that's all it should be... an interesting bit of counterintuitive puzzling. Folks like Stephen Williamson and John Cochrane immediately move from describing the model to advocating that model as a blueprint for reality. It's odd. Can't they see how unrealistic the assumptions are?<br /><br />Incidentally, on the topic of assumptions and Wallace neutrality, it's worth checking out the recent Woodford paper:<br /><br />http://kansascityfed.org/publicat/sympos/2012/mw.pdf<br /><br />See page 61 on assumptions:<br /><br />"The irrelevance result is easiest to derive in the context of a representative household model, but in fact it does not depend on the existence of a representative household, nor upon the existence of a complete set of financial markets. All that one needs for the argument are the assumptions that (i) the assets in question are valued only for their pecuniary returns — they may not be perfect substitutes from the standpoint of investors, owing to different risk characteristics, but not for any other reason — and that (ii) all investors can purchase arbitrary quantities of the same assets at the same (market) prices, with no binding constraints on the positions that any investor can take, other than her overall budget constraint. Under these assumptions, the irrelevance of central-bank open-market operations is essentially a Modigliani-Miller result, as noted by Wallace (1981)."<br /><br />Anyone who's spent some time in markets knows that assumption ii simply doesn't hold. That's not to say that Wallace neutrality isn't interesting, and that it doesn't succeed in defining some lower limit to the usefulness of QE, but it surely shouldn't be used to deny the relevance of QE outright.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com