How Big Is My Multiplier?

The debate rages about whether the Chancellor should implement a Plan B, or C or D or even Z.  There seems to be a plethora of alternatives.  But many of them share a key common theme.  Namely, that an increase in public spending will boost output in the economy overall. This was one of the […]

Why are markets so volatile?

Mainstream economic thinking has considerable difficulty in explaining the massive degree of volatility of financial markets over the past few months.Both shares and bonds exhibit large fluctuations on an almost daily basis. The problem is particularly acute for the concept which is fundamental to a great deal of modern macroeconomics, based on the so-called ‘representative […]

What a good job Keynes didn’t believe in forecasting

Keynes is in many people’s minds at the moment, as uncertainty about the course of the economic recovery is high. In May 1933, at roughly the same stage in the cycle as we are today, Keynes wrote in the Times: ‘Confidence has been restored and cheap money established both on long and on short term […]

one swallow…

Of course one swallow doesn’t make a summer, but the second quarter 2010 UK GDP figures released today show output growing at an annual rate of over 4 per cent, much higher than the consensus. I wrote a piece for the Financial Times last summer arguing that ‘The historical evidence reveals a typical pattern of […]

cutting the deficit

The new Government’s plans to reduce the deficit much more sharply than most people expected. Will this stimulate or depress the economy? Not surprisingly there is a fierce debate about this. But it is a situation in which econometric evidence is not going to be of much use at all in arbitrating the dispute. So […]