Advanced economy governments have increased financial regulation in the aftermath of the crisis, but haven’t altered their own behavior sufficiently to compensate for greater restrictions—-My latest over at The Huffington Post: http://www.huffingtonpost.com/european-horizons/governments-cant-keep-up-_b_10506148.html
Here is a good primer from Josh Hendrickson of the University of Mississippi on the mechanics of the global safe asset shortage—a recurring topic in my articles/posts.
A theme you often hear among bloggers, but a bit less so in seminars, is the idea that the supply of and demand for safe assets matter. David Beckworth is one such blogger who talks about this, but critics often find it hard to think about the macroeconomy in these terms since the role of money has been marginalized within the New Keynesian wing of macroeconomics. I say this because David’s intuitive explanation of safe asset equilibrium seems to be a cross between New Keynesian intuition and Old Monetarist intuition. He is trying to communicate his message to what is essentially the mainstream of the discipline, but by emphasizing something that isn’t generally in their models.
Along these lines, I was happy to stumble upon this paper by Caballero, Farhi, and Gourinchas. In my view this paper is quite similar to David’s views regarding safe assets and monetary policy and…
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