Dirk Niepelt

On VoxEU, Luca Benati, Robert Lucas, Juan Pablo Nicolini, and Warren Weber argue that long-run money demand in many countries is rather stable. … using a specific, narrow monetary aggregate, M1, we study a dataset comprising 32 countries since the mid-19th century (Benati et al. 2016). The main finding of this large-scale investigation is that, contrary to conventional wisdom, in most cases statistical tests do identify with high confidence a long-run equilibrium relationship between...

In the NZZ, Michael Schaefer reports on a study about the performance of Swiss portfolio managers in 2016. The median portfolio returns in all investment strategies except those not investing in stocks fell short of the corresponding benchmark returns. Only a fifth of the portfolios generated returns in excess of their benchmark. These numbers do not yet account for management fees. No portfolio manager generated high returns across all strategies. But some managers consistently generate...

In Commentary, Nicholas Eberstadt recounts how low employment, deteriorating health, and declining social mobility in the United States foreshadow a “Miserable 21st Century.” Between 2000 and 2016, the work rate for Americans aged 20 or older fell by almost 5 percentage points, to 60 percent. In the “prime working age” group, it fell by almost 4 percentage points. While work rates for men had been falling for much longer, a similar decline for prime age women set in in 2000. Death rates...

In The Great Leveler, Walter Scheidel argues that over thousands of years, only mass violence and catastrophes have triggered significant reductions in inequality. From the book’s introduction: For thousands of years, civilization did not lend itself to peaceful equalization. … stability favored economic inequality. This was as true of Pharaonic Egypt as it was of Victorian England, as true of the Roman Empire as of the United States. … Four different kinds of violent ruptures have...

In another excellent post on Moneyness, J P Koning likens the monetary system to the plot in the movie Inception, featuring a dream piled on a dream piled on a dream piled on a dream. Koning explains that [l]ike Inception, our monetary system is a layer upon a layer upon a layer. Anyone who withdraws cash at an ATM is ‘kicking’ back into the underlying central bank layer from the banking layer; depositing cash is like sedating oneself back into the overlying banking layer. Monetary...

In his blog A Fine Theorem, Kevin Bryan discusses the history of economic thought leading from the classical economists and Walras to Arrow and Debreu. My read of the literature on GE following Arrow is as follows. First, the theory of general equilibrium is an incredible proof that markets can, in theory and in certain cases, work as efficiently as an all-powerful planner. That said, the three other hopes of general equilibrium theory since the days of Walras are, in fact, disproven by...

In the FT (Alphaville), Marcello Minnena explains what type of currency denominations of Euro area sovereign debt constitute credit events; and how markets assess the risk of such denominations. After the Greek default in 2012 new ISDA standards entered into force: contracts made since 2014 protect against euro area countries redenominating their debt into new national currencies [unless the debt is redenominated] into a reserve currency: the US dollar, the Canadian dollar, the British...

In the FT, David Pilling reports about Somalia which has managed without central bank issued money for decades. … up to 98 per cent of local banknotes are fake … With the help of the International Monetary Fund, Mogadishu plans to print official banknotes for the first time in more than a quarter of a century … No official Somali currency has left the presses since the Horn of Africa nation descended into clan warfare after the collapse of the government in 1991. … warlords, businessmen...

A blog post on Random Critical Analysis argues that high wealth (proxied by high consumption) rather than GDP explains US health care expenditures. Total per capita health care spending increases as wealth increases because people actually demand more goods and services (volume) per capita and because it is relatively labor intensive sector that does not enjoy the productivity gains found in some other sectors of the economy, i.e., overall costs increase through both volume and price...

In separate blog posts, Russ Roberts and John Cochrane have called for humility on the part of economists. Asking “What do economists know?,” Roberts and Cochrane point out—correctly—that economics is not as strong on quantification as some economists and many pseudo economists pretend, and as is often expected from economists. Economics is not the same as applied statistics although the latter can help clarify, at least to some extent, the empirical relevance of economic theories....