Author Archives: James_Hamilton

Uber efficiency

Ride-sharing services like Uber and Lyft are using a vastly more efficient technology for matching people who want a ride with people who want to drive them than was available when the taxi radio dispatch systems were set up in the 1940s.
Continue reading

2016 Econbrowser NCAA tournament challenge

Sign up for the world famous ninth annual Econbrowser NCAA tournament challenge, in which Econbrowsers are invited to demonstrate their inability to predict the outcome of the U.S. college mens’ basketball tournament. It’s almost as much glory as winning Warren Buffett’s competing pool, but don’t worry, you can enter both! If you want to participate, go to the Econbrowser group at ESPN, do some minor registering to create a free ESPN account if you haven’t used that site before, and fill in your bracket before Thursday at noon.

Forward guidance

According to economic theory, one of the most promising ways in which monetary policy might be able to stimulate an economy in which the nominal interest rate has reached zero is to promise to follow a different policy rule once interest rates are again positive. A commitment to more stimulus and inflation in the future regime could in principle influence expectations and actions of people in the economy today, and thereby offer a means by which the central bank could help an economy recover from the zero lower bound. But as a practical matter, how does the Fed communicate to the public at date t something it intends to do at some future date t+h?
Continue reading

Negative interest rates

For an economy with underutilized resources or too low a rate of inflation the traditional prescription for monetary policy is to lower the interest rate. Central banks around the world tried to do that in response to stubbornly weak economies, bringing the overnight interest rate in many countries all the way to zero. But when that didn’t seem to be getting the job done, the Bank of Japan last week decided to go negative, charging banks 0.1% interest for excess reserves. With this step Japan now joins the Euro system, Switzerland, Denmark, and Sweden, all of whom have had negative interest rate policies in place for over a year. Here I describe how negative interest rates work, what they are intended to accomplish, and some of the limitations of using this policy to try to stimulate the economy.
Continue reading