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Roger E. A. Farmer Profile picture
Roger E. A. Farmer
@farmerrf
Roger Farmer's Economic Window. Professor of Economics, Warwick University, Distinguished Professor of Economics UCLA and Visiting Scholar UVA.
Dec 3, 2022 • 11 tweets • 3 min read
A nice defense, from @GeorgeSelgin, of fractional reserve banking. (See the link in the second tweet in his thread). 1/ Banks play the role of monitors. They make collateralized loans in the form of deposits (bank money). The bank has an asset, — the collateral — and a liability — the deposit. When you take out a mortgage from a bank to buy a house, the bank creates a deposit. 2/
Dec 29, 2020 • 4 tweets • 1 min read
I don’t think we should give up entirely on micro foundations. There is much to be said for insights from the 1950s and 1960s that go beyond Keynes. For example, Friedman’s permanent income hypothesis and its analog from work on the lifecycle model by 1/n Modigliani and Ando convinced many, me included, that consumption is better modeled as a function of wealth not as a function of income. These developments matter. And they matter a lot. 2/n
Dec 6, 2020 • 12 tweets • 3 min read
So first, my model is not the same as @dandolfa’s because I do not have a natural rate. That makes it much closer to your analysis. Second, it is one thing to accurately fit data. It is another to explain the world. What I do in my paper, is 1/n ... to provide a parsimonious model with constant parameter for the entire post-war period. You seem to be saying that you are allowing for different parameters after every recession. Second, in each of your expansion phases of declining unemployment 2/n
Dec 6, 2020 • 6 tweets • 2 min read
Not true @neoliberal_dad. The model in my paper is a VECM. i.e. a bivariate cointegrated ARIMA. Since Jason’s model is, a univariate ARIMA (he can correct me if I’m wrong on that) it is a subset of mine. My experiment is different from his. @infotranecon 1/n My forecasts are k-step ahead forecasts. I am not resetting the initial condition in response to ex post information about when a recession occurs, as Jason is doing. We agree that, conditional on not being in a recession, 2/n
Dec 6, 2020 • 8 tweets • 2 min read
Jason. If you have this much confidence in your analysis then you should engage with macro time series econometricians who do this for a living. You misunderstand what I am trying to achieve and you also, IMO, ... 1/n ... misunderstand the nature of the scientific enterprise. I repeat. I am not your huckleberry. If you think you have a comprehensive theory that predicts the behavior of a set of interrelated time series then explain to us all what that theory is ... 2/n
Dec 6, 2020 • 4 tweets • 1 min read
Yes of course that’s true. That’s what every mainstream economic model does. And the statement that “it’s a complex system” is not very helpful. If it’s a high dimensional complex system, which it certainly is, then Occam’s razor argues for stochastic linear systems 1/n This was the outcome of a conference in Paris where Buzz Brock demolished the idea that chaotic systems are useful in economics ideas.repec.org/a/eee/jetheo/v… 2/n
Dec 4, 2020 • 4 tweets • 1 min read
Don’t use interest rate movements to fine tune employment. Use risky asset purchases instead. Set a target for the unemployment rate. Call that target u*. Set a target growth rate for the price of a broad stock price index fund. call that p*. 1/n If u>u*, choose p>p*. If u<u*, choose p<p*. Implement the policy by open market operations swapping between bonds and stocks in the Fed portfolio. Peg the money interest rate by sterilizing the impact of risky asset-bond swaps on the monetary base. 2/n
Dec 4, 2020 • 4 tweets • 2 min read
That’s easy. Replace the Phillips Curve with the belief function: a new fundamental. If you remove the PC you must replace it with a new equation. The FTPL is not a new equation. It’s a way of selecting an initial condition in a model with multiple dynamic equilibrium paths. 1/n I introduced the Belief Function in my 1993 book: The Macroeconomics of Self Fulfilling Prophecies. This piece for the Oxford Review of Economic Policy makes the case and looks at two different ways of modeling a belief function in a purely real model static1.squarespace.com/static/573b5f2… 2/n
Dec 2, 2020 • 4 tweets • 2 min read
Hi John @JohnBarrdear. I’m basing that statement on the following two charts which show that money wages and money prices each fell by 25% in the first three years of the Great Depression. You could of course, argue, that wages did not fall enough.... 1/n ... but then how would we ever know what was ‘enough’ except through the tautological lens of a theory where persistent unemployment MUST be a consequence of wage and price rigidity. 2/n
Aug 17, 2020 • 7 tweets • 3 min read
Interesting paper @dandolfa There used to be a question on UWO comps. “Is Canadian Tire Money, Money?” I’m still not sure what answer was expected but it sure is a fun to try.

A few points on your paper. 1. You make no distinction between outside money and debt 1/ Does that mean that you agree with Cass-Shell in their 1980 paper karlshell.com/wp-content/upl… They argue that the OLG model is the right way to model money. I used to agree with that and I tried to convince Don Patinkin in the mid 1980s. I lost that argument 2/
Apr 3, 2020 • 7 tweets • 2 min read
The number of economic papers on Coronavirus is multiplying almost as quickly as the # of infections. Here is a link to NBER research on the topic. nber.org/wp_covid19.html and here is a link to David Levine’s resource at EUI covid-19-research-conduit.org/category/resou… /1 There are also a fast multiplying number of high quality online seminars on the topic. For those of my colleagues who are engaged in this research: I have some questions. Most of the models I have seen to date follow the following strategy. 2/
Mar 16, 2020 • 9 tweets • 4 min read
I had not seen this interesting piece by @LucaFornaro3 and Wolf which is based on the analysis in Benigno & Fornaro academic.oup.com/restud/article… @BenignoGianluca The B&F paper is one of the first to combine an endogenous growth model 1/ ... with a model of secular stagnation. But while I like the idea, I don’t like their implementation of it. They adopt a NK framework that relies on downwardly rigid nominal wages. While it is certainly true that wages don’t move one for one with money 2/
Feb 25, 2020 • 6 tweets • 4 min read
I am late to this conversation but here are a few thoughts @GeorgeSelgin @TimDuy @dandolfa @susharma @MacRoweNick @david_glasner @DavidBeckworth Coronavirus is already beginning to have a major effect on global supply chains. If I were on the OMC right now I would be much ... 1/n ... more worried about the impact on the financial markets than on inflation. @GeorgeSelgin is right to be worried about a supply effect. UK firms that rely on Chinese parts are already reporting concern over disruption. The same is surely true in the US. 2/n
Jan 17, 2020 • 8 tweets • 4 min read
.@bencasselman @FabioGhironi @KaasLeo @delong @Claudia_Sahm @1954swilliamson @dandolfa @MacRoweNick @GeorgeSelgin Some people leave one job and, later, take up another. While they are between jobs, they are, by my definition, unemployed. That, I believe to be true in reality. 1/n I do not think it is feasible to eliminate spells between jobs. Sometimes jobs are eliminated because firms go bankrupt. Sometimes people leave jobs voluntarily without an immediate replacement opportunity. Labor economists refer to unemployment of that kind as frictional. 2/n
Jan 17, 2020 • 10 tweets • 2 min read
I thought this tweet was uncontroversial. Apparently not, as it has generated a huge amount of push back. Let me try to explain it better. The labor market is in constant flux. In the US, roughly 30% of the labor force changes jobs every year. 1/n Some unemployment is inevitable. Some people lose their jobs because the company they work for goes broke. Some people move to another part of the country. Some people simply look for a better opportunity. Most people who change jobs spend some time unemployed. 2/n
Nov 23, 2019 • 11 tweets • 3 min read
Fascinating exchange between @Noahpinion and @gabriel_zucman My scoring so far:
Noah: 10
Gabriel: 0
I suspect that Gabriel’s answer to Noah, which he is resisting articulating, is that he believes the argument for taxing immediately to be moral. There is a better answer. ... 1/n ... The ownership of wealth, whether or not the income from that wealth is converted into a taxable income flow, may be converted into influence over social and political institutions. The primary way this happens is through the creation of non taxable foundations with ... 2/n
Sep 24, 2019 • 6 tweets • 2 min read
I recently read Marty Weitzman’s review of the Stern Report scholar.harvard.edu/files/weitzman… For anyone with an economics background, this is a superb summary of the issues surrounding climate change policy. But tying climate change policy, as @GeorgeMonbiot does, to ... 1/n ... a movement to end global capitalism, is probably not wise. Markets have a proven record of success at ending global poverty and reducing inequality worldwide. And if human beings have a hope of solving the very real issues posed by ... 2/n
Jul 27, 2019 • 9 tweets • 5 min read
Thread: I agree with some of this @IvanWerning @dandolfa @RebelEconProf @ojblanchard1 @DavidBeckworth @TheStalwart @MESandbu @warwicknewsroom @RebuildMacro @BaldwinRE Particularly the part about breaking apart the theory of the Phillips Curve from the statistical ... 1/9 correlation. But underlying it all there is a deep and fundamental disagreement over the legacy of the General Theory. It began with Samuelson who pushed an interpretation of Keynes’ General Theory in the third edition of his textbook public.econ.duke.edu/~kdh9/Source%2… According ... 2/9
Feb 4, 2019 • 6 tweets • 3 min read
.@BenChu_ discusses the intellectual support for a wealth tax. @NIESRorg @RebuildMacro @warwicknewsroom Here is what I proposed in 2017. niesr.ac.uk/blog/mondays-m… There is a big difference between the disincentive effects of a high marginal ... ... tax on earned income, which I oppose, and taxing wealth, which I support. Taxing earned income at a high rate is wildly unpopular as this Beatles classic suggests. The top marginal rate was 98% at the time they wrote this song.