May 10, 2003

Economics 236: Extra Readings: Liquidity Trap

Paul R. Krugman (1998), "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Vol. 1998, No. 2. (Fall), pp. 137-187.

Paul R. Krugman (1999), "Thinking About the Liquidity Trap."

Lars Svensson (2003), "Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy".

Lars Svensson (2000), "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap."

Willem H. Buiter and Nikolaos Panigirtzoglou (1999), "Liquidity Traps: How to Avoid Them and How to Escape Them".

Posted by DeLong at May 10, 2003 09:34 PM | TrackBack

Comments

I like Krugman's analyses (cited here, in the NY Times, and at his Web site) and I generally have no reason to disagree with what he's written about the liquidity trap and possible solutions in the U.S. However, as I read him I am reminded of university years when my humble little Volkswagen's need of repairs often outran my ability to pay for them--not exactly the same kind of liquidity trap, but not unrelated either. I figured out how to fumble around and adjust something here and something there to keep the car running until I accumulated the resources to get it fixed but the real issue, of course, was much larger, and went beyond simply getting an expert mechanic to replace a part or get the old machine to simply work better for a time.

There are immense problems in the American economy and political system--lack of democratic participation (read "not voting") by many (which means, I believe, a loss of faith in democracy itself) leading to government's taking advantage of the situation and limiting individual rights, government-corporate collusion that impact disasterously on the middle and lower classes, poverty, inadequate investment in infrastructure and education, a brutal foreign policy based on empire expansion, a global society that has more poor people than non-poor, and environmental devastation (This is a huge matter but I know any reference to it usually causes our eyes to glaze over. I'm not a tree hugger, but in my lifetime I've seen the world in which we live deteriorate enormously.)--to name a few overwhelming issues.

Even relatively well-educated, caring people can struggle to understand liquidity traps, deflation, Federal Reserve policy, fiscal adjustments, and so forth, but in relation to the related and even larger issues, these are not wholly unlike in metaphorical terms my temporary adjustments on my car.

Posted by: Mike on May 12, 2003 06:53 AM

I like Krugman's analyses (cited here, in the NY Times, and at his Web site) and I generally have no reason to disagree with what he's written about the liquidity trap and possible solutions in the U.S. However, as I read him I am reminded of university years when my humble little Volkswagen's need of repairs often outran my ability to pay for them--not exactly the same kind of liquidity trap, but not unrelated either. I figured out how to fumble around and adjust something here and something there to keep the car running until I accumulated the resources to get it fixed but the real issue, of course, was much larger, and went beyond simply getting an expert mechanic to replace a part or get the old machine to simply work better for a time.

There are immense problems in the American economy and political system--lack of democratic participation (read "not voting") by many (which means, I believe, a loss of faith in democracy itself) leading to government's taking advantage of the situation and limiting individual rights, government-corporate collusion that impact disasterously on the middle and lower classes, poverty, inadequate investment in infrastructure and education, a brutal foreign policy based on empire expansion, a global society that has more poor people than non-poor, and environmental devastation (This is a huge matter but I know any reference to it usually causes our eyes to glaze over. I'm not a tree hugger, but in my lifetime I've seen the world in which we live deteriorate enormously.)--to name a few overwhelming issues.

Even relatively well-educated, caring people can struggle to understand liquidity traps, deflation, Federal Reserve policy, fiscal adjustments, and so forth, but in relation to the related and even larger issues, these are not wholly unlike in metaphorical terms my temporary adjustments on my car.

Posted by: Mike on May 12, 2003 06:54 AM
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