We start this year 2012 course in Monetary Economics still in the middle of an economic crisis started 5 years ago in a small corner of the mortgage market in the USA. For 5 years economists have discussed, argued, researched and analysed and a lot of new and old thinking has surfaced. None of this discussion will appear in any textbook for many years to come. Nevertheless it is important to look at how the crisis is changing the way we do economics and how economists have responded to the crisis.
An interesting starting point is the importance assumed by simple "National Accounting Identities": national accounting identities (like Current Account = (Private Saving - Private Investment) + (Taxation - Public Expenditure) = -Capital Account) don't give a theory but they give constraints: they clarify what is not possible. A nice example of how this accounting framework can be used to identify possible scenarios is given by this article of Marin Wolf of the Financial Times. See also the comparison between US and Japan quoted by Martin Wolf - here. Next week (the 8th of August) I want to discuss the concept of "Balance Sheet Recession" and why it is so difficult to get out of it.
An interesting starting point is the importance assumed by simple "National Accounting Identities": national accounting identities (like Current Account = (Private Saving - Private Investment) + (Taxation - Public Expenditure) = -Capital Account) don't give a theory but they give constraints: they clarify what is not possible. A nice example of how this accounting framework can be used to identify possible scenarios is given by this article of Marin Wolf of the Financial Times. See also the comparison between US and Japan quoted by Martin Wolf - here. Next week (the 8th of August) I want to discuss the concept of "Balance Sheet Recession" and why it is so difficult to get out of it.
