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A blog about cognitive and behavioural economics. Building mathematical models of how psychology influences economic systems.

A thought experiment: why the ECB should print money...

Mon, 12 Dec 2011 23:39:52 GMT

...and why the Bank of England and Fed are right to have done so already. I'm not talking about whether the European Central Bank should directly buy eurozone government bonds. This causes a moral hazard problem - it might encourage governments to be profligate and reduce incentives for structural reform. It's, at the very least, debatable. I'm talking about a more general question: why should central banks print money in a recession? This post won't have much new to say to...

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