When I see articles that are of interest to this course, I’ll post them here, with a brief comment.

Here are some articles from 2003-2004.

At this point, we are not in a good position to discuss the contents of this recent Economist magazine article. But, it’s a good idea to have a look at it, because it describes an issue that may become more important in the years ahead: inflation. The point of the article is that there are signs around the world that inflation is picking up. Central banks are expected respond to this by ‘raising interest rates’ (or, at least not cutting them). As pointed out in class, central banks don’t actually set interest rates themselves. Interest rates are set in markets. When people say that central banks raise interest rates they are referring to central banks’ ability to affect interest rates through their control over the supply of money. How a tight monetary policy (i.e., a policy of reducing the money supply, which increases the interest rate) fights and increase in the price level is something we will discuss later. At this point, the price level, P, is an exogenous variable in our model. It will become endogenous when we construct the AD-AS model.