About me and this page
Welcome to my web page. Here you can find just about anything I've ever written.
The Research link will take you to all my academic writing, including published books, papers, working papers and comments. It includes comments and talks given at academic conferences. It also has information about my textbook, Asset Pricing
The News, Op-eds link takes you includes op-eds, blog posts, links to media coverage, slides and videos of talks, and other items of interest to the average non-academic.
I usually post slides of any talk I've given, so if there was some delicious graph you saw at a talk, you're likely to find it in the Research (for academic talks) or News (for other talks) links.
In December 2011 I started a blog with news and opeds and commentary.
Teaching takes you to class web pages. Students: these are the right web pages. Booth sometimes echoes old and out-of-date information to other sites. Visitors: you are welcome to use any of my materials that you find useful, so long as you cite their source. All: yes, the problem set answer links don't lead anywhere when I'm not teaching.
Data and Programs takes you to a webpage with data and programs for older papers. Starting 2011, I'm posting links to data and programs next to the paper on these pages, but I haven't yet cleaned up the old papers to that method.
If you're a sailplane pilot looking for Soaring writing, go to the soaring link. If you're an economist but flying gliders sounds a lot more interesting than whatever else brought you here, go ahead and take a look.
I'm a proud father and husband of a creative family. Check out the Family web page, with art, comics, animation, music, plus the famous Hippo pages. Warning: If you click this link you may not be back for an hour or two. My wife, Elizabeth Fama is a children's book author, elizabethfama.com is her web page and blog, her latest book is Monstrous Beauty. My daugher Sally is studying representational art at the Grand Central Academy in New York; Her paintings and blog are worth a detour.
This is (July 2011) a big web site redesign. Please let me know about inevitable bugs, broken links, etc.
Academic articles and working papers
- The new-Keynesian Liquidity Trap Revised, Sept 2013. In standard solutions, the new-Keynesian model produces a deep recession with deflation in a liquidity trap. Useless government spending, technical regress, and capital destruction have large positive multipliers. The recession, deflation and policy paradoxes are larger when prices are less sticky. I show that these features are all artifacts of equilibrium selection. For the same interest-rate policy, different choices of equilibria overturn all these results. A "local-to-frictionless" equilibrim, for the same interest rate policy, predicts mild inflation, no output reduction and negative multipliers during the liquidity trap, and its predictions approach the frictionless model smoothly. Skip to the pictures if you're busy. A new last paragraph defends the basic NK model. The current slides
- Finance: Function Matters, not Size May 2013 Journal of Economic Perspectives 27, 29–50 JEP link (Previous title "Is Finance Too big?" December 2012.) Is finance "too big?" Is this the right question?
- A Mean-Variance Benchmark for Intertemporal Portfolio Theory Manuscript, new revision Jan 2013 forthcoming Journal of Finance. Applies good old fashioned mean-variance portfolio analysis to the entire stream of dividends rather than to one-period returns. Long-Run Mean-Variance Analysis in a Diffusion Environment is a set of notes, detailing all the trouble you get in to if you try to apply long-run ideas to the standard iid lognormal environment, and also discusses shifting bliss points a bit.
- Continuous-time linear models Foundations and Trends in Finance 6 (2011), 165–219 DOI: 10.1561/0500000037 Manuscript How to do ARMA models, opreator tricks, and Hansen-Sargent prediction formulas in continuous time. Why, you ask? I needed to teach myself these tricks in order to solve a Linear-quadratic asset pricing economy with complex habits and durability. In turn, I was hoping that model would provide a good example for A Mean-Variance Benchmark for Intertemporal Portfolio Theory. It didn't, but now I, and I hope you, know how to do all the discrete-time tricks in continuous-time models.
- A Brief Parable of Overdifferencing January 2012. This is a short note, showing how money demand estimation works very well in levels or long (4 year) differences, but not when you first-difference the data. It shows why we often want to run OLS with corrected standard errors rather than GLS or ML, and it cautions against the massive differencing, fixed effects and controls used in micro data. It's from a PhD class, but I thought the reminder worth a little standalone note.
- Inflation and Debt National Affairs 9 (Fall 2011). html An essay summarizing the threat of inflation from large debt and deficits. The danger is best described as a "run on the dollar." Future deficits can lead to inflation today, which the Fed cannot control. I also talk about the conventional Keynesian (Fed) and monetarist views of inflation, and why they are not equipped to deal with the threat of deficits. This essay complements the academic (equations) "Understanding Policy" article (see below) and the Why the 2025 budget matters today WSJ oped (see below)
- Discount rates Joural of Finance 66, 1047-1108 (August 2011).
The video (including gracious roast by Raghu Rajan). The slides. Data and programs (zip file).
My American Finance Association Presidential Address. Discount rate variation (equivalently expected returns, risk premiums) are now at the center of asset pricing questions, from bubbles to the nature of the crash. I survey theory and empirical work, and offer some hope that "macro" theories are relevant to big recent events.
- Determinacy and Identification with Taylor Rules.
Journal of Political Economy, Vol. 119, No. 3 (June 2011), pp. 565-615.
Online Appendix B
JSTOR link, including html, pdf, and online appendix.
There are multiple equilibrium problems at the heart of the New-Keynesian model. This is a new update, including an updated treatment of Obstfeld and Rogoff (uncovering a surprising mistake) and many small improvements. This is the last pre-publication draft. It includes a technical appendix with algebra for determinacy regions and solutions of the three-equation New-Keynesian model, as well as other issues.
- Understanding fiscal and monetary policy in the great recession: Some unpleasant fiscal arithmetic. January 2011 European Economic Review 55 2-30 ScienceDirect Link Why there was a big recession; will we face inflation or deflation, can the Fed do anything about it in the face of looming deficits?
Op-eds, blog posts, essays, articles, and other digestible writing
Note: I started a blog in January 2012, and don't echo the blog posts here.
- Collection of blog posts on 2013 Nobel Prizes in Economics.
- The Work Behind the Prize. The best short summary of Gene Fama's Nobel, presented at the University of Chicago Syposium Nov 4 2013. Blog post with Video. Here is a Spanish translation courtesy of Pedro Cervera
- Gene Fama's Nobel Prize. October 2013 I attempt to explain some of his most important work at length.
- The danger of an all-powerful Federal Reserve. August 26 2013 Wall Street Journal. Macro-prudential policy is a license to discretionary financial dirigisme. Clear lessons of monetary policy warn us not to go down this path.
- Financial Reform in 12 Minutes. October 2013 A short paper on where we are. Dodd Frank and Resolution won't work. Regulate run prone liabilities not assets. A regulatory tax on debt will work better than arguing about a red line capital ratio.
- Think government is intrusive now? Wait until E-Verify kicks in. August 1 2013 Wall Street Journal. Congress wants every person in the country to get the Federal Government's approval before he or she can get a job. They must be kidding. See chapter 1 of Capitalism and Freedom
- Stopping Bank Crises Before They Start June 24 2013 Wall Street Journal. Don't try to regulate the riskiness of bank assets, while keeping in place government guarantees. Instead, don't let banks issue run-prone liabilities.
- America Needs an Alternative Maximum Tax April 15 2013 Wall Street Journal.
- The interest rate paradox. April 9 2013 Slides for a talk at Grant's spring conference. I haven't written up the talk yet, but if you were there and want the pictures here they are.
- Treasury needs a better long game March 4 2013 Wall Street Journal. Local pdf. (Better:) Blog post with a few cuts restored and some notes. If the Fed wants to raise rates to 5%, it will raise the deficit by $900 billion. Will Congress let it do that? Fiscal policy limits monetary policy in a time of large debt. A much longer maturity structure would help.
- Running on empty (pdf) (link to WSJ (html)) March 2 2013 Review of "The Banker's new Clothes" by Anat Admati and Martin Hellwig. Banks should issue a lot more equity, a lot less debt, and a heck of a lot less nonsense.
- Having your cake and eating it too: The maturity structure of US debt Update November 15 2012 How the US Treasury can both lengthen and shorten its debt at the same time, to buy insurance against interest rate rises and provide "liquidity." A short paper diguised as comments on Greenwood, Hanson, and Stein “A Comparative Advantage Approach to Government Debt Maturity” at the Second Annual Roundtable on Treasury Markets and Debt Management , US Treasury, Nov. 15 2012
- After the ACA: Freeing the market for health care Revision Feb 6 2013 (Oct 19 2012) An essay on health care, presented at the conference, “The Future of Health Care Reform in the United States,” at the University of Chicago Law School. Most of the policy discussion is focused on health insurance. But the health care market is dysfuctional, and needs to be fixed as well. Where are the Southwest Airlines, Walmart and Apple of health care, bringing cost saving, efficiency, and innovation? I argue that we need a big freeing up of health care markets, both supply and demand.
- CBO and the fiscal cliff Sept 4 2012 Bloomberg.com "Business class" OpEd. local copy ; blog post. A review of the CBO's forecast that the "fiscal cliff" will cause a recession. It's Keynesian, ignoring all incentive effects, and thus right but for the wrong reasons. Policy models should be much more transparent quantiative parables, showing the logic of their foreasts and not pretent to be authoritative black boxes.
- The future of central banks. Sept 1 2012 Wall Street Journal Op-Ed. local pdf ; blog post
- Myths and Facts about the Gold Standard July 28 2012 Wall Street Journal WSJ link, local pdf, blog post a with a few cuts restored (recommended)
- Forget about the mandate. July 12 2012 Bloobmerg Business Class. The health law debate needs to stop worrying about legalities. The mandate was never the central economic problem. A reminder of all the other problems, and alternatives to the health care law. Local html
- What to do on the Day after Obamacare April 2 2012 Wall Street Journal Local pdf. Deregulation and competition. Yes, it can work, even in health insurance. Mostly aimed at the widespread and incorrect view that markets can't provide health insurance.
- “Austerity or Stimulus: What we need is Growth” March 21 2012 IGM/Bloomberg Business Class series. Austerity of high taxes is hurting Europe. Lack of spending isn't their problem. Get rid of the distortions, now, is the only answer. Local pdf
- The Real Trouble With the Birth-Control Mandate Wall Street Journal February 9 2012 Local pdf. Critics complain that religious institutions have to buy health insurance that covers birth control. They're missing the point. Why does health and human services mandate that any and all of us have to buy health insurance that covers regular predictable expenses?
European debt crisis
Current economic situation and policy
Financial crisis, Financial rgulation
Monetary policy; inflation, deficits, fiscal theory
General economics, philoisophical debates
Academic Talks and Comments
- Having your cake and eating it too: The maturity structure of US debt November 12 2012 How the US Treasury can both lengthen and shorten its debt at the same time, to buy insurance against interest rate rises and provide "liquidity." A short paper diguised as comments on Greenwood, Hanson, and Stein “A Comparative Advantage Approach to Government Debt Maturity” at the Second Annual Roundtable on Treasury Markets and Debt Management , US Treasury, Nov. 15 2012
- The Fiscal Theory of the Price Level and its Implications for Current Policy in the United States and Europe November 19, 2011 This is the text of my presentation at the concluding panel of the conference, “Fiscal Policy under Fiscal Imbalance,” hosted by the Becker-Friedman Institute and Federal Reserve Bank of Chicago.
- Hedge Funds. February 20 2012. (Updated again) Extensive slides for various talks about hedge funds. Returns, alphas, betas, fees, how to form portfolios of hedge funds.
More talks and comments in Research talks and comments. ...
News, TV, Radio, other media
- Debt and growth video All the world's troubles in 10 minutes. Posted 4/14/2013 but the event was March 2012.
- "Chicago tonight" interview on the fiscal cliff. Jan 2 2013 Video
- EconTalk podcast with Russ Roberts, on "After the ACA" November 19 2012
- Bloomberg TV interview, with Betty Liu November 13 1012 on the fiscal cliff.
- NPR Marketplace also here November 7 2012 10 minute audio on what the election means for economic policy. Related blog post.
- Bloomberg TV interview, Betty Liu, "In the loop" show, Sept 5 2012 The ECB's huge "sterilized" bond buying announcement, and the future of the Federal Reserve.
- Unraveling the Mysteries of Money. September 2012 An extensive interview by Gideon Magnus of Morningstar, with Harald Uhlig. What is money, fiscal theory of the Price Level, European debt crisis, and more. The Video; a cleaned-up magazine article (pdf)(html)
- Bloomberg TV interview, Tom Keene show, August 16 2012
- Bloomberg TV interview June 18 2012. On Greece, Euro, defaults, bailouts and so on.
- Corriere Della Sera interview. 2/22/2012 In Italian.
- Apperance on Tom Keene's Bloomberg TV show. Fun.
Materials provided are for educational use only. Published articles are the Copyright of their respective publishers. All other material is Copyright © John H. Cochrane. You're welcome to use any of my material for eductional or non-commercial use, provided it is in its original form, and I am recognized as its author. Please post links rather than post copies of the files, so that your users get any updates which I post here.