Why stock markets crash

Originally posted on NYU Stern Economics:Stock markets around the world crashed yesterday — but why? That’s a tough one, but here’s what we know about stock prices in general:  Stocks are discounted cash flows. When you buy a stock, you get a claim to future cash flows, mostly dividends. We think of its value as reflecting…

http://utopiayouarestandinginit.com/2015/08/23/why-stock-markets-crash/

The Incredible Shifting Model

Originally posted on Economics One:Robert Tetlow has published a fascinating research paper in the International Journal of Central Banking on policy robustness with the Fed’s FRB/US model. Perhaps the most important part of the paper is his careful documentation of the enormous shifts in the coefficients and the equations of FRB/US over time. This chart from…

http://utopiayouarestandinginit.com/2015/08/23/the-incredible-shifting-model/