Wednesday, March 12, 2008

Robert Solow about the difference between FED and ECB


Robert Solow, the Nobel's laureate, explained in interview for Handelsblatt, why the politic of FED is better that those of European Central Bank. The scientist is also talking about the users' confidence of ECB and the decisions of the same institution.
Handelsblatt: Mr. Proffesor, according to the monetary theory of Milton Freedman, the active politics of federal reserve of USA and the pack of economy stimulates of US government are a devil's trap.
Solow; Neo-classic theory and the related over it theory about "real business cycle", which is keeping a serious for the economy movements technology shocks, is comming from unreal premises. In these models is not taking under attention, that there are people with different, competing purposes, consumators, ivestors and workers. That is why, the results and the politic advices, which are comming from neo-classic models and in all the time are claiming for "les fer", and not strong enought.
Handelsblatt: What will happen, if there are more realisitic admissions?
Solow: Then we should calculate with unchanged prices and unchanged working sallaries, with calculating of market force and the restricted time horizons of actors. If this is done, you will see, that the monetary and financial politics are working instruments.

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