A perfect example of macroeconomics for managers
Those of you who have taken my Managerial Economics class know that a key learning goal is to break down apparently complex knock-on effects in the national and world economy into understandable parts. Managers can then figure out what causes what and interpret the various views on where the economy is going. Recognising similarities of today with yesteryear fosters better judgements too. Well in today’s Wall Street Journal you couldn’t find a better example of this type of reasoning. Professor Ronald McKinnon, one of the guru’s on monetary policies and exchange rates, had a neat piece on the consequences of the US strategy of Quantitative Easing. There is a nasty sting in the tail (for the US) at the end of his article. Those full time and part time MBAs who’ve taken my Managerial Economics class will recognise that the argument isn’t monetarist in content, even if the ultimate prediction is pretty close to something Milton Friedman would have probably agreed with. The question is: do you buy McKinnon’s argument? What factors, if any, are left out? How could the chain of cause and effect be frustrated by actions taken by emerging market economies to protect their economies against too much financial inflows and inflation? And would those developing country actions inadvertedly let the US escape higher inflation?