Monthly Archives: October 2005
Explaining the CAD-USD exchange rate II: Interest rate differentials
Using interest rate differentials to predict exchange rate movements is a good lesson in hubris. In 1997, the Bank of Canada’s Board of Directors had one of their regional meetings in Quebec City, and as part of this exercise, local notables were invited to an off-the-record dinner with then-Governor Gordon Theissen and other Bank officials. […]
CPI inflation slips out of the zone
Statistics Canada releases September CPI data: "In September, the CPI posted a 3.4% increase over September 2004." "On a monthly basis, the CPI All-items index rose by 0.9% in September. There have been only three increases of comparable magnitude over the past 15 years. Not since the introduction of the GST in January 1991, and […]
Dumbest comment on the Bernanke nomination so far…
…comes to us courtesy of the National Post’s Terence Corcoran. After mentioning the ‘massive’ US trade deficit and ‘the current fashionable concerns about global financial imbalances’, he drops the following clanger: It’s not good enough to stay the course: But what’s to be done about it? In a final sentence, he seemed to be advocating […]
Shaking the Booga-Wooga Stick that is NAFTA’s Chapter 11
In today’s Globe and Mail, Jim Stanford is upset at how the BC govt handled their teachers’ strike: legislation, fines, etc. This is of course a defensible and understandable position for someone who works for a union, but he lets his indignation get the better of him when he reaches for the NAFTA Chapter 11 […]
The unbearable lightness of being the US investment balance
Timothy Geithner of the New York Fed is worried about the US investment balance: Our trade deficit is now roughly the size of the current account deficit, and very large relative to our export base. And our net investment income balances are now likely to move into deficit. It matters because of the trajectory of […]
The Bank of Canada’s outlook for monetary policy
From the Monetary Policy Report, released today (summary here): Canada’s economic growth in the first half of the year was somewhat stronger than had been expected. Overall, the economy now appears to be operating at full production capacity… The base case … assum[es] energy prices consistent with current futures prices; a smooth and orderly resolution […]
David Ricardo’s explanation for the decline in Canada’s savings rates
A graph taken from this IMF report:
The Bank of Canada phones one in
So what do you do when you have an inflation target of between 1% and 3%, an economy running at capacity (unemployment is at a 30-year low, estimates for the output gap at zero), an overnight rate target of 2.75%, and 2.6% y/y CPI inflation? That’s right. You raise interest rates.
Productivity: The demographic tipping-point
Real, per-capita GDP growth has averaged about 1.7% in Canada over the past 30 years – where has it come from? A less-than-exhaustive but more-than-cursory examination of the data suggests the following breakdown: Source Contribution Technical progress: 0.9% Capital deepening: 0.5% Decrease in hours worked per week: -0.2% Increase in employment rate: 0.25% Increase in […]
Forecasting without error
Why is it that forecasters don’t routinely provide error bands with their predictions? I doubt very much that the following dialogue is representative of what goes on in the real world: Decision-maker: ‘Economist, what’s your forecast of GDP growth over the next year?’ Economist: ‘3.13 percent’ DM: ‘Hmm. What are the chances that GDP growth […]
Worthwhile Canadian Initiative 
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