Monthly Archives: October 2008
The Canadian business cycle mesa of 2008
The August 2008 GDP numbers are out, and real output continued its path sideways. As in these posts, all variables in the graphs that follow are logged and re-scaled to zero at the peaks of the expansions: 1981:04, 1990:03, 2000:12 and (provisionally) 2007:11. They are then multiplied by 100, so that they can be interpreted […]
Life in the time of six sigma
Standard deviation of daily per cent changes in the CAD-USD exchange rate since the CAD was allowed to float in June, 1970: 0.33. Number of days in which daily per cent changes exceeded six standard deviations since June 1970: 6. Number of days in which daily per cent changes exceeded six standard deviations since September […]
What if increased government spending is contractionary?
Suppose that Canada does go into recession, either this month or in the months to come. What policy instruments are in the arsenal? The automatic stabilisers: Taxes will fall with revenues, and expenditures will rise as unemployed workers start drawing on employment insurance benefits. (There are of course other mechanisms at work here.) Monetary policy: […]
Commodity prices and the Canadian economy
The story of the Canadian economy since 2002 is one of an improvement in the terms of trade created by a surge in commodity prices. As commodity prices rose, the CAD appreciated and the real buying power of Canadian incomes increased. But in the past few weeks, much of this has been reversed. The possibility […]
What should Canadian governments be doing right now?
My answer would be: nothing. Right now, the Bank of Canada is doing the grunt work of trying to keep financial markets from drying up, and there's not a lot that governments can do to help. And if the Bank were trying to provide monetary stimulus on top of all that, it could hardly do […]
Automatic monetary stabilisers and destabilisers
Since the Lehman Brothers bankruptcy on September 15, the Canadian dollar has depreciated by 12.5% against the USD, and the US trade-weighted exchange rate has appreciated by 6.7%. This may be a partial explanation for the high priority that US policy makers are giving to a fiscal stimulus package. The forex markets are working to […]
A $10b deficit isn’t what it used to be
There are several reports to the effect that the federal govt may run a deficit on the order of $10b in FY 2009-10. When the deficit went to $10b back in 1977-78, it was 5% of GDP. Thirty years later, $10b is something like 0.6% of GDP. Let's all not panic, shall we?
On the causes of an eventual Canadian recession
I was planning on writing this post a bit later, but since several good points have already been made in the comments over here, I'm going to start a discussion on the mechanics of how the Canadian economy might go into recession in the next few months. The decline in exports to the US. About […]
Election markets are beyond silly
I'm going to indulge in a heaping helping of I Told You So: Trader drove up price of McCain 'stock' in online market: An internal investigation by the popular online market Intrade has revealed that an investor’s purchases prompted “unusual” price swings that boosted the prediction that Sen. John McCain will become president. Over the […]
So where were we?
Now that it's been decided who will form the government, it's time to look at the problems facing it and what it can and should do about them. The next few posts will be data-oriented, trying to provide some background. Today, I'm going to look at the state of the labour market. In the US, […]
Worthwhile Canadian Initiative 
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