Monthly Archives: November 2008
Just who is supposed to build the new infrastructure?
It would appear that the issue of whether or not the federal government should be increasing expenditures on infrastructure could determine who will form the government in the next few weeks. But just who is supposed to build this new infrastructure? As I noted earlier, unemployment in the construction sector is at an all-time low. […]
Does Canada need a Fiscal Stimulus? – Discuss
My own view, for what it's worth, is that Canada does not need a fiscal stimulus right now, but there's a possibility it might need one soon, so the government should get everything ready to introduce one as quickly as possible, but not pull the trigger quite yet. My preferred fiscal stimulus would be a […]
On the timing, size and form of an eventual fiscal stimulus
The federal government released its economic update yesterday. Some things were silly: the nickel-and-dime budget cuts are at best pointless, and are much more likely to be counter-productive. One of the benefits of getting public finances under control was supposed to be that we wouldn't have to play these games. And the proposal to cut […]
Monetary policy and durable goods deflation
In a recent post, Nick made an important point about the story we tell when we explain why deflation is a bad thing. If prices are falling, people will delay purchases, which reduces aggregate demand, which induces more rapid deflation, which reduces aggregate demand even more as the economy circles the drain. But to make […]
Will Deficit Spending in fact be Money-Financed?
It's easy to say that money-financed increases in government spending should be used as a weapon of last resort, if the central bank runs out of ammunition as nominal interest rates fall to zero. But would government deficits in fact be money-financed? If the central bank targets the monetary base, the answer is trivial: if […]
A Useful Definition of “Deflation” – the Principle of Charity
Some prices are falling, some are falling quickly, and some are still rising. Whether we've got deflation, and how much deflation we've got, depends on what you include in the index, with what weights, and over what time period. Do we include asset prices for example? It depends on how you define the word. Now […]
Shooting Bears: Ammunition and Central Banks
[ Statistics Canada just announced the seasonally adjusted CPI fell by 0.5% from September to October. And it wasn’t just gas prices. Core was down too (not seasonally adjusted). That’s deflation (on a monthly basis).] Metaphors are like models, only with unclear responsibilities. Can the Bank of Canada (or the Fed, if you like) […]
Nick Rowe joins Worthwhile Canadian Initiative
Over the past few weeks, Nick Rowe of Carleton University has been sending me some very fine pieces of analysis that I've posted here. This has increased the quality of this blog immensely, so I'm very pleased to announce that he has agreed to join me and post as an author in his own right. […]
Are we seeing the end of a 15-year stock price bubble?
I spent much of the latter part of the 1990's looking at this graph: During this period, Pascal St-Amour and I were trying to explain just why stock prices were so volatile; the fundamentals driving the standard C-CAPM were far too smooth to generate swings like this. Our story was based on a two-state model […]
Why aren’t all econometricians Bayesians?
Andrew Gelman offers this wonderful graph: If you have a simple model and lots of data, then it doesn't matter if you use classical or Bayesian methods. Otherwise, classical methods are more likely to generate more in the way of thorny, pointless digressions ("Hey, wait a minute! Are the data trend- or difference-stationary?") than actual […]
Worthwhile Canadian Initiative 
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