Monthly Archives: November 2017
Monetary tightening can lower real interest rates
It's the investment accelerator. Monetary tightening means lower expected NGDP; real interest rates can go either way. Think of this as a teaching post, to explain the intuition. Or look at Miles Kimball's great post. Here's a thought-experiment. Do not take this thought-experiment literally. It's just my weird way of doing the math, where I […]
The Bank of Canada’s “Hot Hand” experiment and Price-level Targeting
This (pdf) might be the most important controlled experiment economists have ever run. The results of this experiment have been influential in the Bank of Canada's decision (so far) to stick with targeting inflation rather than a price-level path. And making the right decision on that question could save many billions of dollars (trillions worldwide) […]
So What Happens in the Next Recession?
I’m not a macro economist by any stretch of the imagination and yet I cannot help wondering what is going to happen in terms of policy response the next time Canada goes into a downturn. It is not a question of whether there will be another recession, only when. By policy response, I am of […]
Rip van Winkle on Price Level vs Inflation Targets
Rip van Winkle is put in charge of a New Keynesian central bank. He sets a nominal interest rate that he believes will keep inflation at 0% and the price level constant. (It doesn't matter if I change this to rising at 2% per year.) Then he falls asleep for 70 years, and that nominal […]
Provincial Government Health Spending: The Force Awakens?
The Canadian Institute for Health Information (CIHI) recently released its 2017 edition of its National Health Expenditure Trends and its worth a trip to its website for the downloadable data on all things related to health spending. I've been on an advisory group to the CIHI with respect to its national health expenditures for a […]
Price-level targeting as an automatic stabiliser for inflation
Targeting the price level could mean lower variation of inflation than targeting inflation. The best way to target inflation might be to target the price level instead. It's one of those paradoxes of pre-commitment. A promise to do something you don't want to do can affect others' expectations, and others' actions, and help you get […]
Capital flows vs Kapital flows (simpler version)
Let me try to make the intuition of my previous post simpler and clearer. Suppose a country wants to invest more, because the profitability of investment has increased. It wants to increase the stock of kapital (machines) in its factories. There are three ways it could do this: 1 Divert some of its own production […]
Capital flows vs Kapital flows (very wonky)
This is only partly a response to Paul Krugman's posts. Mostly it's me trying to get my own head clear on something. This is a difficult topic, and this post is not as clear as it should be. So I don't expect many, or any, to fully understand it. I don't properly understand it myself. […]
How can Halloween get started?
A day late, but whatever. It's easy to understand how money might get started. A non-smoker accepts cigarettes(pdf) he doesn't want in exchange for the jam he doesn't want. Then finds a smoker who will accept those cigarettes in exchange for biscuits he does want. That non-smoker has just used cigarettes as a medium of […]
Worthwhile Canadian Initiative 
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