Author Archives: wciecon
Why current AD depends on expected future AD: Scott Sumner in ISLM
Scott Sumner argues that nominal interest rates are near zero because monetary policy (specifically expected future monetary policy) is too tight. He argues that tight (expected future) monetary policy makes expected inflation low, which makes nominal rates low. He also argues that tight (expected future) monetary policy makes real rates low as well. I want […]
Towards a Monetarist theory of Neo-Chartalism
I am going to start with an orthodox monetarist approach, make one trivial semantic change, and see how far I can get in deriving Neo–Chartalist results. The semantic change is to change what I mean by "fiscal policy". It's an unconventional definition of fiscal policy, from a monetarist perspective, but I don't think a monetarist […]
Churches and Central Banks
If a social scientist wanted to understand what happens in church, he could ask the churchgoers themselves for an account of what they do in church. But the social scientist's account of what happens in church need not be the same as the churchgoers' account. If an economist wanted to understand what happens in a […]
A preliminary estimate for Canadian 2009Q3 GDP growth
This is an update to my series of posts (2009Q1, 2009Q2) that uses Statistics Canada's estimates for monthly GDP estimates (available for the first two months of the previous quarter) and the LFS data for the last month of the quarter to provide an estimate for GDP growth in the previous quarter. Statistics Canada will […]
More on the ineffectiveness of minimum wages as an anti-poverty measure
The most recent issue of Canadian Public Policy has this short note: Minimum Wage Increases as an Anti-Poverty Policy in Ontario: In this article, we consider the possibility of alleviating poverty in Ontario through minimum wage increases. Using survey data from 2004 to profile low wage earners and poor households, we find two important results. […]
Why do central banks have assets?
If you look at the balance sheet of a central bank, you will see it has liabilities (mostly currency) and assets (normally mostly government bonds/bills). Why do central banks have assets? Do they need them? The wrong answer is that central banks need assets to "back" the value of the currency, and that paper currency […]
The Conservatives adopt a scorched-earth strategy against the PBO
The idea is simple: if you must retreat, leave nothing behind that could be useful (h/t to Support the OPBO). Tories unload 4,476 pages of stimulus details: The Harper government has dumped three box-loads of information about its efforts to stimulate Canada's sputtering economy on Parliament's independent budget watchdog. Kevin Page had asked for more […]
What makes a bank a central bank? Asymmetric redeemability and the will to act as one.
Both central banks and commercial banks issue liabilities that function as media of exchange. Why do we say that it is central banks, rather than commercial banks, that determine monetary policy; setting interest rates in the short run, and inflation in the long run? What makes a bank a central bank?
The Globe’s Konrad Yakabuski succumbs to the monetary union zombie
And so it continues. I noted on Wednesday that the Globe and Mail's lead editorial on exchange rate policy demonstrated a singular lack of understanding of the economics of exchange rate policy. A particularly astute commenter noted that it was only a question of time before the zombie notion of monetary union started lumbering across […]
Economic growth, the universe, and the meaning of life
Notes for a panel discussion in Ottawa on Tuesday evening (details below). 200 years ago, economists made a prediction, and we got it wrong. "Big deal" you might say. But it was a big deal; a much bigger deal than some piddling mistake like failing to predict a global financial crisis. Basically, 200 years ago […]
Worthwhile Canadian Initiative 
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