Author Archives: wciecon
“Failed” government bond sales?
The UK government "failed" to sell all the bonds it wanted to sell to finance its deficit spending. The story is here. And here. There are many aspects of this story I find puzzling.
Two questions; no answers.
Are we seeing the first signs of recovery, or just a temporary bear-market rally? What caused it? Fiscal policy? Monetary Policy? Financial policy? Or did it just happen by itself? As I said, I don't have the answers, but while the rest of the economics blogosphere seems to be concentrating on AIG bonuses and the […]
Liquidity and risk: liquidity as the value of an option to sell at the market price
Is this a risk crisis or a liquidity crisis? What's the difference? We can define "risk" and "liquidity" any way we like, but some definitions are more useful than others. A useful definition would explain why "risky" assets need high yields to make people willing to hold them, and why "illiquid" assets need high yields […]
The Quebec provincial budget: Live-blogging on tape delay
I'm off to the media lockup for today's budget; I'll be helping out with the CBC radio (English) budget special. You can listen here; it starts at 4:00 pm, EDT. I won't have internet access, but I'll take notes and post them when I do. 6:27: I'm free! Free! The day's events are documented below […]
Why does liquidity matter so much?
This question has been bugging me for the last few months. I see the financial crisis as largely a liquidity crisis. People only want to hold the most liquid assets, and shun the illiquid. So liquid assets have high prices and low yields; and illiquid assets have low prices and high yields. But if we […]
Economic Impact Assessments, and fiscal policy: the fallacy of decomposition
Some extra money from the last Federal budget went to fund new projects at universities. As part of its application for funds, each university must say how it plans to spend the money, and also do an "Economic Impact Assessment". I have been called in to help. I know little about EIA. I remember a […]
The US may need a financial hegemon. But the US is not the world.
Canadians are federalists by instinct, so my reaction to Dani Rodrik's recommendation to resist the imposition of a global financial regulator with a Procrustean mandate is to nod my head in approval. In the current context, the proper Canadian reaction to such a proposal would be to wonder why on earth ceding authority to a […]
The unit-root zombie: Dead, but still wreaking havoc
If there's one thing that is guaranteed to drive the still-too-small community of Bayesian macroeconometricians up the wall, it's the debate about whether or not GDP – or any other variable – has a unit root. If you don't know what a unit root is or why it has anything to do with GDP, then […]
Is quantitative easing trying to raise or lower interest rates?
The Bank of England has switched to quantitative easing. It is buying long bonds (gilts). What would count as a signal of success? We could argue that falling yields would signal success, because it is trying to reduce long interest rates to stimulate investment. But we could equally argue that rising yields would signal success, […]
The Globe and Mail’s subprime envy
Today's G&M has what purports to be an exposé on subprime mortgages in Canada: Canada's dirty subprime secret: Since the subprime mortgage meltdown in the United States, Canadian leaders have assured the public that a similar tidal wave of foreclosures can't hit here. They have cited the prudence and market dominance of Canada's five most […]
Worthwhile Canadian Initiative 
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