Author Archives: wciecon
Ricardian Equivalence and government spending
If the government takes our money (through taxes), and spends it on our behalf, does that increase aggregate demand? If the government borrows our money, making us pay back the loan (through future taxes), and spends it on our behalf, does that increase aggregate demand? The answer is: it depends. It depends on what the […]
Canada is not the United States: Stimulus-by-infrastructure edition
In an earlier post, I asked "Just who is supposed to build the new infrastructure?" Since then, no-one seems to have even attempted to provide an answer, so I'm asking it again. I agree with the following points: The US needs a large fiscal stimulus. Canada needs a not-quite-so-large fiscal stimulus. A US infrastructure program […]
Government borrowing, private spending
1. "If a private firm decides to borrow more and increase its investment spending, aggregate demand will increase." 2. "If government decides to borrow more and increase its investment spending, aggregate demand will increase". 3. "If government decides to borrow more, and lend to a private firm to increase its investment spending, aggregate demand will […]
Strengthen automatic stabilisers instead?
Suppose you believe that Canada (or the US, or wherever), needs a more expansionary fiscal policy now. If so, answer these questions: 1. Would you also recommend a more expansionary fiscal policy at some future time, if Canada ever found itself in the same situation as it is now? 2. If so, why would you […]
Federal budget speculation: Things you want to see and/or things you expect to see
The Conservatives will bring down their budget Tuesday, and we may as well join in the frenzy. Readers are invited to submit their proposals in the following categories (and are encouraged to add categories if the ones below don't fit): Good ideas that are likely to be part of the budget: Since the Liberals have […]
Canadians should stop beating themselves up: it’s really not our fault
Last week, my colleague Bernard Beaudreau and I were guests on the local Radio-Canada afternoon show to discuss recent events (lots of fun, BTW: if there's anything more riveting than an economist on the radio, it's two economists), and at one point I found it necessary to argue against the notion that the recession that […]
How do we reduce our debt/income ratios? The paradox of debt.
It's a common theme that the financial crisis was caused by too much debt, relative to our incomes. So if we want to get out of the crisis, we need to reduce our debt/income ratios. How? For an individual, the answer is easy and obvious: spend less, save more, and pay down debt. But for […]
Three reasons to believe the Canadian fiscal multiplier might be bigger than we think it is
1. The Short-Run Aggregate Supply curve is not vertical, otherwise fiscal policy (or any change in Aggregate Demand) would have no effect on real output (except via supply-side effects). But the SRAS curve is probably not linear either. It is plausible to assume that the SRAS curve gets steeper as output increases, because as output […]
Canada and the Eurozone: a comparison
I keep an eye on various European economics blogs (especially VoxEu and Maverecon). We often compare Canada and the US. I want to compare Canada and the Eurozone, just for a change. I want to revisit the Optimal Currency Area question, in the light of the financial crisis. The Eurozone is like Canada would be, […]
Default, expected default, and wealth
Actual default on existing debt reduces aggregate wealth a bit; expected default on existing debt reduces aggregate wealth a bit; but expected default on new debt reduces aggregate wealth a lot. Redistribution of wealth from creditors to debtors may reduce aggregate wealth a lot. Default is a symptom of that problem.
Worthwhile Canadian Initiative 
Recent Comments