Author Archives: wciecon
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 […]
Drawing the wrong lessons from policy errors
I've been spending much of the day thinking about the Coyne Affair. You may well ask what the Coyne Affair is; it seems to be one of the few things for which there is no convenient Wikipedia entry to which I can direct you. The Coyne Affair refers to James Coyne, who was Governor of […]
How do we stop it from happening again?
Nick Rowe passes this along: We failed. By “we” I mean economists. Sure, there’s a lot of blame to go round; a lot of people made bad decisions. But we didn’t know how to design a financial system which is robust enough to cope with people making bad decisions. If some people paid too much […]
If only Wilfrid Laurier had won the 1911 election
Much discussion in the past few days and weeks about the wisdom of throwing public money at the Detroit Three (when did they stop being the Big Three?). I'm in the camp of those who don't like the idea, but I'm not going to be a zealot about it just now. Given where we are […]
Are Canadian houses over-priced? A revised estimate
Stackelberg Follower notes that housing prices in Canada continue to not crash. Should we expect them to? Nick Rowe revisits some recent evidence and passes this along: [I thank Tsur Somerville for emailed comments on a previous draft of this Note] An August 2008 paper by Tsur Somerville and Kitson Swann of the Sauder School […]
Worthwhile Canadian Initiative 
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