Category Canadian economy
The arithmetic of household debt
The interest rate on your mortgage is three percent. If the interest rate increases one percentage point, the interest component of your monthly mortgage payments will increase by approximately: a. 1 percent b. 10 percent c. 25 percent d. 33 percent e. None of the above.
Four questions for the Bank of Canada
Three of those questions are questions the Bank of Canada is asking itself (and anyone else who cares to listen). I want to add a fourth. The Bank held a workshop yesterday. Stephen and I attended, along with a few dozen other Canadian economists. It was about the Bank's inflation targeting framework, which comes up […]
Out-sourcing your own job
The Radio-Canada news report sounded like an item from The Onion: Postal worker contracts out his own job. In economic terms, it makes perfect sense for a letter carrier to sub-contract. Say Postman Paul is earning $150 after tax per day for delivering the mail, but can make more money working in construction. (Before taxes, […]
Canada, the Eurozone, and interest rates
This is something I know I don't understand. Compare the following two statements: A: "Some Eurozone countries have higher interest rates on their government bonds, reflecting higher perceived risk of default. This raises all interest rates in those countries, and so reduces aggregate demand in those countries." B: "Some Canadian provinces have higher interest rates […]
Targeting the stickiest price.
Suppose the price of apples is sticky, but the price of everything else adjusts instantly to its equilibrium value. There is then an old, and strong, argument that monetary policy should target the price of apples. The economy performs best when all prices are at equilibrium. If the price of apples won't move (quickly) to […]
Federal Taxation of Labour Income in Canada is Regressive (in Terms of Marginal Rates)
Or at least, it is for some ranges of income. Don't believe me that marginal tax rates are regressive? Follow me:
Canadian monetary policy if half the world turns Japanese?
The latest Statistics Canada Labour Force Survey confirms the impression that the Canadian economy is recovering well. Inflation is still a little below the 2% target, but should rise as the recovery continues. The Bank of Canada's overnight rate target is at 0.50%, which is much lower than normal, and is clearly negative in real […]
Is there any point in saving?
A recent report prepared for the Department of Finance by Keith Horner came to a optimistic conclusion about Canadians' savings levels: Overall, it appears that about 69% of Canadian households saved in RPPs and RRSPs at rates sufficient to fully maintain their consumption levels in retirement (100% replacement rate). About 78% of households met a […]
Should recent immigrants be eligible for Old Age Security?
Most Canadian seniors are guaranteed an income above the poverty line by Old Age Security, Guaranteed Income Supplement and the Canada Pension Plan. Seniors are less likely to be poor than children or adults under 65 – with one exception. Mike Veall has found that 71 percent of recent immigrants aged 66 and older have […]
Bank of Canada performance, and performance pay?
I don't have any strong view on performance pay in general, on performance pay for public sector workers, or on performance pay for workers in the Bank of Canada in particular. And I'm going to stay silent on whether the Bank of Canada had good performance in 2009 (or 2008, if there's a one-year lag?). […]
Worthwhile Canadian Initiative 
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