Category Canadian economy
Only one degree of freedom per Fixed Announcement Date
The Bank of Canada's announcement today, raising the overnight rate target from 0.25% to 0.5%, wasn't a surprise. The surprise was the kicker at the end: "Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments." Most people were expecting […]
Connecting the eurozone crisis to the Canadian economy
This looks tricky. We should perhaps start with Tim Duy's suggestion that the eurozone crisis could be a net positive for the US: The European crisis, by keeping US interest rates in check and oil prices low, may do more to help the US recovery than hurt it. It makes sense to think of lower […]
Fiscal Federalism revisited
A French, German, and Canadian student were asked to write an essay on elephants……And the Canadian student titled his essay "Elephants: a Federal or Provincial responsibility?" The Eurozone is what Canada would be if we abolished the Federal government, leaving only the Bank of Canada. The 16 Eurozone countries are the 10 Canadian provinces. Americans […]
Eurozone: is this the big one?
I'm scared again. I haven't felt this scared for over a year. Things were starting to look better, in Canada in particular, but around the world more generally. Now Greek bond yields are shooting up. I was worried about the Eurozone in January 2009. And again in December. Maybe it was just my Euroskeptic "Anglo-Saxon" […]
Because You Asked For It: Small Business Strategy and the Canadian Dollar
Reader westslope recently asked: BTW, does your company top brass pay attention to your MERT model and, perhaps, strategically plan and hedge accordingly? That’s an easy one for me to answer because I am charge of the finances for Nexreg (a small Canadian company that makes the majority of their sales in the U.S.). What […]
How the hell can we tell (if fiscal policy worked)?
I feel guilty about not wading into the recent debate about whether fiscal policy helped the Canadian economy recover from the recession. It's one of the things I am supposed to know something about — basic macro. But there's a reason I couldn't be bothered to take sides and join in. The patient is ill. […]
Productivity, the Canadian Dollar and Small Business – A Case Study
Based on a true story one of my clients had to deal with (besides teaching at Ivey, I am a consultant to the chemical industry). The following case explains why there could be, at least in theory, a relationship between productivity levels and fluctuations in the Canadian dollar. Consider a small company in Brampton that […]
Human capital: literal truth, fairy tale or myth?
This is from my Carleton colleague Frances Woolley: Part I: Education Every undergraduate student in labour economics gets told the story of human capital. Education and experience make people more productive. The skills so acquired are called “human capital.” This explains why some people earn more than others, and why some countries are […]
Taxation in Canada – Part II: Constraints Faced When Designing a Tax System
In Part I we saw that the goals of taxation were two-fold: to collect revenue for the government and to discourage certain activities. However, the government hoarding Jacques Plante as an Edmonton Oiler hockey cards in an attempt to reduce the after-tax income of rich-people is not aligned with our goals. If there were no […]
The Division of Labour between interest rate and exchange rate
Stephen's graphs show quite clearly that Canadian monetary policy must tighten before US monetary policy. I'm convinced. But what does monetary policy mean? In this context, I'm going to ignore other interpretations, and just focus on interest rates and exchange rates. What is the division of labour between increasing interest rates and appreciating exchange rates? […]
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