Category Finance
Alpha, Beta, ECB independence, and Omega lender of last resort
There is a tension between central bank independence and acting as lender of last resort. We need to recognise that tension. The Bank of Canada prints its dollars on paper plastic. The Bank of Montreal prints its dollars on silicon(?). But both print dollars. BoC dollars and BMO dollars have a fixed exchange rate of […]
It’s the (absence of) trust, Simon
Simon Wren-Lewis ruins (for me) what would otherwise be a very good sensible keynesian post about Greece ("sensible keynesian" is a school of thought, to which Simon belongs) by leaving out trust. Or, if you want to be techie about it, the "time-consistency problem". If you give me one apple today, and I give you […]
Bank of Canada Governors and Economic Performance: A Canada Day Celebration
Another Canada Day, another year of Confederation – we are now 148 years old– and another opportunity for taking a historical look at some economic aspects of Canada. For your Canada Day musings, I decided to take a look at economic indicators according to the tenure of Bank of Canada Governors since 1934 (the legislation […]
Bank walks and options
Why did it takes so long? Currency and deposits are imperfect substitutes. Currency is more convenient for some things, and deposits are more convenient for other things, so many people hold both. If a banking system is working normally, deposits include the option to convert them into currency at a fixed exchange rate (par). (And […]
Secular stagnation, liquidity, and rent/price ratios
No answers here, only questions. By "secular stagnation" I mean "declining equilibrium real interest rates". Most explanations of secular stagnation say it is caused by a rising desire to save and/or a falling investment demand. Call this the "Saving/Investment Hypothesis". But there are lots of different real interest rates. For example, the real interest rate […]
Overdrafts with 100% reserve banking
I was reading Frosti Sigurjonsson's proposal for monetary reform in Iceland. [Click on the document thingy halfway down the page.] His proposal is a variant on 100% reserve banking. I got stuck on page 72 and footnote 66, where he discusses overdrafts. This post is just my attempt to get my own head clear on […]
Funding and the Future of Ontario Universities
Well, the Council of Ontario Universities or COU is looking for a new President and CEO. The role of COU is to serve as a voice for the province’s university sector and help improve the public policies that affect the sector. As the ad for the position states: “As a member-based organization, COU provides the […]
Asymmetric home bias and the transfer problem
A random thought on Germany and Greece. If apple producers and banana producers have the same symmetric Cobb-Douglas preferences U = A0.5.B0.5 the competitive equilibrium has half the apple crop being exchanged for half the banana crop. But if the apple producers only like apples, and refuse to eat bananas, the relative price of apples […]
Babies as Human Capital in an OLG model
I'm trolling Elizabeth Breunig. Because she said that "Human capital is one of the more odious terms in the capitalist lexicon". And I like the term "human capital", because I think it helps us think more clearly about investment in training and education. Are new-born babies "human capital"? My first thought was that they possess […]
The Fuss Over TFSAs
Well, there seems to be a fair amount of fuss over the proposed doubling of the contribution limit to Tax Free Savings Accounts(TFSAs). Kevin Milligan says the case for raising the annual TFSA limit is shaky as the benefit will be mostly to high wealth households rather than those at the middle or bottom of […]
Worthwhile Canadian Initiative 
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