Category Fiscal policy
The Canadian recovery is nearly complete. Now what?
According to this morning's Labour Force Survey release (the LFS is a mandatory survey that uses census data – are its days numbered, too?), 97% of the jobs that were lost to the recessions have been recovered. This, along with 78% of GDP (April data) and 64% of hours worked (3-month average) regained makes for […]
Confidence: In what?
It's a very old argument, and there's some truth in it. Financial crises and recessions are caused by a loss of confidence. And policies that might normally help end the recession might actually make things worse, if they worsen confidence. Confidence in what? The problem right now is that there is too much confidence: in […]
One of these G7 labour markets is not like the others
The G7 are meeting in Huntsville this weekend, about an hour's drive up Highway 11 from my home town. There's been a certain amount of pre-summit jockeying about what would be on the agenda, but it's hard to see how there's going to be a consensus on the issue of the fiscal 'exit strategy' back […]
On the lessons to be learned from the elimination of the Canadian federal deficit in the 1990s
It would appear that there is a significant constituency in both the US and in Europe agitating for immediate efforts to reduce their respective governments' deficits, and some are pointing to the Canadian experience of the 1990s. If Canada could make the swift transition from decades of large and chronic deficits to being the poster […]
Tinkerbell in New Keynesian models
This post is not a critique of Paul Krugman's critique of Scott Sumner (though that's what got me thinking along these lines). It's a critique of all of us, especially all of who use New Keynesian models (which includes me). Framing matters. Tinkerbell is real and all-pervasive. She flies in New Keynesian models all the […]
Opportunity Costs – Their Use and Misuse
Opportunity cost is one of the most important concepts in microeconomics. A solid understanding of opportunity costs both allows us to make better decisions and to better understand the decisions made by others. However, the concept is often used erroneously, as it was earlier this week by an Ontario politician.
Run, don’t walk, up the down escalator
If you find yourself going down the down escalator, and suddenly realise you want to go back up, you don't delay, and you don't walk back up. You turn around immediately, and you run as fast as you can till you get to the top. Over a year ago, Mark Thoma introduced his icy hill […]
Stimulus? What stimulus?
Robert Reich on the risks of a 'double-dip' recession in the US: The only reason the economy isn’t in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can’t continue much longer without igniting speculative bubbles), and replacements (consumers have […]
The (mis-)coordination of monetary and fiscal policy
Suppose the monetary authority says "We already have interest rates at zero, so monetary policy can do no more to increase aggregate demand. But fiscal policy can do more…" Suppose the fiscal authority says "We already have very high deficits and debt, so we are scared of future insolvency, so fiscal policy can do no […]
The orthodox loss of faith
I think we are witnessing the biggest silent shift in macroeconomic thought since the Second World War. For 70 years we have taught, and believed, that we would never again need to suffer a persistent shortage of demand. We promised ourselves the 1930's were behind us. We knew how to increase demand, and would do […]
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