Category Fiscal policy
In praise of (a little bit of) fiscal dominance
Who makes sure the long run consolidated government-central bank budget constraint balances? Is it the government? Or is it the central bank? The former gives us a Ricardian regime; the latter gives us fiscal dominance. Most macroeconomists take a Ricardian regime as their unspoken assumption; and, if pressed, would recommend a Ricardian regime, as is […]
Yes, the federal government has a structural deficit. But let’s keep it in perspective, shall we?
Don Martin loses it in today's National Post: Clock tallies IOU to next generation: Stephen Harper will join Jean Chretien as only the second prime minister in history to enroll Canada in the half-trillion-dollar national debt club. This is silly. Nominal debt figures from 1995 – when the federal debt first went above $500b – […]
On the federal government’s structural deficit
The Department of Finance publishes monthly data for expenditures, revenues and the deficit. These numbers don't necessarily correspond to the annual numbers (for example, various items are sometimes booked to a fiscal year after it's over), but it gives us a good idea of where the government's finances are going. The monthly numbers are pretty […]
Towards a Monetarist theory of Neo-Chartalism
I am going to start with an orthodox monetarist approach, make one trivial semantic change, and see how far I can get in deriving Neo–Chartalist results. The semantic change is to change what I mean by "fiscal policy". It's an unconventional definition of fiscal policy, from a monetarist perspective, but I don't think a monetarist […]
The federal deficit is small, manageable problem with a simple solution. So why are politicians being so boneheaded?
The editorial cartoon in yesterday's Le Soleil has the best take I've seen yet on the issue of how to deal with the federal deficit. The target is Michael Ignatieff, but it could just have well have been Stephen Harper, because their positions on this issue are identical. Here is my approximate translation of the […]
Pre- Darwinian Macroeconomics
There are signs of economic recovery. Suppose a year from now it is clear that the economy has indeed recovered. What caused it? Was it: monetary policy; fiscal policy; or did the economy recover by itself? I don't know the answer to that question; nor does anyone else. If you have one world recovery, and […]
Economic policy advice for the NDP, Part II: Defending big government
A while ago, there was a spurt of articles bemoaning the 'out-of-control' spending of the federal government, making the point that federal spending has been outpacing the rate of growth of GDP over the past five years. We are presumably expected to believe that future federal governments will be obliged by the inexorable logic of […]
Weird Fiscal multipliers in New Keynesian models under ZIRP
Paul Krugman has bravely and commendably been trying to understand intuitively the underlying reasons for the big differences between fiscal policy multipliers in a couple of New Keynesian models. Someone needs to do this job. (Take as read a general rant against economists who write down fancy mathematical models without understanding or explaining the results […]
Rambling thoughts on Canadian house prices and global savings gluts
This isn't a very focused post. There are two sets of thoughts bubbling through my mind this morning. The first is about Canadian house prices; the second is about global savings gluts. But the two topics are very definitely related. There is a lot of anecdotal evidence of a pick-up in at least some Canadian […]
Stimulus? What stimulus?
Over here, I expressed confusion at Mark Carney's reported remarks to the effect that 'whatever good news existed was caused artificially by massive government and central bank stimulus': What government stimulus? The 12-month moving average of federal government program expenditures has been falling since December. (The deficit is due to declining tax revenues.) It occurs […]
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