Category Fiscal policy
International coordination with ZIRP, and Functional Finance
"Deficits and debt don't matter, we owe it to ourselves; we should run as big a deficit as needed to get our country out of recession." "International coordination of fiscal policy is needed to make sure each country runs a big enough deficit to get the world out of recession." Your choice. One or the […]
Does Canada need a Fiscal Stimulus? – Discuss
My own view, for what it's worth, is that Canada does not need a fiscal stimulus right now, but there's a possibility it might need one soon, so the government should get everything ready to introduce one as quickly as possible, but not pull the trigger quite yet. My preferred fiscal stimulus would be a […]
Will Deficit Spending in fact be Money-Financed?
It's easy to say that money-financed increases in government spending should be used as a weapon of last resort, if the central bank runs out of ammunition as nominal interest rates fall to zero. But would government deficits in fact be money-financed? If the central bank targets the monetary base, the answer is trivial: if […]
What if increased government spending is contractionary?
Suppose that Canada does go into recession, either this month or in the months to come. What policy instruments are in the arsenal? The automatic stabilisers: Taxes will fall with revenues, and expenditures will rise as unemployed workers start drawing on employment insurance benefits. (There are of course other mechanisms at work here.) Monetary policy: […]
What should Canadian governments be doing right now?
My answer would be: nothing. Right now, the Bank of Canada is doing the grunt work of trying to keep financial markets from drying up, and there's not a lot that governments can do to help. And if the Bank were trying to provide monetary stimulus on top of all that, it could hardly do […]
A $10b deficit isn’t what it used to be
There are several reports to the effect that the federal govt may run a deficit on the order of $10b in FY 2009-10. When the deficit went to $10b back in 1977-78, it was 5% of GDP. Thirty years later, $10b is something like 0.6% of GDP. Let's all not panic, shall we?
Stephen Harper’s project to reduce the size of the federal government
Paul Wells often makes the point – in his book, and more recently here – that one of Stephen Harper's long-term goals is to reduce the size of the federal government. I don't think that there's much doubt that this is a goal of the Conservative government. What's much less clear is whether or not […]
Deficit hysteresis
So it has come to this: Liberal Leader Stéphane Dion, who this morning refused to say categorically he would never run a deficit if the economy slides, backtracked this afternoon to commit unequivocally that a Liberal government would never cause a deficit. Quizzed three times by reporters in London, Ont., on Wednesday morning, Mr. Dion […]
A brief history of the federal budget surplus
It seems very likely that – for the tenth consecutive year – the federal government will run a healthy surplus in FY2006-07. For those of a certain age, it is perhaps difficult to believe that large surpluses have become a standard feature of the economic policy background. How did this happen?
The #1 reason to fear a hard landing in the US: There are no cushions
A US recession seems inevitable now. Unfortunately for those of us who would be negatively affected by this development, US policy-makers have, in their wisdom, stripped themselves of the means to attenuate its effects. Monetary policy: The Fed didn’t stop raising interest rates in August because it thought that inflation was under control; it did […]
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