Category Fiscal policy
The (near) inevitability, and who and when, of Helicopter Money
Helicopter Money is (almost) inevitable. The only questions are: who does it; and when do they do it. And we can't (easily) tell when it gets spent, and what it gets spent on, because money is fungible and we don't observe counterfactual conditionals. Let's make some ballpark-correct assumptions. Assume currency pays 0% interest, and the […]
“King of deficits”??
I normally stay out of politics on this blog. But with the upcoming election, the political conversation on fiscal policy is starting to get stupid. In particular, for Paul Martin to accuse Stephen Harper of being the "King of deficits" was really stupid. Is there anything Stephen Harper could have done to have prevented a […]
Good shocks, bad shocks, and shocks that cause a monetary coordination failure
Just because a shock is a bad shock doesn't mean it should cause a recession. A recession is a monetary coordination failure. Monetary coordination failures are caused by monetary policy. Start with a Robinson Crusoe economy. By assumption, Robinson Crusoe always allocates his resources perfectly to maximise his expected utility given his information about the […]
Why did (Canadian) inflation-targeting work in 1996 but fail in 2008?
In both 1996 and 2008 the Canadian economy was hit with a big shock. The 1996 shock was the change in fiscal policy, turning a large deficit into a large surplus. The 2008 shock was the global financial crisis. (Canada didn't really have much of a financial crisis; no banks failed, as usual.) In both […]
Are all Eurozone GDP data “fake”?
The title is more inflammatory than I want it to be, but I can't think of a simple way to ask the question properly. And it is a genuine question, because I don't know how they construct GDP data for Eurozone countries. And I know there's no chance I will be able to figure out […]
The Great Convergence: Federal Transfer Revenue Shares 1980/81 to 2013/14
Well the Council of the Federation began meeting in St. John’s yesterday and given we are on the cusp of a federal election, there will no doubt be a targeting of Ottawa’s role in provincial finances. Naturally, there will be some lamentations about the Prime Minister’s absence – once again – from this annual meeting. […]
Fiscal policy and indifference about the size of government
Suppose I were totally indifferent about the size of government. Because I thought that the government was always equally good (or equally bad) at spending money as private households and firms. And not just at the margin, but everywhere. Never better, never worse, but always exactly the same. Whether G is 1% of GDP, or […]
Mark Sadowski’s correlations deserve a response
They are just simple correlations, but a sample of 34 (split into two groups) beats a sample of the one country the economist just happens to live in. Correlations of data are themselves data, and it is our job to try to interpret (or explain) the data. This is how I (tentatively) interpret those correlations: […]
Econometric estimates of fiscal policy multipliers
New Keynesian macroeconomics says that a (temporary) increase in government spending will cause an increase in the natural real interest rate. And unless the central bank increases the actual real interest rate by an equal amount, the result will be an increase in Aggregate Demand, which will cause an increase in real output and/or inflation. […]
Fiscal Policy, the Eurozone, and Ontario under Bob Rae
This post is mostly questions, not answers. I am hoping the commenters will write this post for me. Because I don't have a comparative advantage at this sort of thing. [BTW, JP Koning has an excellent post, much better than this, drawing a parallel between Greece's proposed and Alberta's 1936 parallel currency.]
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