Category Fiscal policy
What the non-lunatic right believes about macroeconomic policy
[Well, I like to think I'm a non-lunatic, when I'm having a good day. But I might be speaking only for myself.] Brad DeLong (a card-carrying member of the non-lunatic left) says: "The non-lunatic right holds that market economies are indeed macroeconomically unstable but they can be balanced by minimal interventions in aggregate variables: that […]
The Growth of the Local Public Sector
The rising expense of local government services is increasingly capturing the attention of pundits and policy makers alike. The rising cost of policing and fire services in particular and their effects on local budgets and ratepayers, has drawn the attention of Canadian municipal leaders. What is also interesting is the overall growth in local government […]
Fiscal shocks as relative demand shocks
Take a macro model of an economy with two different goods being produced; call them Carrots and Grapes (there can be many different varieties of carrots, and many different varieties of grapes, if you like). Suppose the demand for grapes falls, because of a change in preferences. Will there be an equal and offsetting increase […]
Why can’t central banks monetise something else?
Other than government bonds? That's a rhetorical question. They can. David Andolfatto has gone over to the Dark Side, and all the lefty keynesians are celebrating their new convert to Big Government Deficits. (Tongue in cheek warning.) Not so fast. David imagines a world where the demand for (central bank money + government debt) is […]
Deficit targeting vs Debt targeting
Is a "balanced budget law", even a flexible law that allows temporary deficits (and surpluses) in appropriate circumstances, the right way to think about prudent sustainable fiscal policy? A financial asset is just a bit of paper with a promise written on it. A promise is a commitment about the future actions of the promiser, […]
The Federal Deficit: A Long Term View
In honour of the 2015 Federal Budget and the balancing of the budget, why not a retrospective on Canadian federal government deficits since 1867. In the period from 1867 to 2014, the Federal government has run a deficit in 108 out of 148 years or 73 percent of the time. In nominal terms, the federal […]
Fiscal Ships
“We're two ships that pass in the night, And we smile when we say it's alright We're still here, It's just that we're out of sight Like those ships that pass in the night” Barry Manilow Next week is a double-header of sorts for economists interested in Canadian public finance – a Federal budget on […]
How much of a deficit will in fact be money-financed?
I want to do some very back-of-the-envelope calculations. (I will probably get the arithmetic wrong.) A bond-financed deficit is where the government prints bonds to finance a deficit. A money-financed deficit is where the government (or the central bank it owns) prints money to finance the deficit. They are different for two reasons: 1. Money […]
A silly question for anti-austerians
Let's make up some silly numbers. Suppose the national debt was, let's say, 1,000% (ten times) annual GDP. And suppose the budget deficit was, let's say, 50% of GDP. And suppose your economy hit the Zero Lower Bound, and suppose you thought that your own central bank's monetary policy could do no more to increase […]
Worthwhile Canadian Initiative 
Ontario Budget Commentary
Well, another Ontario budget has come and gone. The government still plans to balance its budget by 2017. According to the budget projections it will do this largely by increasing revenues and restricting expenditure growth.