Category Fiscal policy
Do economically illiterate slobs use duality theory?
Dunno. I was never that good at micro/math. That's why I'm asking. The government has a banana machine that converts any number of apples into the same number of bananas. If it starts the machine up we get a new equilibrium, where people will produce more apples and fewer bananas, and/or consume fewer apples and […]
Teaching, OLG models, and the phenomenology of perception
When we teach students economics, we sometimes use numerical examples to help them understand general principles. Sometimes we make them work through those numerical examples by themselves, as an assignment. It's the only way they will really get it, and see what's really going on. But once they get it, they don't need the numbers […]
How markets convert meat into vegetables
It is Winter. It is impossible to produce food, and the people can only eat the food they have already stored. The king wants to take food away from the carnivores and give it to the vegetarians. He orders a tax on the carnivores, so they will eat less food, and a transfer payment to […]
Debt does have intergenerational distributional implications
Consider two possible worlds: World A: Us old people bequeath our government bonds to the next generation (as a freebie). World B: Us old people sell our government bonds to the next generation (they pay us for the bonds). See the difference? In world A the next generation inherits the tax liabilities inherent in the […]
How to lie with NGDP statistics?
I'm not very good at this. But I think we need to ask the question. Others could answer it better than me. Scott Sumner tells me that Greece is considering issuing NGDP-linked bonds, where the amount the government pays to bondholders is proportional to Nominal Gross Domestic Product. Like Scott, I rather like the idea […]
Another Canadian Debt Ranking
Statistics Canada has released provisional estimates of the Canadian Government Finance Statistics (CGFS) for financial flows and the balance sheets of general government and government business enterprises for the period 2007 to 2012. The net liabilities per capita picture for provincial and territorial governments has changed since the 2008 global financial crisis.
Ontario Finances Not Quite On Target This Year
As Ontario moves into budget season, it is instructive to take a quick look at the finances to date as revealed in the most recent Ontario Economic Outlook and Fiscal Review which was presented November 2014. Ontario’s aim then as no doubt now was to have the budget balanced by 2017-18. According to the Review, […]
When Tax Opportunity Knocks…
It looks like the respite from falling oil prices for consumers at the pump has finally attracted the attention of government. Ontario Premier Kathleen Wynne has been reported as saying Ontario will unveil a carbon-pricing scheme this spring. While the idea of a carbon tax in Ontario has been on the agenda since at least […]
“Temporary” increases in G at the ZLB in an NK model
Paul Krugman says: "Monetary policy at the ZLB requires a perceived regime change to be effective, fiscal policy doesn’t — in fact, fiscal policy works better if people believe that it’s temporary, and will end when the economy recovers." In a New Keynesian model temporarily stuck at the Zero Lower Bound with less than potential […]
The third-best case for fiscal policy, and moral hazard for central banks
1. If the central bank is doing it right, and targeting the right level of Aggregate Demand, there is no case for fiscal policy to try to influence AD. It's not needed. And it won't affect AD anyway, because the central bank will offset any changes to fiscal policy to keep AD on target. Fiscal […]
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