Category International
The Fed faces a tricky rebound
Although the Bank of Canada and the Fed have both chosen to stop increasing interest rates, they did so for very different reasons. When the Bank of Canada called a halt to interest rate increases last month, it did so because it thought it had hit the sweet spot – inflation on target, output at […]
Canada’s dark anti-matter
The IMF released its annual report on the Canadian economy the other day. Nothing very much to report, which is understandable: the economy is operating at capacity, inflation is low and stable, and the government has been running a surplus for almost a decade now. There was an interesting tidbit in their forecasts: thanks to […]
Factor shares: Cobb-Douglas vs Stolper-Samuelson
Labour’s share of income in the US is at the low end of its usual range of variation: The long-run stability of this ratio plays an important role in macroeconomic modelling, namely the widespread use of the Cobb-Douglas functional form for production functions. Over the past 25 years, the ratio of (exports + imports)/GDP has […]
Oil prices and the Canadian dollar: A mystery solved
In an earlier post, I noted that the relationship between the CAD-USD exchange rate and oil prices hasn’t always strong as it has apparently been over the past few years. Since I hadn’t been able to sort this problem out on my own, I went into last weekend’s session on this topic organised by the […]
Economic growth and convergence
One of the main predictions of standard neoclassical growth models is convergence. If there are diminishing returns to capital, countries that have relatively higher levels of capital will have lower rates of return on investment than will countries in which capital is relatively scarce. Since poor countries offer higher rates of return on investment, they […]
Waiting for the pass-through
There are two list prices of my copy of Freakonomics: $C 34.95 and $US 25.95. Yesterday’s closing CAD-USD exchange rate was 0.8642. This means that that if you had $C 30,000 handy, you could exchange that for $US 26,000, drive across the border, buy 1000 copies of Freakonomics, cross back again and sell them for […]
Should we be thinking of the US as a small, open economy?
Kash and PGL at Angry Bear have a couple of recent posts challenging the proposition that reducing the rate at which income from capital is taxed will increase growth rates. I disagree with their conclusions, but I’m more intrigued by the fact that they – along with Menzie Chinn at Econbrowser and the Congressional Budget […]
Can’t win for losing
A couple of weeks ago, we learned that Canada had a near-record $9.3b current account surplus in 2005Q3. Today, Statistics Canada announced that the net investment position deteriorated by $17b over the same period. The reason, of course, is the continuing rise of the CAD: The value of international assets fell to $1,001.1 billion, a […]
Explaining the CAD-USD exchange rate II: Interest rate differentials
Using interest rate differentials to predict exchange rate movements is a good lesson in hubris. In 1997, the Bank of Canada’s Board of Directors had one of their regional meetings in Quebec City, and as part of this exercise, local notables were invited to an off-the-record dinner with then-Governor Gordon Theissen and other Bank officials. […]
The unbearable lightness of being the US investment balance
Timothy Geithner of the New York Fed is worried about the US investment balance: Our trade deficit is now roughly the size of the current account deficit, and very large relative to our export base. And our net investment income balances are now likely to move into deficit. It matters because of the trajectory of […]
Worthwhile Canadian Initiative 
Recent Comments