Category Macro
It’s easier to have a sensible fiscal rule with an NGDP level-path target
It's a simple point, perhaps an obvious point, that only needs a short blog post, but I think it's worth making. The Brits seem to be arguing about whether they should have some sort of rule (or charter) for fiscal policy, and if so, what it should look like. I am a bit skeptical, because […]
New Keynesian macro when all output is consumer durables [DRAFT]
Warning: math-challenged economist at play. I want to see if I can sucker any readers into checking my math and doing the rest of the math for me. Do not read this post unless you think that might be fun. Update: Keshav has solved the math. Now we are trying to understand what it means. […]
Does saving count towards GDP?
Here's a fun one. (OK, I think it's fun, anyway.) Especially for those who teach macro. A first year student emails me. Paraphrasing, he asks "For a closed economy, we know that national saving equals national investment, and investing in newly-produced goods counts towards GDP. And "saving" means anything we do with our income other […]
ISLM pictures with interest on money
By popular request (well, David Andolfatto asked, but I think he's right to ask) I'm drawing a picture to illustrate my previous post on the distinction between the interest rate Rb you get paid for lending money and the interest rate Rm you get paid for holding money. But first I need to take a […]
Interest on holding money vs interest on lending/borrowing money
Prerequisite: intermediate macro. I reckon some people might be getting those two things muddled. The difference matters. Actually, the difference is the only thing that matters. It's the spread between those two interest rates, not the levels of those two interest rates, that matters for Aggregate Demand. Simplify massively. There are two rates of interest. […]
Focal points, and how beta money becomes alpha money
This is my response to Tony Yates' lovely fairy tale about escaping the zero bound. There is a Nash equilibrium in which each individual tosses a coin to decide which side of the road to drive on that day. But it's not a stable Nash equilibrium, in the old-fashioned sense of "stable". If I switch […]
Some thoughts on banning 100% reserve banking
In the olden days, economists would argue about whether fractional reserve banking should be banned, and 100% reserve banking should be mandatory. In today's mirror world, economists are arguing about whether fractional reserve banking should be mandatory, and 100% reserve banking banned. Or at least strongly discouraged. What JP Koning calls "cash escape inhibitors" (designed […]
Negative interest rates, hot potatoes, and banks
Let's start out very simple. The central bank issues banknotes, and those banknotes are the only type of money that people use, to buy and sell everything else. It really doesn't matter if people keep those banknotes in their pockets or if they keep them in a shoebox at the central bank with their name […]
Targeting, Tautologies, and Double Divine Coincidence
For Tyler Cowen. I think I see his point, and I've been trying to get my own head around this question. 1. Suppose I live in a world where the central bank targets the price level, as measured by the GDP deflator. And suppose I believe the central bank should target Nominal GDP instead. Given […]
Resources, Investment and the Current Canadian Slowdown
Real GDP growth in Canada slowed down during 2015 with the drop in the price of oil and the crash in the resource sector. The economic contribution of the main resource producing provinces to Canada’s economic performance is particularly important when it comes to recent capital formation as an economic driver.
Worthwhile Canadian Initiative 
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