Category Macro
The relation between ZLB, NGDP, QE, and G
Nothing new here. This is just a brief summary of my views:
How can we know if government spending is money-financed?
I have a proposal that would improve aggregate demand management. I call my proposal "money-financed government expenditure on sacrificing goats". I propose that every time the government sacrifices one goat, the Bank of Canada is required by law to increase the base money supply permanently by $1 billion, relative to what it would otherwise have […]
Labour market slack in Canada and the US
Paul Krugman says: "My guess is that there’s considerably more slack [in the US labour market] than the unemployment number might lead you to suspect, but the truth is that I don’t know." Timothy Lane, deputy governor Bank of Canada, has an estimate that agrees with Paul's guess. He says (in a talk at Carleton […]
Retirement, saving, and the rate of interest
I want to sketch out a very simple model of the effect of retirement on saving and on the rate of interest. Because I think that saving for retirement is the biggest motive for saving, and that the increase in the length of time people are retired is having a big effect on the rate […]
The Bank of Canada vs the bond market
Carolyn Wilkins, Senior Deputy Governor at the Bank of Canada, gave a speech yesterday at noon. She said that the Bank of Canada had lowered its estimate of the (cyclically-adjusted) neutral rate of interest. "All told, we think that the neutral rate of interest is lower than it was in the years leading up to […]
Inventories of goods and money (I=S again)
Think waaaay back, to the Keynesian Cross model of the traditional first-year textbook: 1. Desired expenditure Yd is an increasing function of income (aka production) Y. So Yd = a + bY where a > 0 and 0 < b < 1 2. In equilibrium, Yd = Y What is the process that brings the […]
How scared of deflation were you, in 2008?
In normal times, like today, or 2004, my subjective probability distribution for the average annual inflation rate over the next 5 years looks something like this: The Bank of Canada tries to keep inflation between 1% and 3%, and targets the 2% midpoint of that range. In any one year, inflation will rarely fall below […]
The orthodox New Keynesian position on liquidity preference and loanable funds
I am not an orthodox New Keynesian macroeconomist (ONKM), but I can pretend to be one. Q: What determines the rate of interest? ONKM: "The central bank sets the rate of interest." Discussion: the above answer is a pure liquidity preference theory of the rate of interest. By having a perfectly elastic money supply curve, […]
What’s special about monetary coordination failures?
This is a response to Brad DeLong's and David Glasner's good posts. They are good posts because they forced me to think. This is what I think. [I really ought to spend more time on this post, but I am a little snowed under with committee work at present. Sorry.]
Is Modern Macro Useful?
Well, I had a quick read through Kartik B. Athreya’s Big Ideas in Macroeconomics: A Non-Technical View because I have not been near macro theory since I finished grad school nearly 25 years ago. It seemed like a good way to re-acquaint myself with the subject and get some insight on what some of the […]
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