Category Macro
Coloured sunspots and shells
This post is a sketch of a model of secular stagnation; and of bubbles that burst and get replaced by different bubbles. I don't formalise the model mathematically, because I don't have a comparative (or absolute) advantage at that sort of thing. But I think it could be formalised fairly easily. Start with a model […]
“Is the falling exchange rate good news or bad news?”
I was on CBC radio yesterday morning for about 5 minutes, talking about the exchange rate. From this experience, and from previous similar experiences, this is what reporters want to ask: "Who gains, and who loses, from the fall in the exchange rate? For Canada as a whole, is the fall in the exchange rate […]
One good thing about Bitcoin
Is that it is (sometimes) used as a medium of exchange but is not (yet) used as a medium of account. (Is that right?) Quite probably, someone else has already said this, but just in case they haven't:
Is the macroeconomic importance of finance an artefact of current monetary policy?
Suppose the Bank of Canada pegged the price of gold. If an increased demand for gold caused a recession, would macroeconomists be told they needed to pay more attention to the theory of the demand for gold? Or would the Bank of Canada be told to change its policy? Suppose the Bank of Canada pegged […]
Land and the liquidity trap
Bill Woolsey has a very good post, written in response to my previous post. In this post I steal Bill's thought-experiment, but change "corporate bonds" into "land". There is an alternate universe, just like our own, with one exception. For historical reasons*, central banks do not own government bonds. They own land instead. They buy […]
Monetary policy, fiscal policy, the target, and the size of the central bank
Glen Hodgson asks whether the Bank of Canada's 2% inflation target is too low. He is right to ask that question. I want to explore the trade-offs. Suppose you are a macroeconomist (like Simon Wren-Lewis) who believes that the Zero Lower Bound on nominal interest rates will be a binding constraint in some circumstances, and […]
When Will Low Interest Rates End?
A recent piece in the Financial Post titled “How many times can economists cry wolf about interest rates” caught my interest because I – like many economists in Canada – have been expecting interest rates to eventually start to rise and yet they do not. So when will Canadian interest rates start to go up? […]
Buyers and sellers, bargaining power and recessions, and asymmetric taboos
Think about a model where prices are determined by relative bargaining power. The buyer wants to do the deal, but wants a lower price. The seller wants to do the deal, but wants a higher price. Each threatens to walk away from the deal if the other side refuses to budge on the price. The […]
Efficiency wages and recessions
I'm not 100% sure what Paul Krugman is arguing here, but I think he is probably wrong. And I'm going to take him up on his invitation: "(I’m going to try some formal modeling on all this, but if anyone else wants to jump in, be my guest.)". Not that my modelling here is very […]
Long run, medium run, and short run Fisher curves
Here is a simple way to think about the correlations between nominal interest rates and inflation rates. We need to distinguish between three "Fisher curves": the long run; the medium run; and the short run Fisher curve. We need to distinguish between: the actual inflation rate; the central bank's inflation target; and what people expect […]
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