Category Macro
“Cyclically-adjusted deficit” is not a macroeconomic concept
It shouldn't be, anyway. Tyler Cowen says: "These cyclically adjusted measures are useful information and should not be discarded, but I don’t wish to use them as the sole or main or dominant source of information about the stance of fiscal policy." I'm going to make a stronger claim. One I have made before.
Medium of Account vs Medium of Exchange
Money has two defining functions: it is the medium of account (all prices are quoted in terms of money); it is the medium of exchange (all other goods are only bought or sold for money). ("Store of value" is not a defining function of money, because my canoe is a store of value too.) Scott […]
Liquidity-Velocity Multipliers, Menger, Money, and Financial Crises.
This is a Sunday morning [evening – I hesitated] post, about some ideas I'm playing around with, trying to get my head straight. I'm just throwing it out there, and wondering if it has enough empirical "oomph" to fly. I don't think there's anything original here. "It's all in Menger". But Menger didn't draw a […]
Trashing balance sheets and observational equivalence of fundamental and bubble money
Four years ago (and again two years ago) I argued it might be good policy for central banks to (conditionally) trash their own balance sheets. Now this idea is in the news. See Ralph Musgrave for links. The recent blogosphere debate over whether money is or is not a bubble must have sounded like angels […]
Another debt burden counterexample
One last kick at this can. "OK Nick. Your previous counterexamples have shown that debt can be a burden on future cohorts even if future national income is not affected. But that's not what we meant by 'future burden of the debt'. Those counterexamples don't show the country as a whole being worse off in […]
Liquidity, bubbles/ponzis/chain letters, and money
I might as well join in the fun. Along with Steve Williamson, Noah Smith, Karl Smith, Paul Krugman, David Glasner, and Steve again. [Update: and Brad DeLong and JP Koning. And David Andolfatto.] Some assets are more liquid than others (they have lower transactions costs of buying and selling). More liquid assets will have a […]
You can’t estimate Optimal Currency Areas that way
The better the Bank of Canada is doing its job, the more it will appear that the Bank of Canada should be broken in two. The worse the ECB does its job, the more it will appear that the Eurozone is an Optimal Currency Area. If central banks were even slightly more competent than random […]
Six (maybe) good arguments for deficits (and one bad).
Are deficits good or bad? That depends. Sometimes they are good, and sometimes they are bad. But even when deficits are good, don't use bad arguments to defend them. It really annoys me. First as an economist, because it's bad economics. Second, as a (Canadian, but whatever) citizen. Because we want governments to run deficits […]
Fiscal policy in a simple New Keynesian OLG model with unemployment
For wonks. And for Andy Harless, who encouraged me to do something like this. Yep, there's still a burden on future generations, even with unemployment [update: if future taxes are increased as a result of current fiscal deficits]. Assume people live 2 periods. Lifetime utility is: U = Log(consumption when young) + [(1/(1+n)]Log(consumption when old). […]
Why Noah Smith doesn’t get my point about the debt burden
Because aggregating across people alive at a particular time is not the same as aggregating across time periods in the lifetimes of a particular cohort of people. (See JP Koning on the Borges Problem or Scott Sumner). [Update: or does Noah get my point? because later on in the comments to his post he says: […]
Worthwhile Canadian Initiative 
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