Category Macro
Forecasting the Federal Deficit
I wanted to figure out what the federal budget deficit would look like when Canada eventually recovers from the recession. So I did a very crude back-of-the-envelope calculation. Then I looked at the Parliamentary Budget Office's own forecast (pdf). The PBO forecast is more pessimistic than mine. I'm still trying to figure out why.
Macroeconomics with monopolistic competition in pictures
Thanks to my daughter, and to commenters, I have now learned "Paint", and can now post a simple diagrammatic exposition of macroeconomics with monopolistically competitive firms. This may be useful in its own right, and can help readers understand the point I was making in my previous post.
AD, AS, Y, Output Gaps, Cuba, Monopolistic Competition, and Recalculation
They are all related, honest! Journalists can be excused for speaking as though Aggregate Demand (AD) and output or GDP (Y) were synonyms. Macroeconomists ought to know better, but we are often just as bad as journalists. Macroeconomists never treat Aggregate Supply (AS) as a synonym for Y. The output gap is always the gap […]
Horizontalism, black holes, and liquidity traps
The same "horizontalist" macroeconomic theories that predict the existence of black holes also predict that standard monetary policy is useless in a liquidity trap, and for the very same reason. But we do not observe any economies ever falling into black holes, so black holes probably don't exist. So if those macroeconomic theories are wrong […]
Why don’t we observe (macroeconomic) black holes?
Like physics, modern macroeconomic theory predicts the possibility of "black holes". The analogy with physics is close, but not exact. Because unlike physics, where it's not easy to see a black hole, there should be no difficulty in macroeconomists seeing a black hole, if one exists. At the very least, we should certainly see any […]
What is it with Microeconomists?
They are certainly not stupid. And they are certainly not ignorant either. I know that the ones I'm complaining about are smarter than me, and more knowledgeable than me. And that includes economics smarts and knowledge. Some of them make me feel totally inadequate on a daily basis (I read their blogs daily). Some of […]
Greece, the Eurozone, and Canada
I have been following the story about Greece. Like some other Eurozone countries, Greece has high deficit/GDP and debt/GDP ratios. Unlike Canada, but like Canadian provinces, Greece cannot print money. Eurozone countries are like Canadian provinces, as I argued in here back in January. But the Eurozone, unlike Canada, lacks a federal fiscal authority. The […]
Random Thoughts
Sometimes my brain can't concentrate on any one topic long enough to write a serious post. Or maybe I just don't know enough to give a good answer to some question I want to answer. So here is a random collection of thoughts:
What is “the natural rate of interest”?
"The natural rate of interest" is a theoretical construct. It is a theoretical construct that only has a defined meaning within a certain class of economic models. And even within that class of models, the exact definition may vary from one model to the next.
Why do (bad) banks (really) matter?
I'm going to put forward two perspectives on why bad banks might be important in understanding the recession: an orthodox perspective; and a heterodox perspective.
Worthwhile Canadian Initiative 
Recent Comments