Category Macro
Why can’t the Fed just buy yuan?
The title really says it all. And it's not a rhetorical question; I don't know the answer. But if the US is really concerned (H/T Mark Thoma) about the US dollar being too high against China's yuan, and it believes China is "artificially" preventing the yuan from appreciating against the dollar by foreign exchange market […]
Cheap talk and the exchange rate
Why does the Loonie appreciate when the Bank of Canada tightens monetary policy (relative to what was expected)? And depreciate when the Bank loosens monetary policy (relative to what was expected)? Before you conclude I've lost it, by asking such an easy question, consider the following weird thought-experiment.
Flashbacks to the 1970’s: the Bank of Canada and the deficit
Doug Peters and Arthur Donner (names I remember from the 1970s debate over inflation in Canada) have an opinion piece in the Toronto Star on the role of the Bank of Canada in reducing the budget deficit. It starts out fine, but ends in a non-sequitur.
Can rent controls cause a recession? A response to Scott Sumner and Bill Woolsey
There is a perfectly sensible theory that says that rent controls reduce labour mobility and can therefore worsen structural unemployment. I'm going to ignore that sensible theory and put forward a silly theory — one I believe is wrong. But I'm putting forward a silly theory to make (what I think is) a sensible point, […]
The hub and spoke model of money — a rejoinder to Arnold Kling
The textbooks say that money serves as: store of value; medium of account; and medium of exchange. Arnold Kling seems to miss the importance of the fact that money is a medium of exchange. Worse, he misunderstands me, thinking that I am one of those economists who makes a big deal of money's role as […]
Mackerels and Money
Arnold Kling asks: why are mackerels different from money? Why should the M in MV=PY stand for money, and not mackerels? Why can't an excess demand for mackerel cause a recession? Why can't an excess supply of other goods be matched by an excess demand for mackerel? Keynesians don't know the answer to this question […]
So where’s the market failure (in macroeconomics)?
Mike Moffatt asks the right question; and it's the economist's question. In economics, if we think the price of x is too high, we don't just say "we should lower the price of x". We look for the underlying causes of the price of x being too high. "Where's the market failure?"
Dark Age in Macroeconomics? A History of Taught approach
(Or maybe the title should be: "Notes from the Phelps/Lucas Administration"; or "Notes to supplement our fading memories of the late 1970's".) Is this a Dark Age in macroeconomics? In other words, have we collectively forgotten some (important) stuff that we used to understand? I want to approach this question by looking at what was […]
My own memories of the Phelps/Lucas administration
My own memories are similar to Paul Krugman's, but with one important difference. This is the bit I remember differently: "The Lucas view took the economics profession by storm – not because there was any solid evidence for it, but because it was so clever, because it led to nice math, because it let macroeconomists […]
All Microeconomics gets Say’s/Walras’ Law wrong
It's not just John Cochrane; it's not just (modern) Chicago; it's (nearly) all of us. Which economist has not written, said, thought, taught, or learned, the following: "Let there be n goods (including money, if it exists). Max U(X1,X2,..Xn) subject to SUM over n[P(X-E)]=0. Aggregate over all people. Therefore the sum of the n excess […]
Worthwhile Canadian Initiative 
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