Category Macro
Exogenous policy, endogenous policy……and improving policy
On Saturday I posted my views on why it is difficult to get good estimates of the effects of fiscal and monetary policy. On Sunday Greg Mankiw responded to (less than civil) criticism from Nate Silver. Here is the very short version: Nate Silver criticised Greg Mankiw for looking at the effects of an exogenous […]
Why there’s so little good evidence that fiscal (or monetary) policy works
Will fiscal (or monetary) policy work to prevent a recession? This is perhaps the central question of macroeconomics. We ought to know the answer, and we ought to have overwhelmingly good evidence to support our answer. But we don't. It's still being debated. There's a reason we don't have good evidence.
Debt and Wealth
Does an increase in debt mean a decrease in wealth? There's the accounting question, which should help us keep our heads straight. But there's also an economic question: what is the causal relation between debt and wealth?
Average Debt and Representative Agents
The representative agent is sometimes a useful conceptual fiction. What's the income of the average Canadian? How many hours does the average Canadian work? It's not just theoretical macroeconomists who ask those questions. But it is a useless fiction when we ask about debt. Or rather, at best it's useless; at worst it's dangerously misleading.
Current Fiscal Policy vs. Future Monetary Policy: Price-level Path Targeting
Paul Krugman presents a simple formal model of a liquidity trap. He shows that monetary policy won't work, but fiscal policy can work, to bring the economy to full-employment. Actually, that's not right. What his model shows is that current monetary policy won't work (because the nominal interest rate is at zero); but future monetary […]
Canadian Economic Forecasts 2009: Make Yours Now!
John Palmer at EclectEcon has made his own forecasts for 2009 . That's an implicit challenge to this blog, and we must not let it go unanswered. So I am now going to follow him down this foolish road, and invite you all to join me.
“The Bank of Canada should peg the TSE 300” – revisited
"The Bank of Canada should peg the TSE-300" is the title of a Carleton Economics Department working paper I wrote in 1992. (Sorry, but no web version available; this was in the olden days when all we had was paper, and when the TSX was the TSE.) Given the recent turmoil in financial markets, and […]
The 15-year old Liquidity Trap
Macroeconomists think of the zero lower bound liquidity trap as something that only became a problem in 2008 (Japan aside). JKH, a commenter on this blog, says it became a problem for banks about 15 years ago. "An interesting aspect of gap management is that the zero bound for interest rates has been a critical […]
Multipliers in a liquidity trap; fixed vs. flexible exchange rates. Disagreeing with the IMF.
In a liquidity trap, interest rates are stuck at zero, so increases in government spending do not raise interest rates. What are the government spending multipliers in a liquidity trap? Closed/open economies; fixed/flexible exchange rates.
Buiter, Krugman, Steinbrueck, free-riding, and the exchange rate
Warning: this post is difficult, and I'm not at all sure I've got it right. But I'm going to post it anyway. What determines the exchange rate in a liquidity trap? [Prerequisite: second year Open Economy Macro] In case you hadn't noticed, there's a small war going on, with Willem Buiter (UK) and Paul Krugman […]
Worthwhile Canadian Initiative 
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