Category Monetary policy
WTF!? Neo Fisherianism as one social construction of reality
Macroeconomists need to pay more attention to finance sociology. Choke. Languages have multiple equilibria. If we all used the word "cat" to mean dog, then "cat" would mean dog. And if I walked into a pet store and said "I want to buy a cat", the people in the pet store would react differently to […]
Understanding Schmidt and Woodford on Neo-Fisherianism
I think this is roughly what is going on in their model (pdf). I'm not 100% sure I'm right. And I'm not even trying to be 100% right. I'm trying to get the intuition (reverse-engineer) for those bits of their results I find most interesting. Suppose you are really bad at algebra. You can't solve […]
Privately-issued preloaded Drachma cards?
Forget monetary theory for a minute, and think only about the technical/engineering stuff: is Andrew Lainton basically right about this? Can something like this be done quickly and cheaply, without too much danger of counterfeit and fraud? (I don't know, which is why I'm asking.) If you introduce a new money, you want to do […]
Alpha, Beta, ECB independence, and Omega lender of last resort
There is a tension between central bank independence and acting as lender of last resort. We need to recognise that tension. The Bank of Canada prints its dollars on paper plastic. The Bank of Montreal prints its dollars on silicon(?). But both print dollars. BoC dollars and BMO dollars have a fixed exchange rate of […]
Euro MOA+MOE plus Drachma MOE
Suppose your country (call it "Greece") is in recession, because there is an excess demand for money (call it "Euros"). And suppose that the Euro is both Medium of Account (prices are quoted in Euros) and Medium of Exchange (all other goods are bought and sold for Euros). Now suppose your government introduces a new […]
Bad news on GDP vs good news on employment
Here is a macro exam question: Q. You are the New Keynesian governor of an inflation targeting central bank. Two bits of information arrive simultaneously: GDP is lower than you expected; employment is higher than you expected. Relative to what you had otherwise planned to do, how do you respond to the news? Do you […]
Thoughts on the news from Greece
This is just to record my thoughts, so I can look back on this and see what I got right and what I got wrong. Or at least, what I changed my mind about. The Euro was a mistake. I hoped (and still hope) to see the Euro dissolved. But the Euro is now stronger […]
Bank of Canada Governors and Economic Performance: A Canada Day Celebration
Another Canada Day, another year of Confederation – we are now 148 years old– and another opportunity for taking a historical look at some economic aspects of Canada. For your Canada Day musings, I decided to take a look at economic indicators according to the tenure of Bank of Canada Governors since 1934 (the legislation […]
The Bank of Canada’s “stitch in time”
Steve Poloz is good at economics, but not always so good at finding the best metaphor. Greg Quinn says "Bank of Canada Governor Stephen Poloz said his “controversial” decision to cut interest rates in January could be compared to life-saving surgery for the economy and any resulting increase in household debt should be viewed as […]
Seigniorage transfers and runs on common currencies
Two identical countries A and B share a common (paper) currency C. The demand for currency is 5% of annual (Nominal) GDP. Suppose B decides to quit the currency union and print its own currency. There are two different ways it could do this: 1. Convert and destroy. The people in B convert their C […]
Worthwhile Canadian Initiative 
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