Category Monetary policy
New Keynesian macroeconomics doesn’t make sense to me any more
WARNING: this post is not quite ready for prime-time. But I can't figure out how to re-write it before I leave to England this evening. And we were arguing about this stuff in comments on my Tinkerbell post, so I'm just going to post it anyway. Old Keynesian macroeconomics makes sense. It might be right, […]
Tinkerbell in New Keynesian models
This post is not a critique of Paul Krugman's critique of Scott Sumner (though that's what got me thinking along these lines). It's a critique of all of us, especially all of who use New Keynesian models (which includes me). Framing matters. Tinkerbell is real and all-pervasive. She flies in New Keynesian models all the […]
Run, don’t walk, up the down escalator
If you find yourself going down the down escalator, and suddenly realise you want to go back up, you don't delay, and you don't walk back up. You turn around immediately, and you run as fast as you can till you get to the top. Over a year ago, Mark Thoma introduced his icy hill […]
Bank of Canada performance, and performance pay?
I don't have any strong view on performance pay in general, on performance pay for public sector workers, or on performance pay for workers in the Bank of Canada in particular. And I'm going to stay silent on whether the Bank of Canada had good performance in 2009 (or 2008, if there's a one-year lag?). […]
Why it’s a really good thing that the ECB has overpaid for Greek junk bonds
Those of us who argue for monetary policy as a way for countries (and fake countries like the Eurozone) to escape a recession, even in an alleged "liquidity trap", recognise that any increase in the money supply should be permanent, and perceived as permanent, to do much good. Even some Keynesians, like Paul Krugman, recognise […]
Only one degree of freedom per Fixed Announcement Date
The Bank of Canada's announcement today, raising the overnight rate target from 0.25% to 0.5%, wasn't a surprise. The surprise was the kicker at the end: "Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments." Most people were expecting […]
The (mis-)coordination of monetary and fiscal policy
Suppose the monetary authority says "We already have interest rates at zero, so monetary policy can do no more to increase aggregate demand. But fiscal policy can do more…" Suppose the fiscal authority says "We already have very high deficits and debt, so we are scared of future insolvency, so fiscal policy can do no […]
Ban the penny! And the nickel, while we’re at it
Deputy Governor Pierre Duguay provides us with one of the more interesting trial balloons to come out of the Bank of Canada in a very long while: [T]he Bank views the possible elimination of the penny in terms of the potential impact on inflation, and has conducted some preliminary research on this issue. The findings, […]
The CPI and other asset prices
Returning from a long weekend's canoeing, I remembered one of the main reasons I am a sticky-price macroeconomist. I checked to see if the economy had imploded while I was not worrying about it. April CPI up 0.1% from March; CAD/USD down about 2%; CAD/EUR up about 2%; TSX down around 3%; S&P500 down around […]
Maybe the Bank of Canada won’t raise interest rates on June 1
The April CPI release is out; here is the updated graph of core inflation rates over various horizons: Core inflation started trending above the 2% target in November, and this trend explains why the Bank felt it necessary to use its April 20 interest rate decision to release itself from the conditional commitment to hold […]
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