Category Monetary policy
In which Maclean’s confuses good news with bad
This week's Maclean's has yet another installment in its series of apocalyptic economics cover stories (not yet on line, as far as I can tell updated: now available here). One of the points it makes is that where households in other countries are reducing their debt loads, Canadians are borrowing and spending more. I'm having […]
When should the Bank of Canada raise interest rates?
The strong-ish November GDP number has revived the debate about when the Bank of Canada will start increasing its target for the overnight rate. On one hand, we have this: Recovery points to summer rate hike: With the North American economy growing significantly faster than expected at the end of 2009, and with mounting evidence […]
Is Barter Countercyclical?
The Wall Street Journal (H/T Peter Gordon) says that barter is countercyclical. Barter increases in recessions, like now, and decreases in booms. Can anyone confirm this? Because that fact (if it is a fact) is really important in understanding the nature of business cycles and recessions. Countercyclical barter is exactly what one would predict from […]
The Canadian dollar, the euro and political agendas
Paul Krugman points out that the existence of an independent Canadian dollar – and the fact that Canadians aren't in any hurry to adopt the USD – is something to think about when one ponders the euro project: [I]t suggests that Europeans made too much of the need for the euro. The euro project had […]
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 […]
The case for the Bank of Canada’s intervening in the forex market gets even weaker
The lines of reasoning that have been advanced over the past few months in favour of slowing the appreciation of the Canadian dollar can be broken down into two categories:
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.
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