Category Monetary policy
The Bank of Canada and the dollar in the short and long term
Perhaps the strongest signal that the recession is over is the fact that the appreciation of the CAD is making headlines, just as it did in the last expansion. But since we're operating at the interest rate lower bound, things are a bit trickier this time around. In the short term, there is a good […]
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 […]
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 […]
A “proof” of Say’s Law; and why money is weird
For a whole economy, does planned expenditure on newly-produced goods necessarily equal planned income from the sale of newly-produced goods? That's what I mean by "Say's Law" in this context. Say's Law is wrong, and the fact that it is wrong is really important for macroeconomics. But it's not obvious why Say's Law is wrong. […]
John Cochrane, Paul Krugman, and Say’s Law, again
Via Casey Mulligan and Karl Smith, here is John Cochrane's response to Paul Krugman. It's a very good response. But there is one part where John Cochrane is definitely wrong. It's small, but important. And it's all about Say's Law, and the crucial difference between a monetary exchange and a barter economy.
Is the Bank of Canada bluffing?
From today's interest rate announcement: Persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target. In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR. The Bank has been issuing warnings such […]
Who is increasing their spending – debtors or creditors?
That's the question we ought to be asking right now, but I haven't seen anyone ask it, let alone answer it. I don't know the answer, but I do know it's the right question to ask.
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