Category Monetary policy
Non-super-neutralities: an open invitation (to Austrians especially)
There is nothing new in the substance of this post; it is an exposition of standard monetary theory. (Though some might find the exposition interesting.) It is an open invitation for people to tell me where standard monetary theory of the effects of inflation might be wrong. It's an invitation open to all, but I […]
Re-thinking the lags in monetary policy — it depends on the shock
The lag in the effect of monetary policy on output employment and inflation may or may not be a problem. It depends on the nature of the shock: whether the shock has a shorter or longer lag than monetary policy. It should not have been a problem in the current recession, where the shock was […]
Oil prices, the CAD and the Bank of Canada
Apparently both Nick and I have been spending the weekend thinking about the recent run-up in the CAD and the Bank of Canada's attempt to talk it down. My take on it is based on the relationship between the exchange rate and commodity prices, and it starts below the fold.
Talking down the Loonie?
The Loonie (Canadian dollar) has appreciated against the US dollar recently. The Bank of Canada expressed its concern in Thursday's Announcement. "In recent weeks, financial conditions and commodity prices have improved significantly, and consumer and business confidence have recovered modestly. If the unprecedentedly rapid rise in the Canadian dollar (which reflects a combination of higher […]
“John Cochrane’s” argument for fiscal stimulus
I just finished reading John Cochrane's paper, where he applies the fiscal theory of the price level to the current crisis. (Thanks Adam P!). OK, I admit I didn't really read it thoroughly; I skimmed it. It's full of good insights, and also bad mistakes. The best thing to do with a paper like that […]
Summoning the ghost
I've been reading through the Annex of the Bank of Canada's most recent Monetary Policy Report (pdf), the "Framework for conducting monetary policy at low interest rates", and reading Deputy Governor John Murray's speech on unconventional monetary policy. I can't quite put my finger on the right metaphor. "Atheists explaining the efficacy of prayer" comes […]
The IS curve
You might think you understand the IS curve. You probably don't. And your failure to understand it properly means you don't understand how an excess demand for money is an integral part of the theory of the IS curve, underlying any state of deficient-demand unemployment. And you don't understand the monetary transmission mechanism properly. I […]
Deflation: a less clear and less present danger
It would appear from the April CPI release that the Bank of Canada won't be obliged to figure out how to implement policy quantitative easing after all.
Imagine there’s no money….
Would the current financial crisis matter as much in a world without money? Let me be more specific. Imagine we lived in a world where we still had money as a medium of account, so prices were measured in money. But people did not use any medium of exchange; they used barter instead. Would your […]
Has the Bank of Canada shifted from credit easing to quantitative easing?
Five weeks ago, I posted on the evolution of the Bank of Canada's balance sheet during the financial and economic crisis. Since then, several things have happened:
Worthwhile Canadian Initiative 
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