Category Nick Rowe
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 […]
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 […]
“Investment” in housing
Talking about "investment" in housing is guaranteed to provoke a reaction. It's a way of talking about houses that sounds so reminiscent of the bubble mentality. It's yesterday's way of thinking. "A house is not an investment; it's a place to live!" is today's way of thinking. I decided to write this post after reading […]
Is fiscal conservatism about deficits or debt?
I was on CPAC Sunday evening, on a roundtable with two other economists: David MacDonald (who coordinated the alternative budget for the Canadian Centre for Policy Alternatives); and Glen Hodgson (Chief Economist for the Conference Board). [You can watch it here – SG.] The topic was Canada's projected $50 billion federal deficit; should we be […]
A $50 billion deficit is really a $25 billion deficit
If the government runs a deficit, it means you have to increase taxes or cut government spending sometime in the future, right? Well no, that's not exactly right.
“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 […]
A “Why Fiscal Policy Won’t Work” Contest
I am opening a contest. Let's see who can come up with the most plausible (or least implausible) model in which fiscal policy would not work in present circumstances. This is not an entirely frivolous exercise. David Andolfatto (who runs another excellent Canadian economics blog) has made a number of posts recently questioning the empirical […]
Worthwhile Canadian Initiative 
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