Category Nick Rowe
“The Bank of Canada should peg the TSE 300” – revisited
"The Bank of Canada should peg the TSE-300" is the title of a Carleton Economics Department working paper I wrote in 1992. (Sorry, but no web version available; this was in the olden days when all we had was paper, and when the TSX was the TSE.) Given the recent turmoil in financial markets, and […]
The 15-year old Liquidity Trap
Macroeconomists think of the zero lower bound liquidity trap as something that only became a problem in 2008 (Japan aside). JKH, a commenter on this blog, says it became a problem for banks about 15 years ago. "An interesting aspect of gap management is that the zero bound for interest rates has been a critical […]
Hair of the Dog
"Too much debt got us into this mess, and now central banks are trying to get us out of the mess by lowering interest rates to get us to borrow and spend more?" It sounds very much like the cure for hangovers: "take some hair of the dog that bit you". At best, drinking more […]
Central Banks should bet on recovery – literally
Ben Bernanke should publicly bet $1 trillion dollars that the US economy will recover quickly from deflation and recession. He should make that bet on the Fed's behalf. The Treasury should publicly disavow all responsibility for bailing out the Fed if Bernanke loses the bet. If he loses the bet, it would be paid for […]
Always hire the worst
"Are you sitting comfortably? Then I'll begin. Once upon a time, in a city called Ottawa…." "I thought it was called Windsor?" "No dear, that's another story. Once upon a time, the City of Ottawa needed to hire one person to do a job…." "I thought it was a car factory?"
Multipliers in a liquidity trap; fixed vs. flexible exchange rates. Disagreeing with the IMF.
In a liquidity trap, interest rates are stuck at zero, so increases in government spending do not raise interest rates. What are the government spending multipliers in a liquidity trap? Closed/open economies; fixed/flexible exchange rates.
Some simple arithmetic of Canadian debt and deficits
Various numbers for projected deficits have been reported recently. This post tries to put those numbers into perspective.
Buiter, Krugman, Steinbrueck, free-riding, and the exchange rate
Warning: this post is difficult, and I'm not at all sure I've got it right. But I'm going to post it anyway. What determines the exchange rate in a liquidity trap? [Prerequisite: second year Open Economy Macro] In case you hadn't noticed, there's a small war going on, with Willem Buiter (UK) and Paul Krugman […]
Let’s cut to zero too
OK, the US Federal Reserve has now cut interest rates essentially to zero. I think the Bank of Canada should now do the same.
But what would happen to the debt if we didn’t run a deficit now?
If the government runs a deficit now, the debt-burden on future taxpayers will increase. But maybe the debt-burden would increase even more if we didn't run a deficit now? The proper way to handle policy questions (in economics, or anywhere) is to compare what will happen with the proposed policy to what would happen under […]
Worthwhile Canadian Initiative 
Recent Comments