Category Nick Rowe
Bad news on GDP vs good news on employment
Here is a macro exam question: Q. You are the New Keynesian governor of an inflation targeting central bank. Two bits of information arrive simultaneously: GDP is lower than you expected; employment is higher than you expected. Relative to what you had otherwise planned to do, how do you respond to the news? Do you […]
Thoughts on the news from Greece
This is just to record my thoughts, so I can look back on this and see what I got right and what I got wrong. Or at least, what I changed my mind about. The Euro was a mistake. I hoped (and still hope) to see the Euro dissolved. But the Euro is now stronger […]
The Bank of Canada’s “stitch in time”
Steve Poloz is good at economics, but not always so good at finding the best metaphor. Greg Quinn says "Bank of Canada Governor Stephen Poloz said his “controversial” decision to cut interest rates in January could be compared to life-saving surgery for the economy and any resulting increase in household debt should be viewed as […]
Seigniorage transfers and runs on common currencies
Two identical countries A and B share a common (paper) currency C. The demand for currency is 5% of annual (Nominal) GDP. Suppose B decides to quit the currency union and print its own currency. There are two different ways it could do this: 1. Convert and destroy. The people in B convert their C […]
Bank walks and options
Why did it takes so long? Currency and deposits are imperfect substitutes. Currency is more convenient for some things, and deposits are more convenient for other things, so many people hold both. If a banking system is working normally, deposits include the option to convert them into currency at a fixed exchange rate (par). (And […]
Fiscal policy and indifference about the size of government
Suppose I were totally indifferent about the size of government. Because I thought that the government was always equally good (or equally bad) at spending money as private households and firms. And not just at the margin, but everywhere. Never better, never worse, but always exactly the same. Whether G is 1% of GDP, or […]
Mark Sadowski’s correlations deserve a response
They are just simple correlations, but a sample of 34 (split into two groups) beats a sample of the one country the economist just happens to live in. Correlations of data are themselves data, and it is our job to try to interpret (or explain) the data. This is how I (tentatively) interpret those correlations: […]
Are Technology and Learning joint inputs?
[More musings. I started writing this post arguing that they are joint inputs. Now I'm not so sure. So I changed the title into a question.] We need both land and labour to produce wheat, but land and labour are not "joint inputs", because we can combine them in variable proportions. The marginal product of […]
AK/Solow/Smith/Schumpeterian growth
More random musings, mostly to try to get my own head straight on some questions. (I should steal Robert Waldmann's idea of calling them "stochastic thoughts".) And probably not very original. But sometimes it's easier to try to reinvent the wheel than walk to the library and read all the books on "wheels"; and experiential […]
Are apples non-rival?
Suppose we had an apple replicating machine, that could replicate apples costlessly and instantly. How would we go about answering the question: "Are apples a non-rival good?". 1. We could have a lovely philosophical argument about whether the original apple and the copy are two different apples or just two different manifestations of the same […]
Worthwhile Canadian Initiative 
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