Category Nick Rowe
A simple Keynesian-monetarist brain-teaser
Mostly for fun. Mostly for economics undergraduates. But I think there may be some serious lessons too. Sometimes I like to really push a model, into an extreme limiting case. To see if I can still get my head around it. To see if my intuition is lining up with what the math is telling […]
Aggregate supply and relative supply — and demand.
Micro and macro are different. We have to be careful about drawing macro conclusions from what happens at the micro level. We can't just extrapolate. This is in response to Casey Mulligan's post on evidence that supply matters. He draws macro conclusions about aggregate supply from micro evidence about relative supply.
ZMP workers and output quotas
Imagine, just imagine, that the government put a quota on the total output of, say, cars. Because some rabid environmentalists told them to. The result would be a drop in employment of auto workers. Some of those workers, who had skills useful in other sectors, would be able to find jobs elsewhere. Others, who had […]
The monetary policy of last resort — currency reform.
The monetary policy of last resort is to get rid of the old money and start a new one. "Currency reform". I can just remember this policy being mooted in the 1970's. What happens if tightening monetary policy fails to break entrenched inflationary expectations and an ever-increasing inflationary spiral? It was the ace in the […]
What does lower US GDP mean for Canadian monetary policy?
A thought-experiment. A rather real thought-experiment. Assume you are Governor of the Bank of Canada. Your job is set monetary policy to bring inflation to the 2% target in the "medium term". You are just about to conclude a meeting where you will decide what target for the overnight rate you will set at the […]
Taxes and the value of paper money
Does the value of an intrinsically worthless (paper) money depend on the government's power to tax? I am going to answer this question from a quantity-theory perspective. The short answer is "yes". But the full answer is different from some other theories that also answer "yes". Those of you who already understand the modern quantity […]
Can the buck “break the buck”?
Obviously not, in any literal sense. But this might be a metaphor worth exploring. Are central banks like money market mutual funds? What happens to the value of the US Dollar, or the Euro, if the risk of sovereign default causes the value of a central bank's assets to fall below the value of its […]
Do Keynesians believe their own models?
I ask this as a quasi-Keynesian myself. I'm not (merely) trying to score points. [Update 2. Paul Krugman weighs in. Like Brad DeLong, and Scott Sumner (in comments), he questions my assumption that the central bank can keep the interest rate fixed, without buying all the outstanding bonds.] Take the standard ISLM model straight off […]
Taylor Rules and the Bank of Canada’s Monetary Policy Report
This morning I've been in email conversations with several economists who do not understand, or disagree with, something in the Bank of Canada's latest Monetary Policy Report (pdf). Specifically, Technical Box 2. These include some very good macroeconomists. I think I do understand it. And I agree with the Bank of Canada. So I am […]
Why does stuff take so long to happen?
For example, the Eurozone crisis. A couple of decades back, I noticed that things often seemed to happen the way economists thought they would happen, but that they always seemed to take about ten times longer to happen than you would have thought they would. We go from one equilibrium to another equilibrium in a […]
Worthwhile Canadian Initiative 
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