Category Nick Rowe
A public finance vignette
Here's a short story, simple but true, that illustrates a lot of public finance: from public choice to Ricardian Equivalence. I live on a cul de sac. Many of my neighbours wanted our gravel road paved, and were prepared to pay for it. The municipality held a neighbourhood referendum, and the motion passed by more […]
Eurozone: is this the big one?
I'm scared again. I haven't felt this scared for over a year. Things were starting to look better, in Canada in particular, but around the world more generally. Now Greek bond yields are shooting up. I was worried about the Eurozone in January 2009. And again in December. Maybe it was just my Euroskeptic "Anglo-Saxon" […]
Minimum wages and employment
"An increase in the minimum wage will raise workers' incomes, which will increase aggregate demand, which will increase output and employment. So would an increase in union wages." I remember hearing that argument a lot in the 1970s. You don't hear it as much nowadays, but it still lives on in the underworld of economic […]
Is intertemporal trade like international trade?
No answers in this post, only questions. If the past is another country, and so is the future: then is intertemporal trade (borrowing and lending), like international trade (exports and imports)? There are two stylised facts about the relation between international trade and GDP: international trade has been rising faster than GDP over the long […]
Lloyd George and Avatar
I haven't seen Avatar. That's good. It means I can take a clearer look at the underlying policy problem. The policy problem in Avatar is that some blue people own all of some valuable natural resource, and won't let anybody else have any. Lloyd George, as UK Chancellor of the Exchequer, addressed the same policy […]
How the hell can we tell (if fiscal policy worked)?
I feel guilty about not wading into the recent debate about whether fiscal policy helped the Canadian economy recover from the recession. It's one of the things I am supposed to know something about — basic macro. But there's a reason I couldn't be bothered to take sides and join in. The patient is ill. […]
The supply and demand for bubbles (in pictures)
I have drawn a picture of the supply and demand for bubbles. I think this picture might make it easier to understand what I was saying in my previous post on the need for a bubble. If the natural rate of interest, in an economy without a bubble, is below the growth rate of the […]
A Lucas Critique of monetary policy as interest rates
"The statistical relation between inflation and unemployment will not be invariant to the monetary policy regime". Economists will recognise that statement as an example of the Lucas Critique. They know it has implications for any policy that uses inflation to target unemployment. "The statistical relation between interest rates and inflation will not be invariant to […]
Do we need a bubble?
There is something economists have known since 1958 that we don't talk about much, except in private, like in economics journals that nobody else reads. It's a bit too weird. There are two sorts of world. In a normal world, the equilibrium rate of interest is above the growth rate of the economy. In a […]
Why the LM curve is (usually) vertical, and the AD curve (usually) horizontal
Short version: because the Bank of Canada (or any inflation-targeting central bank) makes the LM curve vertical and the AD curve horizontal. Long version below the fold:
Worthwhile Canadian Initiative 
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