Category Nick Rowe
What monetary policy cannot do, and so cannot be blamed for having done
We have learned, after long and painful lessons, that there are some good things we wish that monetary policy could do that monetary policy in fact cannot do. But we don't seem to have learned the corollary to that lesson: by exactly the same argument, there are also some bad things that monetary policy gets […]
Greenspan and his critics, again — with a Canadian twist
His critics blame Alan Greenspan for setting interest rates too low, which caused the house-price bubble, which then burst and caused the financial crisis. As I argued back in February, the critics are typically confused between interest rates that are low, and interest rates that are low relative to the natural rate. The topic is […]
Monetary stability vs financial stability
I want to compare and contrast the pursuit of monetary stability with the pursuit of financial stability. I am talking mainly about Canada, though much of what I say applies to other countries as well.
Don’t borrowing-constrained households spend more of a tax cut??
One of the standard arguments against the Ricardian Equivalence Proposition is that some households are borrowing-constrained. They want to borrow and spend against their future income, but can't find anyone to lend them money. So when the government gives them a tax cut, financed by higher future taxes, the government is effectively lending them the […]
Monetary and fiscal policy ought normally move together
We normally think of monetary and fiscal policy as alternative methods of stabilising fluctuations in aggregate demand. It is only in abnormal times, like the present, when central banks' interest rate instruments are at or near the zero lower bound, that we might want to use both monetary and fiscal policy together. Only if we […]
The economic impact of canoeing
Seeing the path on the rocks worn by millions of passing feet on an old portage just upstream of Ottawa reminds you that what is now a short detour off a recreational walking trail was once the trans-Canada highway. Canoes once had a very large economic impact in Canada. Now they have very little.
Reader Survey
We are just curious to know who is reading this blog, and would love to know a little bit more about you, including those who don't usually comment. 1. What is your nationality or country of residence? (What proportion of our readers are Canadian?). 2. What is your profession/occupation? Private/government/education sector? 3. How much economics […]
Too much household debt? Again.
As far as I can tell, the Bank of Canada's Financial System Review (pdf) has basically got it right. At least in the way it is looking at household debt. Provided you ignore the aggregate numbers that make the headlines, and focus on the disaggregated numbers instead.
In praise of MV=PY
I used to think that the Equation of Exchange, MV=PY, was just a different way of writing the Cambridge Equation, M=kPY, with V=1/k. And of the two I preferred the M=kPY formulation, because it looked more like a money supply=money demand condition, and reminded us that V=1/k must be interpreted as desired velocity, if MV=PY […]
Too little financial innovation in mortgages?
While "financial conservatives" have been complaining about too much financial innovation, my complaint is that there's been too little. Why can't I use my house as an ATM, as long as I have sufficient remaining equity? Why can't I make positive, zero, or negative monthly payments on my mortgage, whenever I feel like it? The […]
Worthwhile Canadian Initiative 
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