Category Stephen Gordon
The Bank of Canada’s outlook for monetary policy
From the Monetary Policy Report, released today (summary here): Canada’s economic growth in the first half of the year was somewhat stronger than had been expected. Overall, the economy now appears to be operating at full production capacity… The base case … assum[es] energy prices consistent with current futures prices; a smooth and orderly resolution […]
David Ricardo’s explanation for the decline in Canada’s savings rates
A graph taken from this IMF report:
The Bank of Canada phones one in
So what do you do when you have an inflation target of between 1% and 3%, an economy running at capacity (unemployment is at a 30-year low, estimates for the output gap at zero), an overnight rate target of 2.75%, and 2.6% y/y CPI inflation? That’s right. You raise interest rates.
Productivity: The demographic tipping-point
Real, per-capita GDP growth has averaged about 1.7% in Canada over the past 30 years – where has it come from? A less-than-exhaustive but more-than-cursory examination of the data suggests the following breakdown: Source Contribution Technical progress: 0.9% Capital deepening: 0.5% Decrease in hours worked per week: -0.2% Increase in employment rate: 0.25% Increase in […]
Forecasting without error
Why is it that forecasters don’t routinely provide error bands with their predictions? I doubt very much that the following dialogue is representative of what goes on in the real world: Decision-maker: ‘Economist, what’s your forecast of GDP growth over the next year?’ Economist: ‘3.13 percent’ DM: ‘Hmm. What are the chances that GDP growth […]
An embarrassment of riches
The federal government has been running surpluses since 1997 (data available here), and these surpluses have been used to help drive Canada’s debt-to-GDP ratio from 89% down to 44%. But now that we’ve retreated well back from the debt wall, Canadians are starting to wonder if surpluses are really what we want. After all, there […]
Explaining the CAD-USD exchange rate: I
An enduring mystery of the Canadian economy is trying to figure out why the CAD-USD exchange rate is doing whatever it happens to be doing at any given moment. Notwithstanding popular opinion – an opinion that is all-too-often reinforced by commentators who should know better – the CAD-USD exchange rate isn’t like a stock price, […]
Productivity: Curiouser and curiouser
New Economist points us to a recent Bank of International Settlements study on productivity in OECD countries. The good news: Measures of productivity growth rates in Canada during 1995-2003 were about 0.5% higher than in 1986-1995. The disquieting comparison: The US improved its productivity growth rates by at least 1%. The puzzle: Notwithstanding the higher […]
Stocks and flows: Putting the hydro in hydroelectricity
Winter’s coming, so it’s time for Hydro-Québec to test the water. Happily, the news is good: Le Devoir: Hydro pourra répondre à la demande: Même si 55 000 nouvelles maisons se sont branchées sur son réseau cette année, même si le très bel été a fait baisser le niveau de l’eau dans ses réservoirs et […]
GDP vs ‘Progress and Happiness’
The New York Times reports on a conference in Nova Scotia: A New Measure of Well-Being From a Happy Little Kingdom* (registration req’d). [Thanks to the New Economist, who in turn thanks other two bloggers.] Everyone agrees that GDP is not the same thing as social welfare: economists learn this point early on in our […]
Worthwhile Canadian Initiative 
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