Category The 2008-9 recession
Cash-in-advance constraints and modeling liquidity traps
It was good to see Paul Krugman's response to my previous post. We agree more than we disagree, I think. We need to move outside the Neo-Wicksellian perspective if we want to look at monetary policy where short-term interest rates are already at zero. You can't use a model which contains i and does not […]
The return of Monetarism
As interest rates approach zero, and central banks look at "unorthodox" monetary policies, the Neo-Wicksellian perspective on monetary policy has switched to a blank screen. We are witnessing the return of Monetarism. That's the main reason why economists find it hard to think about unorthodox monetary policies. The dominant Neo-Wicksellian paradigm which fills our heads […]
Who will buy the bonds? Eurozone edition
This is a followup to my previous post "Who will buy the bonds?". It is also a followup to my January 20th post "Canada and the Eurozone: a comparison". The main theme of that second post is that the Eurozone is like Canada, only without the Federal government of Canada. Eurozone countries are like Canadian […]
Who will buy the bonds?
"The government needs to sell bonds to finance an expansionary fiscal policy. But who will buy the bonds? What happens if nobody wants to?" What we ought be be concerned about is the exact opposite. The fiscal policy will be more likely to succeed if people do not want to buy the bonds.
What next for the Bank of Canada?
The Bank of Canada currently sets the overnight rate at 1%. Markets expect it to cut by about 50bp on Tuesday. I think it should cut to zero (or 0.25%, which is effectively zero, given the traditional spreads). I thought it should cut to zero back in December. But if it does cut to zero, […]
Can Canada recover alone? Why not, exactly?
If Canada gets its macroeconomic policies right, is it possible for Canada to recover from the recession, even if the rest of the world does not? The same question could be asked for any individual country. And if not, why not?
Location, location, location: Canadian house prices by city
The Teranet-National Bank Housing Price Index has begun to make regular appearances in the media ([1], [2]), which is all to the good. But it's important to note – as the producers of the index take great care to emphasise – that the Composite-6 index masks considerable variation in movements in house prices across major […]
The silence of the keynesian econ-bloggers
OK. I'm trying to attract your attention. But I'm not knocking Keynesians. I'm more or less a Keynesian myself, especially under current circumstances. And I'm coming at this question from a Keynesian perspective. Is it good economic policy for Hillary Clinton to try to persuade China to continue to buy US Treasuries? Why have economics […]
I hope Hillary fails
Nothing personal, but I just do not understand why she is asking China to buy more US treasuries. This just doesn't make any sense to me. She ought to be doing the exact opposite. Can someone explain it? Regardless of the ultimate cause of the crisis (and China and perhaps Japan saving too much and […]
A very simple macro model of the last few years
Here is a very simple model of interest rates, debt, asset prices, and recession. It seems to fit the facts of the last few years reasonably well. There are two types of people: the A's and the B's. The A's have normal interest-elastic savings and investment functions. They save less and invest more if the […]
Worthwhile Canadian Initiative 
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