Paul Krugman, responding to Simon Wren-Lewis, wants a model to better articulate Ken Rogoff's fears of debt and deficits (pdf). Fair enough request. I can't give Paul a fully worked-out formal model, but I think I can give him a sketch of what such a model would look like. (Update: If Paul likes, he could […]
One more for the Banking School. This is a thought-experiment to help us clarify our thinking about banks. If banks bought houses, instead of lending people the money for people to buy houses, what would be different? Not much. But we students of money and banking would avoid some common mistakes, like confusing the demand […]
The Parliamentary Budget Office has issued a very pleasing report on federal fiscal sustainability but the flip side is that the provinces and territories are now not fiscally sustainable because of their rising health costs and the federal fiscal gap created by the change in the Canada Health Transfer escalator. According to Andrew Coyne, the […]
Statistics Canada just released its total population estimates for 2013 and the picture shows declining shares of population not just for Quebec and the Atlantic region, but also for parts of the west. While the population share of the western provinces has grown over the period 1983 to 2013, this increase is due to Alberta […]
To misquote Milton Friedman: macroeconomics has only regressed one derivative since Wicksell. The old Wicksellian indeterminacy has long been known: the equilibrium price level is indeterminate if the central bank sets an interest rate. The neo-Wicksellian/New Keynesian model has two indeterminacies. I've been worrying about the indeterminacy of the level of output; John Cochrane has […]
When we teach comparative advantage in Intro Econ we assume barter exchange. We swap Canadian apples for US bananas. But the students, quite naturally, are thinking of monetary exchange. What happens if Canadian apples and bananas cost more dollars [to produce] than US apples and bananas? That's possible, isn't it? Wouldn't that mean [US prices […]
This is a graph of real Canadian median family incomes: What do you think the relevant trend is for current policy?
It happens at universities across the country. Professors do it. Administrative staff do it. Some sneak onto campus on evenings or weekends, and quietly do it when no one is around. Others are bold enough to do it during regular office hours. I'm talking about cleaning. Dusting. Vacuuming. Sweeping. And, for the truly bold: Painting. Unblocking […]
The Economic History Association meetings currently underway in Washington D.C. have a number of fascinating sessions including several on economic depression and financial crises. One paper by Thilo Albers (Humboldt University Berlin) and Martin Uebele (University of Groningen) is particularly interesting given that it presents a new monthly international dataset for the interwar period (1925-1936) […]
What happened in 2008? Why didn't the cut in interest rates prevent Aggregate Demand from falling? Was it just that the cut in interest rates wasn't big enough? Or is the rate of interest the wrong thing to look at? Because it's only a relative price, and relative prices only matter for relative demand? Suppose […]
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