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Blog Profile / Worthwhile Canadian Initiative


URL :http://worthwhile.typepad.com/worthwhile_canadian_initi/
Filed Under:Business & Finance / Economics
Posts on Regator:1161
Posts / Week:5.9
Archived Since:April 1, 2011

Blog Post Archive

"Temporary" increases in G at the ZLB in an NK model

Paul Krugman says: "Monetary policy at the ZLB requires a perceived regime change to be effective, fiscal policy doesn’t — in fact, fiscal policy works better if people believe that it’s temporary, and will end when the economy recovers." In...

The third-best case for fiscal policy, and moral hazard for central banks

1. If the central bank is doing it right, and targeting the right level of Aggregate Demand, there is no case for fiscal policy to try to influence AD too. It's not needed. And it won't affect AD anyway, because...

Why does Toronto have better outdoor ice than Ottawa?

Toronto is, on average, warmer than Ottawa. So why does it have better outdoor ice? Some might argue that it doesn't. Every winter, Ottawa's Rideau Canal freezes to form the world's largest skating rink. Just about every city park sports...

Doug Saunders has written a dreadful column about the "resource curse", and I'm going to explain why it's dreadful

This column by Doug Saunders on the "resource curse" in last Saturday's Globe and Mail is quite dreadful: When the price of oil is the foundation of your country’s economy, a sudden plunge to half its value focuses the mind...

A proof of the need for fiscal policy to escape the liquidity trap

For simplicity, ignore government spending and taxes. "Fiscal policy" means lump-sum transfer payments. Suppose the economy is in a permanent liquidity trap. If we ignore the central bank's paper and ink operating costs, another name for the permanent liquidity trap...

Language games and expectations of "doing nothing"

If I make one very trivial change to Paul Krugman's model of a temporary liquidity trap, I can change the results, so that the central bank can use current monetary policy to return the economy to full employment, even if...

Monetary policy is always and everywhere about expectations

Paul Krugman is frustrated because people aren't taking his model of the liquidity trap seriously. OK, let me take it seriously. Suppose Paul's model is 100% true. And suppose that Paul's model economy is humming along nicely, at full employment,...

Helicopter money is normal, or else we're doomed!

With one exception, Tony Yates strikes me as being a very sensible and very good money/macro economist. But at the mention of "helicopter money", he seems to turn into an Old Testament prophet, or maybe Private Frazer from Dad's Army,...

Temporary vs permanent elasticities

This is (supposed to be) a simple "teaching" post. There should be nothing new here. Just a newish way of presenting old stuff. The more interest-elastic the demand for money, the more important is the distinction between temporary vs permanent...

Alpha, beta, and gold

Central banks issue currency. (They issue reserves too, but "reserves" are just the name we give to central bank currency held by commercial banks in electronic form rather than in paper form, and it makes no difference whether money is...

Federations and Health Care Spending

In putting together my material for my fiscal federalism course next term, I decided to take a look at some health spending figures for the OECD countries in order to compare federal with non-federal countries. Federal structures generally try to...

FTPL: a federal or provincial issue?

[Apologies for the title. It's a Canadian joke, about our fixations, that can be told various ways, but always ends with the punchline: "Elephants: a federal or provincial issue?"] Does fiscal policy affect the price level? If so, are we...

Who would ever lend to an FTPL government?

Think back to philosophy class: Would you ever believe the promise of an Act-Utilitarian? No. An Act-Utilitarian will perform action A if and only if action A will maximise the sum of expected present and future utilities. His past act...

Currency is alpha; bonds are beta

If you understand the title you understand the post. It's obvious really. Betas peg their exchange rate to alphas; alphas do not peg their exchange rates to betas. Beta's promise to redeem their liabilities for alpha liabilities at a fixed...

The degeneracy of FTPL

Consider a corporation that earns a flow of (real) profits S(t). Assume for simplicity the corporation finances itself by issuing only shares (it does not issue bonds). Let the stock of shares be M(t). Let the reciprocal of the shar...

Principal-agent problems and level-path targeting

Suppose you hire an agent to do a job. The agent's level of production p depends on the agent's effort m and on a mean-zero shock from nature s. So p = m + s. You observe p, but you...

My failed attempt to model longevity, retirement, and secular stagnation

We don't normally publish our failures. But perhaps we should. Because we can (sometimes) learn as much from our failures as from our successes. Academic economists spend a lot of time trying to model things. One reason we do this,....

Stabilising deflation under the gold standard

We can learn from history, but we need to be careful about the lessons we learn. If the historical monetary policy regime is different from today's monetary policy regime, stabilising deflation in history might be destabilising deflation today. Put the...

Economic Superiority

Marion Fourcade, Etienne Ollion and Yann Algan have penned a Max Plank SciencesPo discussion paper on the traits of the economics profession. In The Superiority of Economists, the authors write: “Taken together, these traits constitute what we call the superiority...

The desired stock of savings

Isn't a concept we talk about much in macro. Which is a bit weird, when you think about it. And it's always good to examine the way we think about things, and teach those things. We talk about households' desired...

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