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Archive for 'monetary policy'

Secular Stagnation

I have written a couple of pieces for Economy Lab in the Globe and Mail recently on the issue of secular stagnation. (Links below) The term was coined by the pioneering American Keynesian Alvin Hansen who argued that the US economy of the late 1930s faced a long period of stagnation due to a chronic, […]

A Trillion Dollar Coin for Canada?

Arun here…breaking radio silence to share with you a thought-provoking piece by Larry Kazdan, a graduate of York University in sociology and history, and currently a Council Member with the World Federalist Movement-Canada, an organization that monitors developments at the United Nations and advocates for more effective global governance. Our friend and fellow blogger Keith […]

Rebutting Raganomics

Today, I had the following commentary posted on The Globe and Mail’s Economy Lab: The loonie is overvalued and the Bank of Canada has room to act On Tuesday, Christopher Ragan characterized the notion of an overvalued Canadian dollar as a “seductive myth” that the Bank of Canada should not act to address. I have […]

Inflation Collapse Confounds Monetary Hawks

Statistics Canada reported today that inflation collapsed to just 0.4% in April. The Bank of Canada’s core inflation rate, which excludes volatile items, fell to 1.1%. Continued low inflation does not provide a rationale to raise interest rates. Perhaps for that reason, Canadian monetary hawks have shifted their rationale for higher interest rates. In 2011, […]

Polozogistics: Nine Thoughts About the Choice of the New Bank of Canada Governor

  1. He’s Number Two: Stephen Poloz was widely acknowledged in economic and political circles as the second-best choice for the top job at the Bank of Canada. So the surprise was not that he was chosen. The surprise was, Why Not Tiff Macklem? Will someone please find out and tell the rest of us? 2. […]

Breaking The Taboo on Monetizing Deficits

In a very long and fascinating speech which has been amplified by Martin Wolf in the FT, Lord Adair Turner seeks to break the taboo on discussion of the potential ability of central banks to monetize fiscal deficits. His argument boils down to a political economic one … Some monetization might be useful in certain […]

What Does the Bank of Canada Do?

The Board of Directors of the Bank of Canada have retained Odgers Berndtson to seek a new Governor, and have placed an ad in the Globe and Mail, the Economist and La Presse. The wording of the advertisement is questionable. First, it states that “the Bank of Canada is the pre-eminent macro-economic institution in Canada.” […]

Mark Carney’s tenure and the state of monetary policy

Mark Carney’s tenure as Governor of the Bank of Canada overlaps some challenging economy history. Appointed in early 2008 just as the US housing bubble was popping, Carney took the helm in time for a financial crisis that brought the global economy to its knees. We are still living that history in terms of a […]

Broadening the Bank of Canada’s Mandate

Yesterday, Mike Moffatt took to The Globe and Mail’s “Economy Lab” in response to my suggestion that the Bank of Canada should moderate the exchange rate. (Perhaps his motive for encouraging me to seek the Saskatchewan NDP leadership was to get me as far as possible from the levers of monetary policy.) My rebuttal of […]

Prices Decline Yet Again

Statistics Canada reported today that, for a third consecutive month, consumer prices declined and the inflation rate fell below 2%. In July, the inflation rate was 1.3% and the Bank of Canada’s core rate was 1.7%. Gasoline and natural gas prices, which have been lower this summer than last, dragged down the overall Consumer Price […]

CPI Deflates Case for Rate Hike

Today’s report that the national inflation rate fell to 1.2% in May deflates calls for higher interest rates to reduce inflation. The central bank’s core rate was 1.8%, also below the 2% target. The other argument for an interest-rate hike was to moderate mortgage lending and the housing market. However, the federal government’s move to […]

Marc Lavoie and Monetary Economics

There is a very interesting interview with PEF’s own Marc Lavoie here on the Naked Capitalism site on his new book. Monetary Economics was co-authored by Marc with the late Wynne Godley. (Make sure to start by linking back to Part 1.)

Complete details of 2008-09 Bank Support

Readers of this blog will have hopefully read my report “The big banks big secret” which examines the $114 billion that Canada’s banks received during the 2008-09 financial crisis.  Its major finding was that at some point three of Canada’s five big banks had received support worth more than their market capitalization, or the value of all […]

GDP: Austerity Bites

Canada’s economy grew by half a percent in the first quarter of 2012, staying on pace for unimpressive annual growth of two percent. The good news is that business investment was strong, at least on a seasonally-adjusted basis. (As usually happens in the first quarter, the actual dollar value of business investment decreased.) Unfortunately, the […]

Inflation On Target; Exchange Rate Off Target

Today, Statistics Canada reported an annual inflation rate of 2%, precisely in line with the Bank of Canada’s target. With inflation under control and renewed risks to the global economy, there is little rationale for the central bank to raise interest rates anytime soon. In fact, the Bank of Canada should now be more concerned […]

Quebec Tuition: Between a Rock and Hard Place?

In the context of student protests over Quebec tuition fees, my friend Luan Ngo has just written a very informative blog post on Quebec’s fiscal situation. While I encourage readers to read his full post, I do want to use the present space to make mention of three important points he makes: -On a per […]

The Oil Price-Loonie Transmission Mechanism

The most interesting comments from Bank of Canada Governor Mark Carney last week, in releasing the Bank’s semi-annual Monetary Policy Report, dealt with the relationship between the price of oil and the Canadian currency.  The Globe and Mail reported Carney as publicly questioning why currency traders automatically presume such a direct link between the loonie […]

Deflating the Monetary Hawks

Canada’s business press has recently been filled with speculation that the Bank of Canada may soon hike interest rates based on its somewhat more optimistic economic outlook. But today’s Consumer Price Index report indicates that there is no need to raise interest rates. Statistics Canada reported that both headline and core inflation fell to 1.9% […]

Lower Inflation Frees Carney’s Hand

Statistics Canada reported today that consumer prices decreased in December, lowering the annual inflation rate to 2.3%. The Bank of Canada’s core inflation rate declined to 1.9%. Tame inflation leaves room to lower interest rates. If unemployment continues to rise, the Bank of Canada should reduce interest rates to boost the economy and create jobs. […]

The Economist Takes Note: Modern Monetary Theory Gets Much Deserved Attention

As faithful readers of this blog will know, I make only very sporadic contributions to this blog but a substantial fraction of those contributions have made reference to modern monetary theory (MMT), the view (crudely put) that, based on a detailed understanding of the institutional mechanisms behind monetary operations, calls into question our obsession with […]

Modest Inflation Outstrips Wages and Canada Social Transfer

Statistics Canada reported today that the annual inflation rate remained 2.9% and the Bank of Canada’s core rate remained 2.1% in November. The monthly increase in consumer prices slowed to 0.1% in November from 0.3% in October. The monthly increase in core prices slowed to 0.1% in November from 0.2% in October. Inflation remains modest […]

Inflation Targeting and the Crisis

Many long-held tenets of neoclassical orthodoxy have fallen by the wayside in the past 3 years, but perhaps one of the biggest dominos that is at least teetering precariously (if not fully tipped over) is the consensus that inflation targeting should be the exclusive focus of monetary policy.

Bring Out the Printing Press!

That’s the only way out of the deepening crisis of the advanced economies, according to FT economics editor Martin Wolf in his column today. “It is the policy that dare not speak its name: the printing press. The time has come to employ this nuclear option on a grand scale. The alternative is likely to […]

Hurricane Trichet Hits Jackson Hole

After watching Jack Layton’s state funeral, I noticed that Jean-Claude Trichet’s speech from Jackson Hole is online. The European Central Bank president does not seem to get it. Far from acknowledging that last month’s interest-rate hike was premature, he touts “price stability.” His main theme is that the economic divergence between Eurozone countries is comparable […]

Mythologies: Money and Hyperinflation

In an earlier post, Marc Lee mentioned in passing the German hyperinflation episode of the 1920s. It’s remarkable that this event still holds such sway over the popular imagination despite other more recent instances of hyperinflation. Certainly, the imagery is powerful: German citizens pushing wheelbarrows full of worthless paper money around for everyday purchases, banknotes […]

MMT: What it Means for Canada

Arun Dubois’ blog post yesterday on Modern Monetary Theory has prompted me to write my own take on the subject.  For those interested, an interesting thumbnail sketch of MMT, essentially functional finance augmented by a full understanding of monetary operations, is explained here. While MMT deals with the details of monetary and fiscal matters, the […]

No Retreat, No Surrender: Time For Progressives to Explode Deficit/Monetary Myths

Friends, I’m concerned. I fear that too often, we on the left retreat when we should attack, surrender when we should vanquish.  What do I speak of?  Well, I am concerned that too many of us are willing to play in the frame, the box, the straighjacket of modern discourse about fiscal and monetary policy.  […]

Thoughts on “Why not print money?”

Richard Gilbert’s “Why not print money?” in the Globe’s Economy Lab toys with more radical monetary intervention as a response to the crisis. Desperate times, they say, call for desperate measures. The title (which was perhaps not Gilbert’s at all) is more provocative than the article itself, which is mostly about tolerating higher inflation that […]

C. D. Howe’s Overnight Moves Need Work

Less than a month ago, the C. D. Howe Institute released Michael Parkin’s paper, “Overnight Moves: The Bank of Canada Should Start to Raise Interest Rates Now.” The next day, its Monetary Policy Council called on the Bank to increase the overnight interest rate. This call was terrible. The following week, Statistics Canada reported June’s […]

The Bank Moves to Hit the Ball

The release of today’s Monetary Policy Report from the Bank of Canada follows yesterday’s announcement of no change in interest rates, the latest in a long series.  It reminds me of an English County cricket match in which a batsman is politely applauded – “very well not played, sir!” – for doing absolutely nothing other than […]