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Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
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such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
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Quebec model balances greater equality with economic progress


Glance at just about any publication from the Fraser Institute and other conservative think tanks, and you will be told that too much government social spending and too much regulation of the job market damage growth and job creation. There is, we are told, an ineluctable trade-off between social equity and economic efficiency.

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Ending central bank forward guidance: What it means for the markets


Since the onset of the financial crisis in 2008, central banks around the world have been relying on a new trick: forward guidance. The Federal Reserve, the Bank of Japan, the Bank of England, the European Central Bank and the Bank of Canada have all started providing the public with some form of guidance about future policy rates, through either qualitative arguments (e.g., to keep rates steady as long as inflation expectations remain well anchored), quantitative targets (e.g., as long as the unemployment rate remains above 6.5 per cent), or even by referencing specific economic developments.

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For Alberta, expect a ‘Lazy U’ recovery


The Conference Board of Canada’s latest provincial economic outlook has captured the impact of the collapse in oil prices on Canada’s regions, and it is not pretty for some provinces.

We are projecting a decline in economic output (gross domestic product, or GDP) in 2015 for two oil-producing provinces – Alberta, and Newfoundland and Labrador. Economic growth in Saskatchewan, which is also an oil producer, will be much slower than previously projected but will remain positive. All three provinces will feel a large negative hit to provincial government finances, due to much lower oil royalties and a drop in other business-related revenues.

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There are no ‘good guys’ and ‘bad guys’ in climate change


Last week, The Globe and Mail released the results of a new survey showing that 71 per cent of Canadians support new taxes on businesses that emit greenhouse gases (GHG). Yet only 41 per cent are willing to face new taxes on gasoline and even fewer approve higher taxes on heating oil. These results point to a troubling conundrum that we need to confront if we are going to be smart about addressing climate change.

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Chatty and colourful: Stephen Poloz’s communication problem


Stephen Poloz has an admission about the elaborate and occasionally bizarre economic metaphors for which he has become notorious: They’re as much for himself as for anyone else.

“Partly, it’s not me explaining things to people, it’s me explaining things to myself,” the Bank of Canada Governor told The Globe and Mail in an exclusive interview conducted at the bank’s Ottawa headquarters last Friday.

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Quebec's budget will decide its prosperity or downfall


The most important budget this spring won’t be tabled in Ottawa or Edmonton but Quebec City. In fact, this may not only be the budget of the year, but of the decade, matched in recent memory only by Paul Martin’s epoch-making 1995 document.

This year’s Quebec budget and Paul Martin’s in 1995 are linked in the great sweep of history. Starting in the 1960s, Ottawa and Quebec became embroiled in a political struggle born of the rise of a separatist Quebec nationalism. Both sides saw themselves engaged in an existential struggle. Quebec City, whatever the party in power, was building a Quebec nation endowed with all the instruments of statehood. Nor was it only the Parti Québécois that brandished separation to get their way. Liberal premier Robert Bourassa wasn’t above threatening sovereignty votes when it suited him.

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Canadian economy suffers from the myth of comparative advantage


Economists love to talk about the theory of comparative advantage, which holds (somewhat counterintuitively) that two countries trading with each other will be better off if each specializes in what it does best, even if one country has an absolute competitive advantage in the production of all goods and services that are traded.

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Fourth-quarter statistics show economy is already weakening


Better-than-expected economic growth recorded in the fourth quarter masked the deleterious effect that lower oil prices have already had on the Canadian economy.

The figure that gets top billing in headlines – gross domestic product – increased at a seasonally adjusted and annualized rate of 2.4 per cent in the fourth quarter, exceeding economists’ expectations. Meanwhile, gross domestic income contracted by an annualized 0.4 per cent quarter over quarter.

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Calgary’s public art is more than just ‘nice-to-have’


A ruckus over taxpayer funding of public art has recently broken out in Calgary’s city hall. For years, the city has had a policy requiring 1 per cent of the cost of building projects to be dedicated to public art, including tax-funded municipal projects.

But at least one city councillor has suggested that the public art funding policy be relaxed. The city is bracing for another one of its famous economic downturns. Oil prices hover near a meagre $50 (U.S.) a barrel and announcements of layoffs are in the news. Calgary’s unemployment rate is expected to rise from an enviable 4.5 per cent to something close to the national average. The councillor has called public art a “nice-to-have” but something that should be cut in difficult economic times.

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