Category: Policy commentary

How far out of whack are house prices? A ranking of Canadian cities

John Deutsch Institute for the Study of Economic Policy (JDI)

By Allen Head & Huw Lloyd-Ellis, Queen’s University

Building on the research behind a recent article in the Canadian Journal of Economics (Head and Lloyd-Ellis, 2016), we develop an economic model of housing markets and use it to rank Canadian cities based on the percentage difference between predictions and real world prices. This gives us the following excess valuations by year.

Table: Excess Valuations (% deviation from 1984-1998 average)

  2011 2012 2013 2014 2015 2016
1. Vancouver, BC 39 33 32 32 39 48
2. Oshawa, ON 1 11 8 12 23 39
3. St. John’s, NL 52 63 60 57 44 37
4. Toronto, ON 4 12 10 12 18 32
5. St Catharines-Niagara, ON 4 9 6 6 12 25
6. Sherbrooke, QB 24 30 29 19 29 18
7. Hamilton, ON 4 17 13 13 13 16
8. Regina, SK 20 27 22 11 13 15
9. Victoria, BC 19 17 10 7 7 13
10. Calgary, AB 18 15 9 3 2 10
11. Halifax, NS 22 27 20 14 12 9
12. Winnipeg, MB 20 26 18 13 11 9
13. Windsor, ON -3 0 0 0 0 8
14. Gatineau, QB 8 14 11 7 7 6
15. Thunder Bay, ON -6 1 6 9 8 6
16. Montreal, QB 6 15 9 7 5 5
17. Saskatoon, SK 9 13 7 2 8 5
18. Ottawa, ON 10 14 10 8 5 3
19. Quebec, QB 9 16 13 6 4 2
20. Kitchener-Waterloo, ON -2 2 -4 -5 -4 1
21. Saguenay, QB 9 20 15 6 0 -2
22. Edmonton, AB 5 6 -4 -9 -8 -4
23. Greater Sudbury, ON 2 7 5 2 -5 -4
24. Kingston, ON -5 -2 -8 -11 -10 -10
25. Trois-Rivieres, QB 0 2 -1 -3 -8 -10
26. London, ON -12 -10 -12 -13 -12 -12
27. Saint John, NB 0 0 -1 -9 -13 -13
Average 10 14 10 7 7 9

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What the “Terminator” Tells Us about Blockchain and Privacy

John Deutsch Institute for the Study of Economic Policy (JDI)

By Thorsten Koeppl, Department of Economics

The Blockchain revolution is here. And, in many ways, it is like the Internet was when it started 20 years ago. We did not know how we would be affected, but we all had a feeling that this is going to be big. After watching a movie classic — the “Terminator” — I realized that three questions stand out when gauging the potential of Blockchain and Distributed Ledger Technology more broadly.

  1. How big are the cost savings?
  2. Is there a need for privacy?
  3. Can we rely on independent, safe and smart communication between IT systems?

Continue reading at the C.D. Howe Institute

The NYTs is wrong. More people should walk up escalators

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton, Queen’s University

Yesterday, The New York Times published an article explaining why it is would be more efficient if the social norm involved everyone standing when riding escalators. The current norm in many countries involve those on the right standing, while leaving the left side of the escalators for walkers. The NYTs argues that we’d be better off as a society if both sides were used by standers alone.Read More »

Research: Oil Exporters Should NOT Price Level Target

John Deutsch Institute for the Study of Economic Policy (JDI)

By Stephen Snudden, JDI Student Fellow, Queen’s University

Monetary policy may focus on price level targeting (PLT) or inflation targeting (IT). The distinction between the two frameworks is that under IT, the central bank does not respond to temporary deviation of prices from trend. Bygones are bygones. In contrast, with PLT, past inflation performance matters and past deviations must be undone to restore the price level to the target path.Read More »

The likely impact of Trudeau’s cash-for-access reforms

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton, Queen’s University

Justin Trudeau’s government is set to introduce changes to the rules governing political fundraising activities. The prime minister has faced heat for the so-called “cash-for-access” fundraisers it has held featuring the prime minister and cabinet ministers. A news report suggested the new legislation will require fundraising events to take place at public locations, rather than private homes or clubs; be announced ahead of time and summarized in reports following the events; and be open to the media. Democratic Institutions Minister Karina Gould has said any changes will revolve around making the fundraisers more transparent.

So, what is the likely impact of these reforms, what do they accomplish, and what else could be done?

Read the column at IRPP’s Policy Options
photo: shutterstock

 

On the Benefits of Government Intervention in the Vancouver Housing Market

John Deutsch Institute for the Study of Economic Policy (JDI)

By Andrea Craig, JDI Student Fellow, Queen’s University

Housing prices, housing affordability, and the impact of offshore money on residential real estate in Vancouver are not new topics. However, policies to address these issues are new. Beginning last August, foreign purchases of residential real estate in Metro Vancouver are subject to an additional 15 percent property transfer tax. In addition, last month, the provincial government announced repayable down-payment assistance for first-time homebuyers in B.C.

As consumers we associate higher tax rates with higher prices. In the usual case of a tax imposed on all consumers, this is correct. However, in the case of the foreign property transfer tax, prices will decrease (or appreciate less). Here is a stylized analysis showing how the foreign property transfer tax decreases housing prices.Read More »

The Impact of Post-Secondary Funding on the Educational Attainment of Indigenous Students in Canada

John Deutsch Institute for the Study of Economic Policy (JDI)

By Maggie Jones, JDI Student Fellow, Queen’s University

In 1980, Canadian men with a bachelor’s degree earned approximately 32% more than those with a high school degree. For women, the equivalent figure was 44%.  By 2005 the university to high school wage premium had increased to about 41% for men and 51% for women (see Figure 1).  The rise in the wage premium over this time period shows just how important post-secondary education has become at an individual level.

Wage gap for men. Figure from Boudarbat, Lemieux, and Riddell (2010).
Wage gap for women. Figure from Boudarbat, Lemieux, and Riddell (2010).

In a recent working paper, titled Student Aid and the Distribution of Educational Attainment, I examine the effects of providing post-secondary funding on educational choices in the context of a large program for Indigenous students in Canada. Read More »

Fiscal Policy as a Recession Fighter: Lessons from the Interwar Period

John Deutsch Institute for the Study of Economic Policy (JDI)

By Gregor Smith, Queen’s University

One of the legacies of the recession and slow growth in developed economies during the past decade has been a revived consensus that discretionary fiscal policy can be used to counteract recessions, especially at times of very low interest rates. Jason Furman, chair of the US Council of Economic Advisors, outlines the theory and evidence behind this revival.

These circumstances of slow growth and low interest rates remind one of the Great Depression, so it’s natural to ask what lessons for fiscal policy the interwar period holds. Unfortunately, a disadvantage of studying that time period is that the data are sparse. National accounts data are incomplete and are available only at an annual frequency. That makes it very difficult to isolate the “shocks” (unexpected changes in fiscal policy) that are used in modern statistical studies to measure the multiplier for government spending. But there is also an advantage of studying this time period: There is a rich diversity of international experiences both in the severity of depressions and in the stance of fiscal policy. That diversity should help isolate whether fiscal policy helped recovery or not.Read More »

Developing a theory of decision making in the face of unknown unknowns

John Deutsch Institute for the Study of Economic Policy (JDI)

By Marie-Louise Viero, Queen’s University

“There are known knowns: There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns. The ones we don’t know we don’t know.”

–Donald Rumsfeld, former U.S. Secretary of Defense

Until recently, economic analysis has only been able to deal with known knowns and known unknowns. According to the way uncertainty has been modeled, economic agents (e.g. consumers, managers, investors, etc.) start out with a detailed understanding of all things that can possibly happen. When the agent receives new information, it narrows down that list of possibilities, so that the agent’s knowledge becomes more precise over time. But, the set of possibilities never changes. Economic agents never discover new possibilities that they didn’t recognize before. There are no “unknown unknowns.”Read More »

An open letter to Stephen Poloz on interest rates

John Deutsch Institute for the Study of Economic Policy (JDI)

By Thorsten Koeppl, Queen’s University

In an open letter to Stephen Poloz, Thor Koeppl compares Canada’s interest rate policy to a kiwi–a cute flightless bird. 

This week, the Bank of Canada left interest rates unchanged.  Business as usual one might think.  But far from it.  In your remarks to the Standing Senate Committee on Banking, Trade and Commerce, you all but made the argument for a possible future cut in interest rates.  Your reasoning, however, seems to reflect a brave new world in central banking where interest rates have to do all the heavy lifting and may even never rise again; in other words, a world in which doves become kiwis, a cute flightless bird.

The main reasoning for a cut in interest rates would be the dire state of Canadian exports – especially from the manufacturing and resource sector.  Growth has remained anemic due to what the Bank admits is a competitiveness challenge.  Uncertainty regarding future growth in the US and emerging economies have caused businesses to not make up for lost export capacity and to engage in productivity enhancing investment.

continue reading at the C.D. Howe Institute blog