What can we Learn from Historical Economic and Financial Crises?

These notes form a short extract from the forthcoming monograph by John Crean and Frank Milne, The Anatomy of Systemic Risk, (2017a); and a shorter working paper, The Foundations of Systemic Risk (2017b).

By Frank Milne, Queen’s University

There are many historical financial crises that resemble the recent crisis of 2007-9. Crean and Milne provide a summary of various banking crises, discuss their similarities, provide a theory integrating their observations and examine the implications for Risk Management systems and financial regulation.

Here we will restrict our discussion to two major banking crises that should be of interest for Canadians. There are clear parallels with current Canadian banking and regulatory risks. We will draw some conclusions that are supported by the Crean-Milne framework.

The first example is the Australian Banking Crisis of the 1890s, and the second example is the Texas Banking Crisis of 1980-89.Read More »

Do longer license suspensions decrease impaired driving?

By Dayna Bartlett, Queen’s Economics M.A. student

In 2015, according to Statistics Canada, there were 72,039 police reported impaired driving incidents and 122 of those leading to death. Further, MADD Canada reports that on average, four people are killed daily by alcohol-related or drug-related traffic collisions. It is, therefore, no surprise that the concern regarding impaired driving is a subject that has continued to bring a range of heartaches and considerable debate. As it has been and remains one of the leading causes of death in Canada, there has been a great deal of research conducted, policies proposed, and laws implemented in the attempt to reduce the fatal collisions arising from impaired driving.

Under the Criminal Code of Canada, an individual is considered impaired and is subject to criminal charges if they drive while having consumed an amount of alcohol in which their blood alcohol concentration (BAC) level exceeds the legal limit of 80 milligrams per 100 milliliters of blood. In addition to the per se legal limit set by the Criminal Code of Canada, different provinces have also implemented warn ranges, in which penalties and sanctions may be applied even if an individual is driving below the 0.08 legal limit. One of the more recent laws that has been adopted by most Canadian provinces aimed to deter drunk driving are longer license suspensions that offenders face if found driving with BAC levels between 0.05 and 0.08.  Specifically, license suspensions have recently increased for first-time offenders past the initial 24-hour period to a minimum of 3 days, and even longer in certain jurisdictions.Read More »

Economic historian Frank Lewis retires after 44 years at Queen’s

By Nora Ottenhof, JDI undergraduate research assistant

After 44 years at Queen’s University, economic historian Frank Lewis has retired. Prof. Lewis has contributed immeasurably to the Queen’s University community through both his groundbreaking research and passionate teaching style. His research legacy has provided countless insights into First Nations economies in Canada, the fur trade, slavery, and migration, among many other topics.

Throughout his career, Lewis has devoted a great deal of time to the study of trading between First Nations people and European colonizers. Lewis’s 2010 book Commerce by a Frozen Sea, written in partnership with Ann Carlos, delves deeply into the subject matter and is what Lewis considers his greatest professional accomplishment. As Lewis explains, the goal of this research was to understand the exact nature of this relationship. Such questions were posed as: Was the correspondence strictly commercial? Who had the bargaining power and by what degree? How did both the Europeans and First Nations people respond to changes in the market given their limited access to information?Read More »

Canadian Public Economic Group to meet at Queen’s

By Nora Ottenhof, JDI undergraduate research assistant

The 2017 Canadian Public Economic Group Meeting (CPEG2017) will take place on the Queen’s University campus in Kingston on November 2 – 4. This year’s meetings are being hosted by the John Deutsch Institute (JDI) and the Department of Economics. “We are very excited for the conference, which will feature presentations by some of the leading public economists in Canada,” said Dr. Christopher Cotton, the conference organizer and the Director of the JDI.

For more information on the conference, see the CPEG website.

Here, I review a handful of the papers that will be presented and discussed during this year’s conference.Read More »

Medical marijuana in Canada: Some data and a pricing equation

By Allan W. Gregory, Queen’s University

Licensed medical cannabis use in Canada has grown considerably in the last two years. From Health Canada’s website, we can measure the size of this market over a period of more than two years (Q1 2015 – Q1 2017). Figure 1 shows the growth in both the dried and oil cannabis.

Figure 1AG1

 

Not only are sales of dry marijuana growing (just under 6000 kgs in Q1 2017) but the inventories are increasing at an even faster rate (currently over 18,000 kgs). Oil cannabis has had a steady increase as well over the period it has been recorded (starting in Q4 2015).Read More »

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

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

Read More »

Why do Wages Differ Across Countries? Lessons from migrants to Canada in the 1920s

By Frank Lewis, Professor Emeritus, Department of Economics, Queen’s University

A chambermaid in Canada has a wage more than twice that of a chambermaid in South Korea; a pharmacist earns four times what a pharmacist in India earns; and a registered nurse receives six times the earnings of a registered nurse in the Philippines. These approximate purchasing-power-parity comparisons typify the large wage gaps between Canada and many other countries; and lead to the question: why doesn’t the chambermaid in South Korea, the pharmacist in India, and the registered nurse in the Philippines move to Canada? Read More »

Research: Oil Exporters Should NOT Price Level Target

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 »

Working to better understand the relationship between student effort and parental investments

Eric Richert summarizes his essay, “Estimating an Effort Coordination Game Between Parents and Their Children,” which was a co-winner of the 2016 Scarthingmoor Prize for best MA essay in economics. Eric is currently a PhD student in the Queen’s Economics Department. 

By Eric Richert, Queen’s University

Student learning typically requires effort provision by parents, teachers, and students.  However, the early education literature all too often ignores student effort focusing only on the effort of parents and teachers. The effort decision of the child is often excluded from the optimization problem that is solved by the parent, or is a decision made by the parent.   The traditional model strangely ignores the child’s decisions. This assumption may make sense in early childhood but is less believable as students move into high school and beyond, where they are able to make their own decisions.

In my research, I examine the effects of allowing children to make their own decisions regarding the amount of effort they put into their studies.

Read More »

On the Benefits of Government Intervention in the Vancouver Housing Market

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 »