In this rejoinder the key role played by high interest rates in the Canadian economic and fiscal crisis of 1990-96 is reaffirmed. I argue that (i) important econometric biases could have led many to underestimate the effects of high interest rates on output; (ii) it is imprudent to conduct...

A review of the two competing paradigms explaining inflation and unemployment fluctuations singles out the Keynesian Phillips curve as the clear empirical winner over its classic competitors. Reestimation of the Canadian Phillips curve for 1957-90 identifies a sharp structural shift toward a...