Tyler Cowen links to an article suggesting that Taylor Swift’s upcoming concerts in London may boost inflation and delay an interest rate cut by the Bank of England. I am not a macroeconomist, but color my skeptical. For one thing, a short blip in the demand for hotel rooms in London will likely increase room rates, but this increase really will be temporary – it will reverse as soon as Swift leaves town. More significantly, spending on the ERAs tour is a shift in domestic spending from domestically produced goods to imports, and this should actually dampen price pressure (that is, it’s deflationary). Taking money from middle- and upper-class English people and putting it in the pocket of Taylor Swift will reduce spending and price
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Eric Kramer considers the following as important: Journalism, Taylor Swift, US/Global Economics
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Tyler Cowen links to an article suggesting that Taylor Swift’s upcoming concerts in London may boost inflation and delay an interest rate cut by the Bank of England.
I am not a macroeconomist, but color my skeptical.
For one thing, a short blip in the demand for hotel rooms in London will likely increase room rates, but this increase really will be temporary – it will reverse as soon as Swift leaves town.
More significantly, spending on the ERAs tour is a shift in domestic spending from domestically produced goods to imports, and this should actually dampen price pressure (that is, it’s deflationary). Taking money from middle- and upper-class English people and putting it in the pocket of Taylor Swift will reduce spending and price inflation in the UK. In fact, assuming that the ERAs tour has a high profit margin (a lot of the ticket dollars end up in Swift’s bank account) and that Swift has a much lower marginal propensity to consume than her fans (presumably, close to 0), the ERAs tour should be deflationary everywhere, even in the United States where it is not an import, no?
I guess a temporary price blip could lead the BoE to hold off on a rate cut, if the blip is large enough to influence aggregate pricing statistics and the governors (or whatever they are called) who set rates are unable to back this out.
Seems far-fetched to me. Am I missing something?