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Tag Archives: inflation

Why what economists are now saying about inflation matters

The US Personal Income and Outlays report for June 2019 came out this morning. It showed personal income increasing 0.4% and wages and salaries increasing 0.5% last month. These are good numbers. And in conjunction with a lot of other data we have seen recently, it should put to rest worries we have seen about an imminent recession. But, over the medium-term, it makes sense for economists to worry about a potential downturn, especially given the weakening growth we have seen in...

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Is There a Relationship between Inflation and Unemployment? — Menzie Chinn

While the equation fits relatively well, clearly it’s not perfect. As of 2019Q2 (first two months), year-on-year PCE inflation is underpredicted by 40 bps. I estimated the equation on a restricted sample ending in 2014; this imparts only a marginal difference — so it’s not that something has changed substantially over the last 4 and a half years. Rather the specification could be improved. In other words, perhaps a different measure of NAIRU, or a nonlinearity might improve the fit....

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Dissecting the Eurozone’s (lack of) inflation

Eurozone inflation is in the doldrums again. After perking up to 1.7% in April, it slumped back to 1.2% in May. According to Bloomberg, this was "lower than expected". But I wonder who, apart from the ECB, really expected anything else. Core inflation has been well below target for the last five years: (chart from Bloomberg)And although the headine HICP measure increased in 2016-18, this was mostly due to the oil price bouncing back from its 2014-15 slump: (chart from Macrotrends)The...

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Darren Williams — «How Populism Affects Our Business»

Most important, after a 40-year period in which capital has won out decisively over labor, there is much likelihood that global economic policy is to shift back in a much less business-friendly direction. Not only will that weigh on economic growth, but it’s also likely to push inflation higher. And that’s something markets are not currently prepared for. FinenewsDarren Williams: «How Populism Affects Our Business» Darren Williams | Global Economic Research Group for Fixed Income

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Philip Pilkington — How Far Can We Push This Thing? Some Optimistic Reflections on the Potential For Economic Experimentation

Readers are probably aware that there is quite a lot of discussion of Modern Monetary Theory (MMT) and the potential for fiscal experimentation batting around at the moment. Others have weighed in on this already, and I have little to add. It is striking, however, that most of the push-back — where there is push-back — is not focused on trying to discredit the idea that we should engage in fiscal experimentation. Indeed, the notion that we should engage in fiscal experimentation seems to...

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Peter Ireland — Modern Monetary Theory, Green New Deal Harken Us to Look Back at ’70s

Thoughtful reflection on historical precedent. These observations are particularly useful because they point to an intellectually rigorous way in which debates over the wisdom of the Green New Deal and the usefulness of MMT might be resolved: by examining more carefully the political and economic history of the 1970s. Was the high inflation of that decade a consequence of excessive money growth, engineered by the Fed to relieve budgetary pressures—the source of the “anguish” in Burns’...

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Brendan Greeley — When DoJ and the FCC slowed inflation

Two weeks ago Alphaville published a clarification on modern monetary theory by Scott Fullwiler, Rohan Grey and Nathan Tankus. They argued that, counter to what had been reported, MMT does not rely exclusively on raising taxes to counter inflation. Proper MMT, they wrote, uses a lot of tools to manage inflation -- taxes only one among them.... FT Alphaville (Free registration required if not a FT subscriber) When DoJ and the FCC slowed inflation Brendan Greeley

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Why Central Bankers Don’t Understand Inflation

My debut post at CapX develops a theme I have written about many times. Central bankers are tasked with controlling inflation, but they don't understand it. For the last decade, central banks in developed countries have been pursuing policies designed to raise inflation. Quantitative easing, cheap funding for banks, tinkering with yield curves, low and negative interest rates – all aim to raise inflation to the ubiquitous 2% target. Understandably, central banks’ inflation forecasts...

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Inflation Is Always And Everywhere A Political Phenomenon

We don't understand inflation. Those who lived through the high inflation of the 1970s are convinced that inflation is always and everywhere caused by wage-price spirals. Germans, economic Austrians and Bitcoiners are convinced that inflation is always and everywhere caused by central bank money printing. Small-state supporters are convinced that inflation is always and everywhere caused by profligate governments borrowing and spending excessively. Hard money enthusiasts are convinced that...

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