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Deflation Worries Easing?
EconomPic —
Paul Krugman shows a chart that he believes shows a strong relationship between an output gap and deflation, while Paul Kedrosky implies that same chart shows randomness. So which is it... inflation or deflation? CPI swap expectations have moved from north of 3% as recently as last May to negative (i.e. expected deflation over 2 and 5 years). Since mid-December, they are all beginning to reverse course. In other words, the market can't figure it out either.
Thursday morning links
The Mess That Greenspan Made —
... barrel - CNN/Money Dubai gold jewellery sales crash by 60 percent - Commodity Online Target-date funds missed the target in 2008 - MarketWatch Oil Inventory Build Surprises Analysts, Not Traders - Hard Assets Investor Silver Investment Demand - Gold & Silver Blog Wall St. Pay Moves in Cycles. (Guess Where We Are Now.) - NY Times ECONOMY State furloughs may further delay unemployment benefits - LA Times About that deflation risk - Krugman, NY Times 2009 GDP Forecasts - Calculated ...
Time for a Price Level Target, and a Damned High One!
Economics and... —
If you believe in a NAIRU, or anything remotely like a NAIRU or an accelerationist Phillips curve, the prognosis for prices is looking increasingly ugly. For those who believe confidently in such a Phillips curve and accept historical estimates of the parameters, deflation is now a certainty, and severe deflation is a strong possibility. Even among those who don't believe in a Phillips curve, deflation should be considered at least a serious possibility, and the danger of a deflationary spiral should not be ignored. ...
Department of "Huh?"
J. Bradford DeLong's Grasping Reality with All Eight Tentacles —
... About that deflation risk - Paul Krugman Blog - NYTimes.com: Larry Summers has finally made the point I’ve been pushing for a while — that we’re at major risk of falling into a deflationary trap.... [T]here’s a clear correlation, driven largely but not entirely by the deep slump and disinflation of the early 1980s, and an implied slope of about 0.5 — that is, every percentage point by which real GDP fall short of potential [in a year] tends to reduce the inflation rate by about half a point over the course of the year. And right now the CBO is ...
What happens to the inflation when the output gap is zero?
Economics and... —
In a blog post a couple of weeks ago, Paul Krugman presents a scatterplot of the change in the inflation rate (y) as a function of the output gap (x), with the following regression line: ...
“There Is No Deflation Threat In Europe” - Jean Claude Trichet - Oh Really!
A Fistful Of Euros » A Fistful Of Euros —
... Now as Krugman explains the figure plots an estimate of the output gap — the difference between actual and potential GDP, as a percentage of potential — and the change in the inflation rate. (Both series are taken from the IMF WEO database, for convenience, and use data from 1980-2007). ...
"There Is No Deflation Threat In Europe" - Jean Claude Trichet - Oh Really!
Euro Watch —
... Now as Krugman explains the figure plots an estimate of the output gap — the difference between actual and potential GDP, as a percentage of potential — and the change in the inflation rate. (Both series are taken from the IMF WEO database, for convenience, and use data from 1980-2007). ...
"There Is No Deflation Threat In Europe" - Jean Claude Trichet - Oh Really!
Global Economy Matters —
... Now as Krugman explains the figure plots an estimate of the output gap — the difference between actual and potential GDP, as a percentage of potential — and the change in the inflation rate. (Both series are taken from the IMF WEO database, for convenience, and use data from 1980-2007). ...
"There Is No Deflation Threat In Europe" - Jean Claude Trichet - Oh Really!
Spain Economy Watch —
... Now as Krugman explains the figure plots an estimate of the output gap — the difference between actual and potential GDP, as a percentage of potential — and the change in the inflation rate. (Both series are taken from the IMF WEO database, for convenience, and use data from 1980-2007). ...
"There Is No Deflation Threat In Europe" - Jean Claude Trichet - Oh Really!
Italian Economy Watch —
... Now as Krugman explains the figure plots an estimate of the output gap — the difference between actual and potential GDP, as a percentage of potential — and the change in the inflation rate. (Both series are taken from the IMF WEO database, for convenience, and use data from 1980-2007). ...
"There Is No Deflation Threat In Europe" - Jean Claude Trichet - Oh Really!
Greece Economy Watch —
... Now as Krugman explains the figure plots an estimate of the output gap — the difference between actual and potential GDP, as a percentage of potential — and the change in the inflation rate. (Both series are taken from the IMF WEO database, for convenience, and use data from 1980-2007). ...
