October 30, 2017

What´s a mystery is why they think low inflation is a mystery

When the editor of the Journal of Economic Perspectives writes “Mysteries of Modern Inflation”: The theory of inflation that I learned long ago suggested that inflation should creep up when an economy is running near full employment, but will come back down during a recession. However, for almost two decades now, the rate of core inflation (that is, inflation not counting the volatile movements in oil and food prices) has stayed low and hasn’t budged by very much. At one level, low and stable is clearly good news. But at another level, it raises a question of whether we really…...

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GDP Outlook Update…Real GDP!

We stress nominal GDP in our posts, for reasons that are at this point well established. This shouldn’t be taken to mean we don’t care about real output, other’s simply cover it so much that we tend to leave the subject alone, unless there’s good reason not to. Real GDP is a tricky concept. In a modern economy of such vast complexity a concept like real GDP certainly has a meaning, but we shouldn’t think it comes close to fully describing the ‘magnitude’ of the economy, which is what it’s about: size. It might be better if RGDP were thought…...

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