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  • #466
    I love the spin on todays US inflation number... YoY Consumer prices now up 2.1% from 1.5% last month, up 0.3% for the month, core up 0.2% - and its a good thing because the Fed is worried about deflation! Please!

    Next month's CPI is projected at 0.2% replacing -0.1% from last Novy, so YoY will be running at about 2.5%, thank goodness, I was begining to get worried about 1.5%, now if we can just get to 3.5% or 4.5% everything will be okay.

    Alan, I think we have a NAIRU jacket problem... '92 all over again.
    Be the bid!

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    • #467
      Originally posted by Sten Sture

      Alan, I think we have a NAIRU jacket problem... '92 all over again.
      Hell no, the situation is very different from '92. The output gap is nowhere near closed.........no NAIRU jacket in sight.

      Besides we shouldn't believe in NAIRU anyway - Roland has spoken.

      Comment

      • #468
        Edit: answered those questions myself. IMF lists output gaps and the output gap is the % shy (or over) potential output.

        Is NAIRU an assumption that once unemployment gets to a certain %, inflation will increase?

        Edit again: OK, taking a look at IMF's numbers, for '02 the US has expected growth of 2.2% and an output gap of -2%. Does this mean simply that the potential growth rate of the US for '02 is 4.2%? That seems awfully high.
        Last edited by DanS; November 19, 2002, 14:55.
        I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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        • #469
          Yes NAIRU is the rate of unemployment at which inflation is not accelerating.......if output is at its long run trend level then employment is at its 'natural' rate, and there is no output gap.

          At present demand growth is temporarily lagging productive potential (productivity growth is a 2 edged sword when a labour market recovery is widely seen as necessary condition for people to generally consider it a recovery), though of course this is not sustainable in the long run.

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          • #470
            Thanks, DrSpike. I'm trying to grok. Could you please be so kind as to answer my math question edited in?
            I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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            • #471
              Does seem a touch high; how is 'expected growth' calculated in the figures you quote? Of course with the way the US calculates productivity trend growth isn't far off of 4.2% IIRC.

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              • #472
                http://www.imf.org/external/pubs/ft/weo/2002/02/pdf/chapter1.pdf


                Expected GDP growth at pg. 2

                Output gap at pg. 16

                Putting those 2 together (and assuming I'm doing this correctly), we had potential growth of 2.2% in 2000 and actual growth of 3.8%. Potential growth in 2001 would have only been 1.5%. Hmmm...

                Btw, I do note that the UK is in a stellar fiscal situation.
                I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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                • #473
                  To see why your calculations don't work consider an economy with a negative output gap. Growth in the next year can be above trend and still not close the output gap, which would still be negative. This means that growth for the last year considered could have been even higher than was observed without generating inflation, but not that trend growth is higher than growth in the past year.

                  Better?

                  Comment

                  • #474
                    Gotcha.
                    I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                    Comment

                    • #475
                      Originally posted by DrSpike
                      Of course with the way the US calculates productivity trend growth isn't far off of 4.2% IIRC.
                      Productivity growth got revised down to something about 2 %. Considering two statistical quirks (only non farm business and falling hours per worker) this should translate into something like 2.5 % trend growth.

                      Now the other interesting things are the cyclical factor in this and hedonic deflators. Whatever you say, my PCs didn't increase their utility to me by 30 % a year....

                      Originally posted by DrSpike
                      Besides we shouldn't believe in NAIRU anyway - Roland has spoken.
                      “Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)

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                      • #476
                        Originally posted by MORON
                        Uh..... so should a moron even try to learn macroeconomics and actually understand any of this or it is beyond my reach?
                        Understanding macroeconomics is extreamly important if you want to be an informed voter. Politicans are extreamly fond of offering economic programs which look good to the uninformed public, but will have overall negative results on society as a whole (ie; trade protection)
                        'Arguing with anonymous strangers on the internet is a sucker's game because they almost always turn out to be - or to be indistinguishable from - self-righteous sixteen year olds possessing infinite amounts of free time.'
                        - Neal Stephenson, Cryptonomicon

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                        • #477
                          I pretty much agree with Roland NAIRU is useless.

                          In principle it's nice but the problem is that the equilibrum is constantly shifting, which makes it pointless to calculate output gaps or make forecasts based on NAIRU.
                          DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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                          • #478
                            I can empathise with that view, but NAIRU and output gap calculations are far from useless in practical macroeconomics I assure you.

                            Output gaps and NAIRU are a powerful way of organising your thinking about some key macroeconomics issues......some of the posts in this thread are good examples of the sorts of muddles you can get yourself into quite easily when you have no framework in which to analyse problems.

                            Ultimately policy decisions need to be undertaken in an uncertain world. Give me a choice between an imperfect tool and no tool at all I know which I will take every time.

                            Comment

                            • #479
                              Originally posted by DanS
                              http://www.imf.org/external/pubs/ft/weo/2002/02/pdf/chapter1.pdf


                              Expected GDP growth at pg. 2

                              Output gap at pg. 16

                              Putting those 2 together (and assuming I'm doing this correctly), we had potential growth of 2.2% in 2000 and actual growth of 3.8%. Potential growth in 2001 would have only been 1.5%. Hmmm...

                              Btw, I do note that the UK is in a stellar fiscal situation.
                              So France's GDP grew by 4.2% in 2000? Interesting...

                              The way it is going now, the UK is pretty much frittering away that stellar situation by 'investing' in higher wages in the public sector.
                              DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

                              Comment

                              • #480
                                Originally posted by Colon


                                So France's GDP grew by 4.2% in 2000? Interesting...
                                I explained in a previous post.

                                *edit*. 4.2% actual.........hehe..........does that bother you?

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