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  • #481
    Originally posted by DrSpike
    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.
    It’s really cool it helps to organise my thinking but that doesn’t make NAIRU more reliable when basing your calculations on it.

    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.
    I'd rather have it that policy decisions are made whilst actually keeping in mind that the tool is imperfect. That's hardly the case, a lot of people have problems distinguishing estimations and truths.
    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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    • #482
      Originally posted by DrSpike


      I explained in a previous post.

      *edit*. 4.2% actual.........hehe..........does that bother you?
      No, it will just be fun to bait Yankees and Limeys with it when I get the chance.
      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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      • #483
        France got revised upward almost 1 % age point, the US down about the same amount.... who knows what will happen to current guesstimates.

        "Output gaps and NAIRU are a powerful way of organising your thinking about some key macroeconomics issues......"

        I can empathise with that view, but how do you measure an output gap ?
        “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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        • #484
          Originally posted by Colon


          I'd rather have it that policy decisions are made whilst actually keeping in mind that the tool is imperfect. That's hardly the case, a lot of people have problems distinguishing estimations and truths.
          The first sentence is exactly how it is. The second is true, but not of the people who count! Things like output gap statistics are guides.......no-one within the profession takes them as gospel. I repeat, bettter to make important decisions with guides than without, so such considerations are far from useless as yourself and Roland have suggested.

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          • #485
            Originally posted by HershOstropoler

            I can empathise with that view, but how do you measure an output gap ?
            Check out my posts above. If you want more detailed econometric info I expect the IMF site Dan linked to will have something on their methodology.

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            • #486
              Ok, we're in Japan 1992, the bubble burst but things are still ok, productivity growth holding up, unemployment is low and consumption is strong. You just had years of +4% productivity growth after and a couple of years of sub-NAIRU won't hurt.
              10 years later, Japan's output gap is 13% according to the NAIRU of the time. According the 'new' NAIRU the output gap is only a couple of %.

              Policy mistakes perhaps but they seem to influence NAIRU oddly enough.
              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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              • #487
                Originally posted by Colon
                So France's GDP grew by 4.2% in 2000? Interesting...


                France has been doing OK. Demographics look good too.

                But they seem to want to snatch defeat from the jaws of victory. 35 hour work week, retirement at 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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                • #488
                  So the occasional catastrophic change in the state of the economy means we have to change NAIRU. So lets never use it at all ever. Come on.

                  You know what I say is true........if you ditch all possible imperfect guides to practical policy making you may as well not bother with discretionary policy at all. And even Roland probably wouldn't say something that silly.

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                  • #489
                    "And even Roland probably wouldn't say something that silly."

                    You misunderestimate him!
                    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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                    • #490
                      Originally posted by DrSpike
                      So the occasional catastrophic change in the state of the economy means we have to change NAIRU. So lets never use it at all ever. Come on.
                      What did they believe NAIRU in the US to be a couple of years ago? 4% of unemployment?

                      You know what I say is true........if you ditch all possible imperfect guides to practical policy making you may as well not bother with discretionary policy at all. And even Roland probably wouldn't say something that silly.
                      Banning discretionary policy doesn't seem like a bad idea.
                      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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                      • #491
                        Mid '90s in the US, they must have pegged it somewhere around 4.5%, which seems about right.

                        The press kept referring to it, without using the term "NAIRU". It seemed like a novel concept that was being introduced. Of course, it was only a little earlier in the decade that the press started giving out the real GDP figures rather than nominal.
                        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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                        • #492
                          "If you want more detailed econometric info..."

                          Don't threaten me. Was a rhetorical question anyway...

                          The problem with the output gap is whether the uncertainty about trend growth is such that it is not just an "imperfect guide" but so unreliable as to be useless.

                          I would not hold that view if the assumptions can be based on longterm observations, but making output gap estimates based upon a short term spike in productivity growth that has been accompanied by suspicious developments is a huge leap of faith, not to say a gamble - and I think the FED is guilty of gambling on that.

                          As for NAIRU - it has a rather poor track record even for the US, has it not.... for European labour markets with their differing institutional framework it is even less useful. Where you put NAIRU for the US and the Eurozone ?
                          “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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                          • #493
                            Originally posted by Colon

                            Banning discretionary policy doesn't seem like a bad idea.
                            Oh dear. There are many misconceptions I can accept in threads such as these......some of the time they don't matter to me as long as the big picture is understood. Please post again and tell me you were joking/trying to bait me. Pretty please. With sugar on. Think about my health - my blood pressure raises itself to dangerous levels when people seriously mean such stupidity.

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                            • #494
                              You should be more openminded, SpikeDoctor!
                              “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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                              • #495
                                Originally posted by DanS
                                Mid '90s in the US, they must have pegged it somewhere around 4.5%, which seems about right.
                                (I'm ignoring what you wrote below that because you DanSed )

                                Here's a table of the NAIRU according to the CBO. (table 11)

                                5.9% in '90 and 4.5% now?

                                Following on what NAIRU Hersh asked the Eurozone has, they put it at 8% now IIRC while it was quite a bit higher in the early 90's of course. (I'll try to find the article I read it in)
                                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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