tag:blogger.com,1999:blog-1110014885778996459.post5025946138929119240..comments2024-03-28T04:16:11.729-07:00Comments on Idiosyncratic Whisk: RDGP and NGDPKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-1110014885778996459.post-41975799935799140102014-02-04T10:06:06.700-07:002014-02-04T10:06:06.700-07:00Hmm. Good point. If inflation tended to be under...Hmm. Good point. If inflation tended to be undermeasured at high levels, RGDP would be overstated. I don't know how much of a problem that would be in the US, although there were various price controls in the 70's which would muddle up the data, and, to be honest, I don't know exactly what the effect would be.<br /><br />Another caveat is that the high inflation data is really a single episode over a number of years, so the low RGDP could just be a coincidence.<br /><br />It still seems to me that inflation under 4% or so doesn't appear to be damaging. I suppose that if the Fed had a centered target of 2% inflation instead of a sort of maximum target of 2%, then 0% to 4% would basically be the working range.<br />Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-66370859837354835572014-02-04T09:46:21.799-07:002014-02-04T09:46:21.799-07:00I would also question assuming no change in measur...I would also question assuming no change in measurement accuracy over all levels of inflation. One thing I will note from observation- the higher the inflation rate, the greater effort a government will make in suppressing the measured number (see Argentina and Venezuela for today's examples).Yancey Wardhttps://www.blogger.com/profile/16427042729449397357noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-50426100422265975152014-01-31T12:33:50.931-07:002014-01-31T12:33:50.931-07:00Good questions, Ryan.
The futures market seems vi...Good questions, Ryan.<br /><br />The futures market seems viable to me, but even if it doesn't help, generally, targeting NGDP instead of inflation seems to me like it would solve some problems without creating new ones.<br /><br />These are YOY % changes in levels, which I used to strike a balance between getting rid of noise and giving timely measures. It seems to me like using the first difference, more or less, covers the policy decisions. The other options get to complicated or noisy, I think.<br /><br />You're right. The 1948-72 data doesn't have much of a correlation, and the outliers account for most of it. Getting rid of the outliers in the post '72 data improves the correlation, though.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-19012804805564647302014-01-31T08:01:28.495-07:002014-01-31T08:01:28.495-07:00Couple of questions/points.
First, have we actual...Couple of questions/points.<br /><br />First, have we actually determined a viable way to target NGDP yet? Last I heard, it was something that everyone thought was a great idea, but no one knew how to do. Something nebulous about targeting some sort of futures market - but how viable is that for a central bank to do reliably, and how much do we expect to gain over the current Fed toolkit?<br /><br />Second, the trend is pretty clear for 83-13, but it looks to me like the trend lines for the other periods are mostly being defined by outliers.<br /><br />Third (oops, I guess I have three points), are we sure YOY % change is the best metric for these numbers? What are those numbers, exactly? Are you talking about the difference between two years' average rates of change? Or, are you talking about the difference between two point-in-time rates of change? The latter strikes me as being a slightly better number (because it avoids the pitfalls of taking the average of averages), but then why not just use quarterly numbers to get a better handle on the actual trend?<br /><br />Just thinking out loud, mostly....RP Longhttps://www.blogger.com/profile/15028013805248797978noreply@blogger.com