DOCSLIB.ORG

Apresentação Do Powerpoint

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Apresentação Do Powerpoint Combating Inflation in Brazil: Sacrifice or Gain? A Calculation of Sacrifice Ratios during Eight Disinflation Periods in Brazil, from 1947.I to 2015.IV Jolanda E. Ygosse Battisti, Rodolfo Pires, Julia von Maltzan Pacheco FGV-EAESP Copyright © 2016 Jolanda E. Ygosse Battisti. All rights reserved Introduction Objective of the paper … to calculate sacrifice ratios for policy-induced inflationary and disinflationary periods, using data on the Brazilian economy from 1947 to 2015. Why do we care? … inflation is costly for society. However, actively combating inflation can also be costly, especially in the short run, resulting in a policy dilemma. Main result … perhaps surprisingly, combating inflation does not necessarily imply a loss of output and jobs in Brazil. Especially when inflation is a fiscal phenomenon, the sacrifice ratio is inverted. This is good news for policy makers 4000 CONTEXT 3750 Consumer Price Index (IPC) 3500 in Brazil, 1912(1)-2015(1) (in log x 100; 1912=0) 3250 Real Plan 3000 2750 IPC (1939=100) 2500 Average annual inflation rate of 2250 54% before the Real Plan, and 2000 6,4% since the Real Plan 1750 1500 in ln, normalized for 1912=0 (x100) 1912=0 fornormalized in ln, 1250 1000 750 500 250 0 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Source: Data from Mitchell (1998); IPEADATA, IPC-FIPE; and author´s calculations. Year Copyright © 2014 Jolanda E. Ygosse Battisti. All rights reserved 200 CONTEXT 175 Monthly Inflation Rate in Brazil 1912-1980, annualized 150 Crisis of the in %, annualizedin %, Sixties Monthly Inflation Monthly 125 WWII 100 High inflation was 75 common, since the 1940s … 50 25 0 -25 (for comparison, current IT 4,5% p.y.) Deflation -50 (Great Depression USA) 1920 1930 1940 1950 1960 1970 1980 Source: Data from Mitchell (1998); IPEADATA, IPC-FIPE; author´s calculations. Year Copyright © 2015 Jolanda E. Ygosse Battisti. All rights reserved 80 CONTEXT 75 Monthly inflation Collor I (Hiper)inflation in % p.m. 70 1980-2015 (p.m.) crisis of the 80s and 90 65 Real Monthly Inflation Monthly 60 Plan 55 50 Collor II 45 Summer 40 Plan 35 Bresser Change, from exchange rate 30 Plan target to inflation target 25 Cruzado 20 Plan 15 10 5 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Data from IPEADATA, IPC-FIPE Year Copyright © 2014 Jolanda E. Ygosse Battisti. All rights reserved 30 CONTEXT Exchange Inflation Inflation rate in Brazil Rate Target since the Real Plan 25 Target 1995(1)-2015(1) (p.y.) annualized 20 Monthly Inflation Monthly 15 10 5 0 (Current IT, of 4,5% (p.y.) -5 ± 2 percentage points (bands indicated in green) -10 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: IPEADATA, IPC-FIPE; authors’ calculations. Year Copyright © 2014 Jolanda E. Ygosse Battisti. All rights reserved CONTEXT General Government Spending Government and Revenues in Brazil, Spending Revenues in % of GDP, 1861-2015 PublicOs deficitssector fiscais fiscaldo setor deficitspúblico and Central Government Spending Spending GDP The fiscal deficits of of the 60s, 70s, and 80s in % % in Government Central Primary Government Surpluses Revenues 90s and 00s ; authors’ calculations. Year Table 1 – Average Annual Growth Rates per Decade and per Period 1870-2013 (144 years), 1912-2013 (102 years) e 1950-2013 (64 years) Real GDP Real p.cap. Labor Annual Period (Total) Population GDP Productivity Inflation 1870s1 2,42 1,87 0,54 -- -- 1880s 2,42 1,87 0,54 -- -- 1890s 1,16 2,34 – 1,15 -- -- 1900s 3,18 2,16 1,00 -- -- 1910s 3,59 2,12 1,44 -- 7,213 1920s 4,53 2,06 2,42 -- 3,96 1930s 3,12 2,05 1,05 -- 4,45 1940s 5,17 2,34 2,77 -- 15,40 1950s 6,26 3,20 2,96 3,312 20,38 1960s 5,59 2,96 2,56 2,92 44,92 1970s 8,23 2,58 5,51 3,61 30,98 1980s 2,83 2,16 0,66 – 0,37 242,80 1990s 1,67 1,58 0,09 0,68 270,57 2000s 3,20 1,22 1,95 0,83 5,72 2010-2013 3,09 0,89 2,18 0,94 5,284 1870-2013 3,79 2,14 1,61 -- -- 1912-2013 4,38 2,17 2,15 -- 44,075 1950-2013 4,49 2,14 2,29 1,74 70,015 Source: Author´s elaboration, based on data from Bolt e van Zanden (2014), The Conference Board, IPEADATA and FIPE. CONTEXT Crisis 225 Economic 2007-2009 100) Real p.cap. GDP, 1870-2013 Miracle 200 Transformed in ln, vezes 1870=0 (x 100) Financial 175 Trend Crisis 2002 Real per Capita GDP per Capita Real 150 Crise de Dívida in1870=0, ln, 125 The slope represent Externa (Hiper) the growth rate Inflation Crisis 100 Crisis 60s 75 50 25 WWII 0 Great Depression Crisis WWI Encilhamento -25 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 Source: Maddison, Bolt & van Zanden (2014), 1870-2010; Year 2011-2013: The Conference Board (2014); author’s calculations Copyright © 2014 Jolanda E. Ygosse Battisti. All rights reserved 20 CONTEXT Business Cycle, p.cap. Real GDP Economic 1870Movimento-2013 da Conjuntura (per Capita)Miracle 15 (Deviationno Brasil from, 1870 Trend)-2013 (Desvio Percentual do PIB Real per Capita da Tendência) Trend 10 Crisis 2007-2009 5 Deviation from Trend, in % in Trend, fromDeviation 0 -5 Financial -10 Crisis External 2002 Great Debt WWII WWI Depression Crisis -15 (Hiper) Crisis of Crisis Inflation “Encilhamento” 60s Crisis -20 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 Source: Maddison, Bolt & van Zanden (2014), 1870-2010; Year 2011-2013: The Conference Board (2014); author’s calculations. Copyright © 2014 Jolanda E. Ygosse Battisti. All rights reserved Research Questions 1./ Has actively combating inflation resulted in (significant) short term loss of GDP? 2./ Has it had a positive or negative impact on (long term) economic growth? SOME STYLIZED FACTS Evidence on Phillips Curve Based on a meta-analysis of the existing literature that estimates the Phillips Curve for Brazil, we cannot conclude unanimously that this trade-off is important for Brazil Based on analysis of 24 papers – joined work with Larissa Marubayashi 4 papers confirmed the existence of a trade off 3 papers rejected the existence of a trade off The remaining articles did not report a clear position Brazil´s Expectations Augmented Phillips Curve, 2011(1) – 2014(4) (monthly data) 6 4 inflation 2 expected 0 minues -2 Taxa de Inflação menos Taxa de Infação Esperada Infação de Taxa menos Inflação de Taxa Effective -4 EffectiveTaxa de Desempregominus natural menos Taxa unemployment de Desemprego Naturalrate -6 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 Source: Monthly data from BCB and IBGE; author’s estimations. Copyright © 2015 Jolanda E. Ygosse Battisti. All rights reserved Evidence on Stagflation Based on a business cycle analysis for 1980-2015, we find that 8 out of the last 11 recessions can be classified as “stagflation”: inflation high or higher when the economy enters in recession compared to before and after the recession joined work with Rafaella Baraldo Evidence on Okun’s Law 8 Okun’s Law for Brazil, 1991 – 2013: ΔY/Y = 2,9 – 1,4 Δu 2010 Y/Y 7 Δ 6 1994 2004 (in % year) % per (in 2007 Average Annual 5 2008 Growth Rate of 1993 1995 Potential GDP 4 2000 1997 Real GDP’s Growth Rate, Growth GDP’s Real 2006 2005 3 2002 2011 1996 2 2013 2001 1 2003 2012 1999 1998 0 1992 2009 -1.50-1 -1.25 -1.00 -0.75 -0.50 -0.25 0.00 0.25 0.50 0.75 1.00 1.25 1.50 Source: Author’s elaboration, based on data of Bolt & van Change in unemployment rate, Δu Zanden (2014), The Conference Board and ILO (in %-pts) Copyright © 2015 Jolanda E. Ygosse Battisti. All rights reserved Evidence on a Negative Impact of Procyclical Fiscal Policy on Long Term Growth Based on a panel data study of upper middle income countries, for 1980-2015, we find that procyclical fiscal policy, measured as increase of structural primary surplus during recessions and decrease during booms, affects negatively long term economic growth Work in progress (with Mariana Meneghini) Cyclical behavior of Government Spending P T P T P T P T P Government Spending Cycle GDP Cycle Time Source: IBGE and own calculations; Recessions dated by CODACE (2015), of FGV-IBRE. P: Peak; T: Trough. Structural Primary Surplus and Recessions 3.5 P T P T P T P T P 3.0 Surplus GDP) 2.5 Primary potential of 2.0 Structural % (in 1.5 1.0 0.5 0.0 -0.5 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Tempo Source: Ygosse-Battisti (2015), with data from Tesouro Nacional; CODACE (2015), of FGV-IBRE. P: Peak; T: Trough. Stylized facts So the Phillips curve is vertical or even positively sloped in the short run GDP cycle and inflation are not significantly correlated Most recessions are inflationary Okun´s Law for Brazil shows that unemployment is less sensitive for diminishing growth compared to, for example, the US And procyclical fiscal policy hurts long-run economic growth This leads us to believe that combating inflation may have short and long term benefits Research Method We calculate sacrifice ratios for Brazil We follow Ball (1994) and the vast literature that applies Ball’s method However, we do some things different: - Ball assumes a priori a negative relationship between the output gap and disinflation.
Load more

Recommended publications
  • Brazilian Inflation and GDP from 1850 to 2000: an Empirical Investigation
    Brazilian Inflation and GDP from 1850 to 2000: An Empirical Investigation Eurilton Araujo Ibmec Business School Alexandre Cunha Ibmec Business School RESUMO A possibilidade de que políticas de combate à inflação possuam efeitos negativos sobre a atividade econômica real e o crescimento é um assunto recorrente no Brasil. Neste traba- lho foram utilizados dados anuais para se estudar o comportamento da inflação e do PIB brasileiro de 1850 até 2000. Adotaram-se técnicas econométricas e da literatura de ciclos econômicos para se estudar o comportamento dessas duas variáveis nos domínios do tempo e da freqüência. Os resultados sugerem que as duas séries não são positivamente relacio- nadas. Assim sendo, a evidência empírica aparentemente indica que a opção de abrandar a política de combate à inflação com intuito de não prejudicar a atividade econômica real e o crescimento não está disponível para os condutores da política econômica brasileira. PALAVRAS-CHAVE inflação, crescimento, ciclos econômicos ABSTRACT The question of whether a policy that leads to low inflation can hamper real economic activity and growth is a recurrent one in Brazil. In this essay we used yearly data to study the behavior of Brazilian inflation and GDP from 1850 to 2000. We used econometric and business cycles techniques to study the behavior of these variables in time and frequency domains. The results suggest the absence of positive comovement between the series. Thus, the empirical evidence apparently implies that the option of easing up on inflation to avoid a slowdown in real economic activity and growth is not available to Brazilian policy makers. KEY WORDS inflation, growth, business cycles JEL Classification C32, E31, E32 EST.
    [Show full text]
  • Center for Institutional Reform and the Informal Sector
    CENTER FOR INSTITUTIONAL REFORM AND THE INFORMAL SECTOR University of Maryland at College Park Center Office: IRIS Center, 2105 Morrill Hall, College Park, MD 20742 Telephone (301) 405-3110 l Fax (301) 405-3020 Financial Markets and Industrial Development: A Comparative Study of Government Regulation Financial Innovation, and Industrial Structure in Brazil and Mexico, 1840-1930 November 1994 Stephen Haber Working Paper No. 143 This publication was made possible through support provided by the U.S. Agency for International Development, under Cooperative Agreement No. DHR-0015-A-00-0031-00. The views and analyses in the paper do not necessarily reflect the official position of the IRIS Center or the U.S.A.I.D. Author: Stephen Haber, Department of History, Stanford University, Standford, CA. IRIS Summary Working Paper #143 Financial Markets and Industrial Development: A Comparative Study of Government Regulation, Financial Innovation and Industrial Structure in Brazil and Mexico 1840-1930. Stephen Haber Department of History Stanford University Stanford, CA 94305 This paper examines the experiences of Mexico and Brazil in the creation of modern banks and stock exchanges during the early stages of industrialization. It addresses three interrelated questions. First, what were the differences in the development of financial intermediaries in both countries. Second< what- were the consequences for the structure and rate of growth of industry of these differences in institutional development? Third, what were the sources of these differences in institutional development? Why did Brazil develop a modern stock and bond market during the 1890s and Mexico did not? In order to answer these questions, the pc3pe.K fucuses cl11 the history of textile mill finance in both countries.
    [Show full text]
  • A REVIEW of IRANIAN STAGFLATION by Hossein Salehi
    THE HISTORY OF STAGFLATION: A REVIEW OF IRANIAN STAGFLATION by Hossein Salehi, M. Sc. A Thesis In ECONOMICS Submitted to the Graduate Faculty of Texas Tech University in Partial Fulfillment of the Requirements for the Degree of MASTER OF ARTS Approved Dr. Masha Rahnama Chair of Committee Dr. Eleanor Von Ende Dr. Mark Sheridan Dean of the Graduate School August, 2015 Copyright 2015, Hossein Salehi Texas Tech University, Hossein Salehi, August, 2015 ACKNOWLEDGMENTS First and foremost, I wish to thank my wonderful parents who have been endlessly supporting me along the way, and I would like to thank my sister for her unlimited love. Next, I would like to show my deep gratitude to Dr. Masha Rahnama, my thesis advisor, for his patient guidance and encouragement throughout my thesis and graduate studies at Texas Tech University. My sincerest appreciation goes to, Dr. Von Ende, for joining my thesis committee, providing valuable assistance, and devoting her invaluable time to complete this thesis. I also would like to thank Brian Spreng for his positive input and guidance. You all have my sincerest respect. ii Texas Tech University, Hossein Salehi, August, 2015 TABLE OF CONTENTS ACKNOWLEDGMENTS .................................................................................................. ii ABSTRACT ........................................................................................................................ v LIST OF FIGURES ..........................................................................................................
    [Show full text]
  • Modern Monetary Theory: a Marxist Critique
    Class, Race and Corporate Power Volume 7 Issue 1 Article 1 2019 Modern Monetary Theory: A Marxist Critique Michael Roberts [email protected] Follow this and additional works at: https://digitalcommons.fiu.edu/classracecorporatepower Part of the Economics Commons Recommended Citation Roberts, Michael (2019) "Modern Monetary Theory: A Marxist Critique," Class, Race and Corporate Power: Vol. 7 : Iss. 1 , Article 1. DOI: 10.25148/CRCP.7.1.008316 Available at: https://digitalcommons.fiu.edu/classracecorporatepower/vol7/iss1/1 This work is brought to you for free and open access by the College of Arts, Sciences & Education at FIU Digital Commons. It has been accepted for inclusion in Class, Race and Corporate Power by an authorized administrator of FIU Digital Commons. For more information, please contact [email protected]. Modern Monetary Theory: A Marxist Critique Abstract Compiled from a series of blog posts which can be found at "The Next Recession." Modern monetary theory (MMT) has become flavor of the time among many leftist economic views in recent years. MMT has some traction in the left as it appears to offer theoretical support for policies of fiscal spending funded yb central bank money and running up budget deficits and public debt without earf of crises – and thus backing policies of government spending on infrastructure projects, job creation and industry in direct contrast to neoliberal mainstream policies of austerity and minimal government intervention. Here I will offer my view on the worth of MMT and its policy implications for the labor movement. First, I’ll try and give broad outline to bring out the similarities and difference with Marx’s monetary theory.
    [Show full text]
  • Deflation and Monetary Policy in a Historical Perspective: Remembering the Past Or Being Condemned to Repeat It?
    NBER WORKING PAPER SERIES DEFLATION AND MONETARY POLICY IN A HISTORICAL PERSPECTIVE: REMEMBERING THE PAST OR BEING CONDEMNED TO REPEAT IT? Michael D. Bordo Andrew Filardo Working Paper 10833 http://www.nber.org/papers/w10833 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2004 This paper was prepared for the 40th Panel Meeting of Economic Policy in Amsterdam (October 2004). The authors would like to thank Jeff Amato, Palle Andersen, Claudio Borio, Gauti Eggertsson, Gabriele Galati, Craig Hakkio, David Lebow and Goetz von Peter, Patrick Minford, Fernando Restoy, Lars Svensson, participants at the 3rd Annual BIS Conference as well as seminar participants at the Bank of Canada and the International Monetary Fund for helpful discussions and comments. We also thank Les Skoczylas and Arturo Macias Fernandez for expert assistance. The views expressed are those of the authors and not necessarily those of the Bank for International Settlements or the National Bureau of Economic Research. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research. ©2004 by Michael D. Bordo and Andrew Filardo. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Deflation and Monetary Policy in a Historical Perspective: Remembering the Past or Being Condemned to Repeat It? Michael D. Bordo and Andrew Filardo NBER Working Paper No. 10833 October 2004 JEL No. E31, N10 ABSTRACT What does the historical record tell us about how to conduct monetary policy in a deflationary environment? We present a broad cross-country historical study of deflation over the past two centuries in order to shed light on current policy challenges.
    [Show full text]
  • When the Periphery Became More Central: from Colonial Pact to Liberal Nationalism in Brazil and Mexico, 1800-1914 Steven Topik
    When the Periphery Became More Central: From Colonial Pact to Liberal Nationalism in Brazil and Mexico, 1800-1914 Steven Topik Introduction The Global Economic History Network has concentrated on examining the “Great Divergence” between Europe and Asia, but recognizes that the Americas also played a major role in the development of the world economy. Ken Pomeranz noted, as had Adam Smith, David Ricardo, and Karl Marx before him, the role of the Americas in supplying the silver and gold that Europeans used to purchase Asian luxury goods.1 Smith wrote about the great importance of colonies2. Marx and Engels, writing almost a century later, noted: "The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonisation of America [north and south] trade with the colonies, ... gave to commerce, to navigation, to industry, an impulse never before known. "3 Many students of the world economy date the beginning of the world economy from the European “discovery” or “encounter” of the “New World”) 4 1 Ken Pomeranz, The Great Divergence , Princeton: Princeton University Press, 2000:264- 285) 2 Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations (1776, rpt. Regnery Publishing, Washington DC, 1998) noted (p. 643) “The colony of a civilized nation which takes possession, either of a waste country or of one so thinly inhabited, that the natives easily give place to the new settlers, advances more rapidly to wealth and greatness than any other human society.” The Americas by supplying silver and “by opening a new and inexhaustible market to all the commodities of Europe, it gave occasion to new divisions of labour and improvements of art….The productive power of labour was improved.” p.
    [Show full text]
  • The History of Financial Crises. 4 Vols.                                     
    KS-4012 / May 2014 ご注文承り中! 【経済史、金融史、金融危機】 近世以降の金融危機の歴史に関する重要論文を収録 L.ニール他編 金融危機史 全 4 巻 The History of Financial Crises. 4 vols. Coffman, D'Maris / Neal, Larry (eds.), The History of Financial Crises: Critical Concepts in Finance. 4 vols. (Critical Concepts in Finance) 1736 pp. 2014:9 (Routledge, UK) <614-722> ISBN 978-0-415-63506-6 hard set 2007 年以降、グローバルな金融制度は極度の混乱を経験しています。いくつかの銀 行は甚大な損失を抱え、各国政府による桁外れの救済を必要としてきました。その上、現 在も進行しているユーロ圏の危機は、政府の規制機関・銀行・資本市場の間の機能不全の 相互作用を浮き彫りにしています。こうした昨今の金融危機を踏まえ、近年、1930 年代 の大恐慌や 1719～20 年のミシシッピ計画及び南海泡沫事件といった歴史上の様々な金融 危機との比較研究が盛んに行われています。 本書は、深刻な金融危機からの回復の成功事例を位置づけ、学び、そして重要な歴史的 コンテクストに昨今の危機を位置づけるという喫緊の必要性によって企画されました。第 1 巻「近世のパラダイムの事例」、第 2 巻「金融資本主義の成長」、第 3 巻「金本位制の時 代」、第 4 巻「現代」の全 4 巻より構成されています。本書を経済史、金融史、金融危機 に関心を持つ研究者・研究室、図書館にお薦めいたします。 〔収録論文明細〕 Volume I: The Early Modern Paradigmatic Cases 1. C. P. Kindleberger, ‘The Economic Crisis of 1619 to 1623’, 1991 2. William A. Shaw, ‘The Monetary Movements of 1600–1621 in Holland and Germany’, 1895 3. V. H. Jung, ‘Die Kipper-und wipperzeit und ihre Auswirkungen auf OberÖsterreich’, 1976 4. S. Quinn & W. Roberds, ‘The Bank of Amsterdam and the Leap to Central Bank Money’, 2007 5. D. French, ‘The Dutch Monetary Environment During Tulipmania’, 2006 6. P. M. Garber, Famous First Bubbles: The Fundamentals of Early Manias, 2000, pp. 1–47. 7. N. W. Posthumus, ‘The Tulip Mania in Holland in the Years 1636 and 1637’, 1929 8. E. A. Thompson, ‘The Tulipmania: Fact or Artifact?’, 2007 9. L. D. Neal, ‘The Integration and Efficiency of the London and Amsterdam Stock Markets in the Eighteenth Century’, 1987 10. P. M. Garber, Famous First Bubbles: The Fundamentals of Early Manias, 2000, pp.
    [Show full text]
  • Is Our Current International Economic Environment Unusually Crisis Prone?
    Is Our Current International Economic Environment Unusually Crisis Prone? Michael Bordo and Barry Eichengreen1 August 1999 1. Introduction From popular accounts one would gain the impression that our current international economic environment is unusually crisis prone. The European of 1992-3, the Mexican crisis of 1994-5, the Asian crisis of 1997-8, and the other currency and banking crises that peppered the 1980s and 1990s dominate journalistic accounts of recent decades. This “crisis problem” is seen as perhaps the single most distinctive financial characteristic of our age. Is it? Even a cursory review of financial history reveals that the problem is not new. One classic reference, O.M.W. Sprague’s History of Crises Under the National Banking System (1910), while concerned with just one country, the United States, contains chapters on the crisis of 1873, the panic of 1884, the stringency of 1890, the crisis of 1893, and the crisis of 1907. One can ask (as does Schwartz 1986) whether it is appropriate to think of these episodes as crises — that is, whether they significantly disrupted the operation of the financial system and impaired the health of the nonfinancial economy — but precisely the same question can be asked of certain recent crises.2 In what follows we revisit this history with an eye toward establishing what is new and 1 Rutgers University and University of California at Berkeley, respectively. This paper is prepared for the Reserve Bank of Australia Conference on Private Capital Flows, Sydney, 9-10 August 1999. It builds on an earlier paper prepared for the Brookings Trade Policy Forum (Bordo, Eichengreen and Irwin 1999); we thank Doug Irwin for his collaboration and support.
    [Show full text]
  • It's Not Stagflation
    MAY 27, 2021 CAPITAL MARKETS RESEARCH WEEKLY MARKET It’s Not Stagflation OUTLOOK MAY 27, 2021 The U.S. is not currently experiencing stagflation, and it’s not going to over Table of Contents Lead Author the next couple of years. The debate Ryan Sweet about stagflation is going to intensify Top of Mind ...................................... 4 Senior Director-Economic Research over the next few months as growth in 610-235-5213 Week Ahead in Global Economy ... 6 [email protected] consumer prices continues to accelerate. However, there are a ton of Geopolitical Risks ............................ 7 Asia-Pacific temporary factors behind the Katrina Ell acceleration and recent gains in the CPI Economist The Long View are concentrated in the most volatile U.S. ................................................................. 8 Shahana Mukherjee components. This is likely not Europe ......................................................... 10 Economist sustainable; it is attributable to the Asia-Pacific .................................................. 11 reopening of the economy. Europe Ross Cioffi Ratings Roundup ........................... 12 Economist Still, a stagflation debate will occur, and Katrina Pirner there won’t be a consensus. Some Market Data ................................... 15 Economist define stagflation as weaker growth and accelerating inflation. The weaker-than- CDS Movers .................................... 16 U.S. expected job growth in April and string Adam Kamins Issuance .......................................... 18 Economist of disappointing economic data coupled with the April CPI have some believing Steve Shields their criteria for stagflation has been Economist met. Ryan Kelly Data Specialist However, we believe this definition is too loose. Periods of stagflation occur when there is Editor high unemployment and high inflation. Inflation isn’t high. We calculated z-scores—a Reid Kanaley measure of the standard deviations above or below the mean—for the headline and core CPI, and they are the highest since oil prices jumped in 2008.
    [Show full text]
  • The Impact of Inflation and Deflation on the Case for Gold
    The impact of inflation and deflation on the case for gold A report commissioned by the World Gold Council July 2011 Contents Foreword ................................................................................................... 1 Executive Summary.................................................................................. 2 1 Introduction ..................................................................................... 3 2 Determinants of the price of gold ................................................... 5 2.1 The distinctive properties of gold ............................................................... 5 2.2 Gold and the general price level ................................................................ 5 2.3 Gold and real interest rates ........................................................................ 7 2.4 Gold and the US dollar ............................................................................... 8 2.5 Gold and financial stress ............................................................................ 8 2.6 Gold and political instability ...................................................................... 10 2.7 Gold and official sector activity ................................................................ 11 3 Modelling the price of gold ........................................................... 13 3.1 Estimation of a gold price equation .......................................................... 13 3.2 Decomposing two key historical periods .................................................
    [Show full text]
  • From the Great Stagflation to the New Economy
    Inflation, Productivity and Monetary Policy: from the Great Stagflation to the New Economy∗ Andrea Tambalotti† Federal Reserve Bank of New York September 2003 Abstract This paper investigates how the productivity slowdown and the systematic response of mon- etary policy to observed economic conditions contributed to the high inflation and low output growth of the seventies. Our main finding is that monetary policy, by responding to real time estimates of output deviations from trend as its main measure of economic slack, provided a crucial impetus to the propagation of the productivity shock to inflation. A central bank that had responded instead to a differenced measure of the output gap would have prevented inflation from rising, at the cost of only a marginal increase in output fluctuations. This kind of behavior is likely behind the much-improved macroeconomic performance of the late nineties. ∗I wish to thank Pierre-Olivier Gourinchas and Michael Woodford for comments and advice and Giorgio Primiceri for extensive conversations. The views expressed in the paper are those of the author and are not necessarily reflective of views at the Federal Rserve Bank of New York or the Federal Reserve System. †Research and Market Analysis Group, Federal Reserve Bank of New York, New York, NY 10045. Email: Andrea. [email protected]. 1Introduction The attempt to account for the unusual behavior of US inflation and real activity in the seventies, what Blinder (1979) dubbed the “great stagflation”, has recently attracted a great deal of attention in the literature. This is partly the result of a growing consensus among monetary economists on the foundations of a theory of monetary policy, as articulated most recently by Woodford (2003).
    [Show full text]
  • Center for Institutional Reform and the Informal Sector
    CENTER FOR INSTITUTIONAL REFORM AND THE INFORMAL SECTOR University of Maryland at College Park Center Office: IRIS Center, 2105 Morrill Hall, College Park, MD 20742 Telephone (301) 405-3110 l Fax (301) 405-3020 Capital Markets and Industrial Development: A Comparative Study of Brazil, India, Mexico, and the United States, 1840-1930 November 1994 Stephen Haber Working Paper No. 144 This publication was made possible through support provided by the U.S. Agency for International Development, under Cooperative Agreement No. DHR-0015-A-00-0031-00. The views and analyses in the paper do not necessarily reflect the official position of the IRIS Center or the U.S.A.I.D. Author: Stephen Haber, Department of History, Stanford University, Standford, CA. IRIS Summary Working Paper #144 Capital Markets and Industrial Development: Comparative Study of Brazil, India, Mexico, and the United States. 1830-1940 Stephen Haber Department of History Stanford University Stanford, CA 94305 This paper seeks to understand the conditions under which imperfections in capital markets may persist for long periods of time and the long-run efficiency consequences of those imperfections. It therefore examines the institutional history of textile mill financing in four countries, two of which had highly imperfect capital markets (India and Mexico), one of which had a relatively efficient capital market (the United States), and one of which made the transition from small. segmented. and concentrated capital markets to one which was characterized by a high degree of openness and efficiency by LDC standards (Brazil). In order to understand the efficiency consequences of capital market imperfections the paper develops four firm concentration ratios and Herfindahl indices of the cotton textile manufacture in all four countries.
    [Show full text]