“The dollar will go down in value and inflation will start rearing its ugly head,”

So spake Donald J. Trump, September 13, 2012. Here’s what actually happened.

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Figure 1: Log real value of US dollar against broad basket of currencies, 2012M09=0 (blue, left scale), and year on year CPI-all inflation, % (red, right scale). Source: Federal Reserve Board, BLS and author’s calculations.

If it’s not obvious, these predictions did not come to pass. Hence, Trump is in the company of Representative Ryan, John Boehner, and Ron Paul, among others.

More on the Kansas-US Unemployment Rate Difference

Bruce Hall says changing dynamics in Kansas have meant that a simple average difference (what I’ve called a individual state fixed effect) in Kansas-US unemployment rates is misleading — or more succinctly put, “the average obfuscates the trend”. So, I allowed a time trend and a square in time trend, in a regression over the 1976-2010 period (data series start in 1976; Brownback takes power in 2011). The t-stats on both coefficients are highly significant. Here is a picture of actual Kansas-US difference and the quadratic trend.

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Figure 1: Kansas-US unemployment rate difference, in %, seasonally adjusted (blue), and quadratic fit (red), and 68% prediction interval (gray). NBER defined recession dates shaded gray. Out of sample period shaded green. Source: BLS, NBER, author’s calculations.

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