Author Archives: Menzie Chinn

Post-Brexit Out-of-Sample Forecasted Electricity Consumption

Take England+Wales log daily electricity consumption, detrend using Christiano-Fitzgerald band pass filter, and then regress on seasonal (calendar) terms, and temperature/wind/rain factors (Kirchmaier and de Guana de Santiago, 2016, h/t Simon Kennedy at Bloomberg), through April 2016. Then forecast out of sample; the residual looks like this:


Figure 3 from Kirchmaier and de Guana de Santiago, (2016).

Electricity consumption is way under what would be expected from historical correlations, suggesting a decline in economic — particularly industrial — activity.

While monthly estimates of November GDP are up 1.1% relative to June, industrial output is down by 1.2%, according to NIESR (Dec. 7).

It is always useful to keep in mind that economic statistics are sometimes revised by large amounts.

A Big MacParity Guide to Undervalued Currencies

China is not high on the list for “day one sanctions” if one were to look at this fast-food data.


Figure 1: Log relative dollar price of Big Mac against dollar price of US Big Mac (July 2016) versus log relative per capita income in PPP terms (2016 estimates); regression fit from quadratic specification (black dots), and 90% prediction interval (gray dots). Source: Economist, World Bank World Development Indicators, and author’s calculations. Data [XLSX]

Using the methodology outlined in this post, it’s clear that by the price criterion, Russia’s currency is much more undervalued (at 50% in log temrs) than China’s.

“The Future’s So Bright, I Gotta Wear Shades”

That’s what Governor Walker said today about Wisconsin’s economy, quoting from a 1980’s song. This was apparently spurred by DWD’s release “Wisconsin Employment Reaches All-Time High in November”. This statement is true, when referring to the relatively imprecisely measured household survey figures [1]. It is not true when referring the (more precisely measured) establishment series.

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