Reader JohnH asserts pgl makes up crazy output gaps. My search of Economists View turns up this 2017 exchange. I don’t see a “crazy” assertion by pgl (certainly not as crazy as the Friedman view of a -18% gap), even if it was in disagreement with CBO’s assessment (and Furman’s) at the time, that the economy was near full employment.
Monthly Archives: September 2023
What’s the Output Gap? – 2023 Edition
One argument for maintaining tight monetary policy is inflationary pressures — but the question is whether it’s from a positive output gap or cost-push shocks (or expectations). One big question is what is the size of the output gap.
Business Cycle Indicators, as of 9/1
With the employment release, and the monthly GDP from SPGMI, we have the following picture of key macro indicators.
The Employment Release, News, and Futures-Implied Fed Funds
NFP employment at 187K (vs. Bloomberg consensus 170K), while average hourly earnings y/y up 4.3% (vs. consensus 4.4%). Combined with to June figures and preliminary benchmark revision, we have a picture of a cooler labor market.
Quantity Theory/Divisia – PaleoKeynesian Phillips Curve Horse Race
Does an error correction model of the Divisia M4 quantity theory or a old style expectations and supply shock augmented Phillips curve fit the post 2019 period better (using 1998-2019 data)? Answer: The Phillips curve works better.