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.
Author Archives: Menzie Chinn
Defense Equipment Investment and Depreciation
Reader JohnH asks “is there a net US GDP forecast that includes the depreciation of defense capital?”. For what I think is being asked (commonly known as NDP, or net domestic product), the answer is de facto yes.
Velocity, 1967-2023Q2
The variability of velocity calculated using divisia money indices is not necessarily lower than that using a conventional monetary aggregate, i.e., M2.
Business Cycle Indicators for July
With personal income, consumption, and manufacturing and trade industry sales released, no downturn yet. If consensus holds, the momentum continues into August. Here are some key indicators followed by the NBER BCDC, along with monthly GDP and GDPNow.
Private Nonfarm Payroll Employment – Three Measures
So far, slowing employment growth.
The Ecological Monetarism QED
Reader Econned asks me for a critique of ecological monetarism. I don’t have one overall assessment, but I will say that I do not understand (1) how Cameron Harwick came up with the conclusion that the case for ecological monetarism was proven by inflation outcomes, and relatedly (2) how the below graph was constructed, which I believe is the basis for that conclusion.
GDO, revised GDP for Q2
While GDP is revised down, GDO matches my guess from last month.
The 2022H1 Recession Call in Hindsight, the 2023H2 Call in Context
Back at the beginning of this year, Mr. Steven Kopits asserted that the Philadelphia Fed’s early preliminary benchmark supported a recession in 2022H1, to wit:
2.5% Russian GDP Growth in 2023: Finance Minister
That’s from a Reuters report a few days ago. I think it’s important to (1) keep in mind what forecasters are saying, and (2) what GDP ex-military spending looks like.
Blue line (pink line) in Figure 1 below shows the IMF July (OECD June) GDP forecasts.
“The Problems with China’s Economy…”
The real challenge is for the government to explicitly recognize that without a strong relationship with its private sector, its hopes of transforming the economy into a high-tech one capable of generating more productivity and employment growth are unrealistic. It needs to back this recognition up with concrete measures to support the private sector, including financial-sector liberalization that will help direct more resources to private businesses rather than state-owned ones. Transparency about information and about its policymaking process will help the government a lot more.