A dominant class of economic theories is built on the assumption that prices respond only sluggishly to new economic conditions. It’s an interesting challenge to try to reconcile that premise with what we see in the data.
Category Archives: inflation
Consumers see bad news
The Reuters-Michigan survey of consumer sentiment registered a decline from 77.5 in February to a preliminary reading of 68.2 in March. That’s the biggest monthly decline since the financial crisis in October 2008, and wipes out the nice gains of the last four months to put us back where we were in October 2010.
New indications of inflation
Where are the inflationary pressures?
Money and reserves
I wanted to offer some clarification on stories about all the money that the Federal Reserve is supposedly printing. It depends, I guess, on your definition of “money.” And your definition of “printing.”
Core, and More, Near Zero
David Leonhardt had an interesting post noting how low core inflation had been, in historical context. In fact, many measures of inflation are at very low levels, indeed close to zero.
The Fed’s new policy tools
We had to throw out our textbook descriptions of how monetary policy is implemented after the fall of 2008, as the Fed turned from its traditional tools to active use of large-scale asset purchases. A number of studies have now been conducted of the potential efficacy of these new policy tools. I surveyed some of the new studies last October. Today I’d like to discuss three new papers that have come out since then.
Changes in the yield curve
The bond market sees an improving economy.
Velocity of money
I wanted to follow up on Menzie’s recent observations about what’s been happening to the supply and demand for money.
The Correlation between Money Base Growth and Inflation
I’ve been reading through undergraduate textbooks, trying to figure out where the idea that money base expansion must necessarily manifest itself in higher inflation. In Stephen Williamson‘s macro textbook, he argues that fears of inflation are motivated by the view that eventually, money base expansion will feed into money expansion (box on pp. 432), despite the fact that there is no obvious contemporaneous correlation between the two variables.