Saturday, June 6, 2015

Sumner is confused about Australia; I am not

Australia's Great Stagnation is a new post from Scott Sumner wherein he is "perplexed" that his frequently cited example of monetary offset at work has started to lag in NGDP growth. He estimates future RGDP growth to fall to roughly 2.5% on average, and lower inflation going forward. He compares it to Canada, which is actually a pretty good comparison in the information transfer model:


Australia is roughly where Canada is in its evolution as an economy and both are roughly where the US was in the mid 1990s. US RGDP growth at that time was about ... 2.5%:


And Canada has started to undershoot its inflation target recently.

The Great Stagnation non-story (i.e. cross-national trends towards lower inflation and lower NGDP growth as an entropic process with no microeconomic explanation) is holding up extraordinarily well!

2 comments:

  1. This post is consistent with those posts by physicists that find economics simply random data that sometimes has a pattern, obeys boundary conditions, or obeys some long term steady state solution. Popular with physicists but not so much with the social scientists called economists, who prefer an underlying 'story'. Reminds me of those headline stories on Marketwatch telling you why the stock market went up or down a particular day, sometimes the same headline will appear whether the market went up or down. Blog on dude!

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