Is inflation even lower than what we think?
As products disappear and replaced by better ones, inflation may be lower at these points than for surviving products. But statistical agencies fail to pick up this effect since they impute inflation for disappearing products from the inflation rate for surviving products. As a result, Aghion and al. argue, creative destruction leads to overstated inflation and understated growth.
Missing Growth from Creative Destruction
Authors: Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, Huiyu Li
From: Federal Reserve Bank of San Francisco
The role of core services inflation
Bhatnagar and al. find that the relationship between the output gap and inflation is more evident with core services inflation than core goods inflation: “In the core services models, the size of the output gap coefficients increases by about 40 per cent for the United States and 70 per cent for the euro area relative to the core
inflation models, and remains highly significant. In Japan, the coefficient on the output gap is not significant.”
Low Inflation in Advanced Economies: Facts and Drivers
Authors: Sanjana Bhatnagar, Anne-Katherine Cormier, Kristina Hess, Patrisha de Leon-Manlagnit, Elise Martin, Vikram Rai, Renaud St-Cyr, Subrata Sarker
From:Bank of Canada
Thinking outside the box!
“Inflation is hard” argues John Cochrane because we need a mechanism to fool people into thinking that a rise in all prices and wages is tantamount to a rise of everyone’s relative prices and wages.
How does inflation work anyway?
By: John Cochrane – Stanford University
