Sunday, September 17, 2006

Another Problem with the Anti-Core Argument

Following up on my previous post, I want to make an empirical point about Caroline Baum’s argument. She argues that a long lag cannot explain the failure of non-oil prices to adjust downward in the face of rising oil prices:
You might counter by saying that the price of something else will fall with a lag, not simultaneously; that when gas prices go up the consumer doesn't immediately cut back on his non-oil purchases.

Let's go to the video tape. The consumer price index was running at about 2 percent year-over-year during the deflation scare in the middle of 2003. Crude oil prices were hovering near $30 a barrel.

Three years later, with crude oil prices hitting a record $78.40 in July, the CPI was rising 4.1 percent. In all that time, the price of something else should have fallen to offset the higher oil prices. The fact that it didn't means our friendly central bank was accommodating the oil-price increase, printing enough money to prevent that from happening.
But there’s a problem here (beyond the theoretical problems mentioned in my previous post). First of all, nobody disputes that the Fed was accommodating the oil price increases in 2003 and 2004. So it shouldn’t surprise anyone that non-oil prices failed to adjust during 2005 and the first half of 2006. At the time (2003 and 2004), the Fed had legitimate concerns about a soft economy, but the economy subsequently proved to be stronger than the Fed had feared. It turned out that the intentional easy money policy of 2002 and 2003 had been successful.

As 2005 went on, however, the Fed stopped accommodating the oil price increases, and in 2006, the Fed has even started pushing the other way. This is where the lag comes in. Because there really is a lag in the behavior of consumers, we won’t know until 2007 (or maybe even 2008) whether the oil price increases (which continued through 2005 and the first half of 2006) have reduced demand in the rest of the economy, as Ms. Baum would expect if the Fed were behaving itself. My guess is that, when all the votes are in, we will find that inflation has lost and that the Fed was right to ignore the direct effect of oil prices.

Labels: , , ,

11 Comments:

Blogger Gabriel Mihalache said...

Why do you mean by "we will find that inflation has lost and that the Fed was right to ignore the direct effect of oil prices"?

By "central bank was accommodating" do you mean to say that the Fed lowered rates and loosened the money supply to allow aggregate demand to expand to close the output gap opened by the shock, therefore permanently (for the time being, at least) rising inflation?

P.S. Thanks for the insightful comment on my site. I'm still chewing on it.

Mon Sep 18, 04:31:00 AM EDT  
Blogger knzn said...

To your first question, I mean that the inflation rate will decline again, which will justify the Fed’s tendency (particularly over the past year or so) to focus on the core inflation rate rather than the headline inflation rate. (Presumably, the Fed would have tightened more aggressively recently if they were focusing on headline inflation, and I suspect that would have ended up causing an unnecessarily severe recession and perhaps ultimately reviving earlier deflation fears.)

To the second question, in 2003 and 2004, I don’t think the Fed was reacting to the effects of the oil shock by easing. (They certainly didn’t cut interest rates after the oil shock became apparent.) There was an output gap before the oil shock hit, and, if the oil shock had not happened, the Fed might have continued its ultra-easy policy for even longer than it actually did. When I say “accommodating the oil price increases,” I just mean the Fed was continuing an accommodative policy in the face of oil price increases. The policy was premised on a larger output gap than what subsequently became apparent. The policy turned out to be inflationary, but the reason was not that the Fed was reacting to the oil shock by easing, but rather that the Fed’s forecast was wrong to begin with.

(At least that’s my story for now, but I’m not sure I’ll be sticking to it. I actually think we have continued to have an output gap all along, and I have to tell a more complicated story involving the interaction of lags and the fact that oil has repeatedly turned out to be scarcer than expected. Ultimately, I’ll fall back on the theoretical arguments in my previous post.)

Mon Sep 18, 09:57:00 AM EDT  
Blogger kharris said...

Read enough of Baum's stuff, and you'll get a feel for her style -- simplistic notions, strongly asserted. I wouldn't mind, but she often sprinkles in a good bit of disdain for anybody who takes views that differ with hers. It's no surprise that her grasp of this argument, which has been around for some time, is not strong.

Mon Sep 18, 12:52:00 PM EDT  
Anonymous Anonymous said...

knzn, Why don´t you comment on your guessing candidates as far as Nobel Prize in Economics (2006) is concerned? You holds a PhD in economics.
Thanks

Wed Sep 20, 04:55:00 PM EDT  
Anonymous Anonymous said...

豆豆聊天室 aio交友愛情館 2008真情寫真 2009真情寫真 aa片免費看 捷克論壇 微風論壇 大眾論壇 plus論壇 080視訊聊天室 情色視訊交友90739 美女交友-成人聊天室 色情小說 做愛成人圖片區 豆豆色情聊天室 080豆豆聊天室 小辣妹影音交友網 台中情人聊天室 桃園星願聊天室 高雄網友聊天室 新中台灣聊天室 中部網友聊天室 嘉義之光聊天室 基隆海岸聊天室 中壢網友聊天室 南台灣聊天室 南部聊坊聊天室 台南不夜城聊天室 南部網友聊天室 屏東網友聊天室 台南網友聊天室 屏東聊坊聊天室 雲林網友聊天室 大學生BBS聊天室 網路學院聊天室 屏東夜語聊天室 孤男寡女聊天室 一網情深聊天室 心靈饗宴聊天室 流星花園聊天室 食色男女色情聊天室 真愛宣言交友聊天室 情人皇朝聊天室 上班族成人聊天室 上班族f1影音視訊聊天室 哈雷視訊聊天室 080影音視訊聊天室 38不夜城聊天室 援交聊天室080 080哈啦聊天室 台北已婚聊天室 已婚廣場聊天室 夢幻家族聊天室 摸摸扣扣同學會聊天室 520情色聊天室 QQ成人交友聊天室 免費視訊網愛聊天室 愛情公寓免費聊天室 拉子性愛聊天室 柔情網友聊天室 哈啦影音交友網 哈啦影音視訊聊天室 櫻井莉亞三點全露寫真集 123上班族聊天室 尋夢園上班族聊天室 成人聊天室上班族 080上班族聊天室 6k聊天室 粉紅豆豆聊天室 080豆豆聊天網 新豆豆聊天室 080聊天室 免費音樂試聽 流行音樂試聽 免費aa片試看A片 免費a長片線上看 色情貼影片 免費a長片 本土成人貼圖站 大台灣情色網 台灣男人幫論壇 A圖網 嘟嘟成人電影網 火辣春夢貼圖網 情色貼圖俱樂部 台灣成人電影 絲襪美腿樂園 18美女貼圖區 柔情聊天網 707網愛聊天室聯盟 台北69色情貼圖區 38女孩情色網 台灣映像館 波波成人情色網站 美女成人貼圖區 無碼貼圖力量 色妹妹性愛貼圖區 日本女優貼圖網 日本美少女貼圖區 亞洲風暴情色貼圖網 哈啦聊天室 美少女自拍貼圖 辣妹成人情色網 台北女孩情色網 辣手貼圖情色網 AV無碼女優影片 男女情色寫真貼圖 a片天使俱樂部 萍水相逢遊戲區 平水相逢遊戲區 免費視訊交友90739 免費視訊聊天 辣妹視訊 - 影音聊天網 080視訊聊天室 日本美女肛交 美女工廠貼圖區 百分百貼圖區 亞洲成人電影情色網 台灣本土自拍貼圖網 麻辣貼圖情色網 好色客成人圖片貼圖區 711成人AV貼圖區 台灣美女貼圖區 筱萱成人論壇 咪咪情色貼圖區 momokoko同學會視訊 kk272視訊 情色文學小站 成人情色貼圖區 嘟嘟成人網 嘟嘟情人色網 - 貼圖區 免費色情a片下載 台灣情色論壇 成人影片分享 免費視訊聊天區 微風 成人 論壇 kiss文學區 taiwankiss文學區

Wed Apr 01, 07:57:00 AM EDT  
Anonymous Anonymous said...

福~
「朵
語‧,最一件事,就。好,你西.............................................................................................................
..................

Wed Apr 01, 10:46:00 AM EDT  
Blogger . said...

酒店喝酒,禮服店,酒店小姐,酒店領檯,便服店,鋼琴酒吧,酒店兼職,酒店兼差,酒店打工,伴唱小姐,暑假打工,酒店上班,酒店兼職,ktv酒店,酒店,酒店公關,酒店兼差,酒店上班,酒店打工,禮服酒店,禮服店,酒店小姐,酒店兼差,暑假打工,酒店經紀,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,台北酒店,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,寒假打工,酒店小姐,禮服店 ,酒店小姐,酒店經紀,酒店兼差,暑假打工,酒店小姐,酒店傳播,酒店經紀人,酒店,酒店,酒店,酒店 ,禮服店 , 酒店小姐,酒店經紀,酒店兼差,暑假打工,招待所,酒店小姐,酒店兼差,寒假打工,酒店上班,暑假打工,酒店公關,酒店兼職,禮服店 , 酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工,酒店,酒店,酒店經紀,酒店領檯 ,禮服店 ,酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工, 酒店上班,禮服店 ,酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工, 酒店上班,禮服店 ,酒店小姐 ,酒店經紀 ,酒店兼差,暑假打工, 酒店上班,酒店經紀,酒店經紀,酒店經紀

Tue Apr 21, 07:02:00 PM EDT  
Blogger wow power leveling said...

Faint hint of the love of friendship

Faint hint of the love of friendship. There is a friend, I think that is a cheap wow gold kind of love and friendship between the feelings between, you will occasionally miss a time to silence him, reminds him, the warm heart, a beautiful, a moving. Sad and worried at the time, you will think of him, you hope that he can in your side, give you comfort and buy wow power leveling understanding to you, and you never talk to him, are you afraid of their own grief that would preclude him from peaceful life.

You will be a song, a color, think of him, think of my wow gold his sincerity, he reminds me of the dedication, his mind had gone through the ups and downs together. With such a friend, you will treasure their lives and love their own lives, because you know I hope you had a good, he would like you to take care of themselves properly, and then to meet, he cheapest wow power leveling would like you to tell him you very happy.

That the concept of secularism, in your mind, because his replica replica rolex presence has become pale and weak, you are only in the depths of the bottom of my heart for this man set up a small space, stick with that quietly happy memories, from the the very beginning you know that you will not have any love, it seems that talk about love on the desecration CHEAP wow power level of this emotion, this can only be a friendship. This is how in the end all about? You want to for many years, but no clue.

You seldom have contacts in this long life, you meet the door may be only a few of the ten thousandth time, but in each other's hearts retain a miss, one asked, even if he went to the ends of the earth, even after many, many years, even BUY power leveling when the meet again, has long been a non-object is not, you still remember back as a profound, and this has been sufficient.

Sometimes life will calm a dry, maybe you will fall into the dry I replica rolex replica did this, perhaps what you do not have love, perhaps early HUAFA, full sideburns pale, but with such a friend, in the your life will ripple slightly, a little color, do you think of him. He remembered the quiet, perhaps the Health and cheap lotro gold the WHO will not forget.

Am grateful for you in this world, there is such a person, he is replica rolex not around you, he did not do anything for you, but you hope that he would have been very good, long life, happiness well-being ... ...

Am glad you had a feeling like that, pure and long, in this complex CHEAPEST power leveling world, there are such a friend, it is worth to cheap rs gold lbless you to miss ... ...

Wed Jun 10, 12:32:00 AM EDT  
Anonymous Anonymous said...

クレジットカード 現金化
会社設立
キャッシング
ダンボール
アダルトDVD
水 通販
アルカリイオン水

Mon Jul 13, 12:39:00 AM EDT  
Anonymous Anonymous said...

コンタクトレンズ
国内格安航空券
おまとめローン
留学
インプラント
CloneDVD

Mon Jul 13, 12:39:00 AM EDT  
Anonymous Anonymous said...

壯陽藥

樂威壯

樂威壯

壯陽藥

樂威壯怎麼使用才正確

樂威壯

壯陽藥

壯陽藥品

樂威壯levitra

levitra樂威壯

樂威壯哪裡買

樂威壯哪裡買

威而鋼

壯陽藥
樂威壯

樂威壯

春藥
早洩治療
壯陽藥

Mon Feb 17, 01:39:00 AM EST  

Post a Comment

Links to this post:

Create a Link

<< Home