Today I’ve
listened to Merrill Lynch (better known as Mario Lanches) US scenario. Growth
will be strong (just consensus) and inflation will be low (interesting). They
believe there is large output gap, large labor idle capacity. Main data to
support their view is “part time workers for economic reasons”, it seems.
Since they were too lazy to do it, I got the
data, divided by the labor force and plotted against change in inflation. (I’ve
also changed sign and multiplied by the Okun coefficient, to be comparable to
an output gap). The result stinks. The measure loses big time against my DSGE outputgap in a Phillips competition.
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