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NGDP + real growth, CA Surplus

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real growth, inflation, money growth, NGDP


CA account, trade, exchange rates

Published in: Business, Economy & Finance
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NGDP + real growth, CA Surplus

  1. 1. NGDP targeting is - just inducing inflation, and - does nothing for REAL growth - diminishes the savings of older, poor and middle class savers Country Money RGDP Inflation NGDP Time growth growth growth period Brazil 77.4% 5.6% 77.8% 83.4% 1963-90 Argentina 72.8% 2.1% 76.0% 78.1% 1952-90 Chile 47.3% 3.1% 42.2% 45.3% 1960-90 Israel 31.0% 6.7% 29.4% 36.1% 1950-90 Korea 22.1% 7.6% 12.8% 20.4% 1953-90 Iceland 18.4% 4.3% 18.8% 23.1% 1950-90 Portugal 11.5% 4.7% 9.9% 14.6% 1953-86 Britain 6.4% 2.4% 6.5% 8.9% 1951-90 U.S. 5.7% 3.1% 4.2% 7.3% 1950-90 Switzerland 4.6% 3.1% 3.2% 6.3% 1950-90Robert Barro data, cited byScott Sumner 3-Apr-2012 in:http://www.themoneyillusion.com/?p=13774
  2. 2. Growing the money base does NOTHING for REAL growth Robert Barro data, cited by Scott Sumner 3-Apr-2012 in: failure of NGDP targeting http://www.themoneyillusion.com/?p=13774 8% data series for the 1950ties - 1990 7% 6% 5%RGDP growth 4% Nothing ! 3% y = 0.003x + 0.0418 2% R2 = 0.0019 Series1 1% Linear (Series1) 0% 0% 20% 40% 60% 80% 100% Money growth
  3. 3. Expanding money base just induces inflationa.k.a. stealing from the older, and poor to middle class savers Robert Barro data, cited by Scott Sumner 3-Apr-2012 in: failure of NGDP targeting http://www.themoneyillusion.com/?p=13774 90% 80% data series for the 1950ties - 1990 Expanding the money base 70% translates 1:1 60% into Inflation in the long runInflation 50% 40% 30% 20% y = 1.0342x - 0.0266 Series1 10% R2 = 0.9866 Linear (Series1) 0% 0% 20% 40% 60% 80% 100% Money growth
  4. 4. Looks like a MINUS to mehttp://www.themoneyillusion.com/?p=13760“Germany has finally surpassed China, and now has the world’slargest current account surplus; $202.9 billion according toThe Economist. But the US has an even more impressiveachievement; the world’s largest capital account surplus;and astounding $473.4 billion. Germany may producenice cars, but no one can beat our assets.” Looks like a PLUS to meWhat that really means,is a very different question,see e.g. Barry Eichengreen“Dark matter” !!“The Economist” data ontrade, output etc.http://www.economist.com/markets-datalatest (4/3/2012) trade data:http://www.economist.com/node/21551521
  5. 5. Long term currency / trade and currency accounts mid / long term developments can be predictedLong term:For mature countries are models: PPP, GSDEER, etc.For emerging countries are models, too: Balassa-Samuelson, GS BRIC Nr. 99, etc. Professional, non-academic models are better, of course : - )Mid term:Certain Currencies follow rather simple, models: Singapore, Malaysia, mainland ChinaOther currencies follow not so simple models: India, BrazilSome (old and hard to understand) illustration of trade / FX rate modeling: http://www.slideshare.net/genauer/currencies

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