ec4024: stagflation and international bong markets

Lecture 16

Stagflation

'I don't think we are anywhere near the situation that prevailed in the 1970's.'— Fed Chairman Ben

Bernanke

Stagflation

A stagflationary economy experiences a slowing of growthcombined with rising inflation. Episodes of stagflation occurred inthe world economy in the late 1970’s and early 1980’s.

Data

Sept 18! CPI (consumer price index) 2.3%! PPI (producer price index) 2.3%! PCE (personal consumption expenditure)

deflator 2.5%! Gold $714

Oct 31! CPI 3.5%! PPI 6.1%! PCE deflator 3.0%! Gold $790

Dec 11! CPI 4.1%! PPI 6.3%! PCE deflator 3.6%! Gold $811

Jan 22! CPI 4.3%! PPI 7.4%! PCE deflator 3.7%! Gold $893

Jan 30! CPI 4.3%! PPI 7.4%! PCE deflator 3.7%! Gold $921

Mar 18! CPI 4.0%! PPI 6.4%! PCE deflator 3.7%! Gold $1004

Real GDP Growth for the US Economy, current andforecasted

Figure: Real GDP Growth for the US Economy, current and forecasted.

Industrial Production for the US Economy, current andforecasted.

Figure: Industrial Production for the US Economy, current andforecasted.

Historical CPI, trends to date.

Figure: Historical CPI, trends to date.

Recent US CPI data, current and forecasted.

Figure: Recent US CPI data, current and forecasted.

Recent US Unemployment.

Figure: Recent US Unemployment.

Inflation Indexed US Treasury Yields

Models of Stagflation

Mathematica

Next Time

Options. Read Pilbeam, chapters 14 and 15.