Inflation 議題 ( 來自 Brookings institution 討論)

原文連接

I find that a scary comparison. The figure below shows why. It plots the core inflation rate (in red) and the real policy interest rate (in blue), constructed as the federal funds rate minus core inflation over the previous 12 months. (The results would be even more striking if I had used headline inflation, but, for the usual reasons, we want a series that removes, at least in part, the transitory components of inflation.)

First, the figure shows how little action there was in either inflation or the real policy rate relative to the 1970s episode and today. The other episodes identified by Blinder are hardly visible. This leads me to think that the only potentially valid comparison (with all the caveats listed below) is between the 1975–83 episode and the current one.

 

Second, it shows what happened when the Fed got seriously "behind the curve" in 1974–75. The real rate and inflation moved in opposite directions, very much like today. Look at the two green ellipses. In early 1975, core inflation was running at 12 percent and the real policy rate was equal to about −6 percent, a gap of about 17 percent. Today, core inflation is running at 6 percent and the real policy rate is equal to −6 percent, a gap of 12 percent—smaller than in 1975, but still strikingly large (had I used core personal consumption expenditures [PCE] instead of core consumer price index [CPI], the two numbers would be 14 percent and 10 percent, respectively). It then took 8 years, from 1975 to 1983, to reduce inflation to 4 percent, with an increase in the real rate from bottom to peak of close to 1,300 basis points, and a peak increase in the unemployment rate of 600 basis points from the early 1970s.[1]

Real interest rate -6%, 仍然負利率, 代表什麼意思呢! 錢存在銀行還得付銀行利息錢, 持有貨幣的機會成本大增, 很多人(包括有錢人) 根本不會把錢存在銀行, 會往股票, 房地產, 大宗物資去投

哪邊價格高了, 就先泡沫化 

 

Today is obviously different in many ways.

 As for the Fed, Arthur Burns did not feel he had a mandate to execute a hard landing and William Miller did not have much time to act. 

當年2位Fed主席 , 第一位Burns不認為有必要升息讓經濟硬著陸, 而另一位Miller 根本沒時間去挽救失控通膨

Even so, together, they still had increased the real policy rate from −6 percent to about 0 percent when Paul Volcker took over. And it took Volcker another 7 percent real rate increase to finish the job and get inflation down to 4 percent by 1983. Today's Fed is more independent and is likely to react faster. ( 這是一定的, 美國人再豬腦, 也不會笨到讓1970s happened again, 尤其Fed 這些人不是idiot)

 

In the 1970s, persistent inflation led long-run inflation expectations to become increasingly deanchored. They have not yet done so today. The Fed has a record of low inflation for nearly 40 years for which it can justifiably take credit, something the 1970s Fed just did not have. The broader economic context is also different, but perhaps less than some assume. In the 1970s, the situation was complicated by two major energy price shocks. But today we might be in for a similar experience: The COVID-19 recovery already increased oil prices substantially, and the war in Ukraine could lead to a further major increase. Energy, however, plays a smaller role in production and consumption today than it did then, and this is good news.

 

What else that is relevant is truly different? Is it reasonable to think that a 200-basis-point increase in the policy rate, so only 1/6 of the rate increase from 1975 to 1981, will do the job this time when the gap between core inflation and the policy rate is 2/3 of what it was in 1975? And that unemployment will barely budge? I wish I could believe it. 原文提到policy rate 升200基點, 只是1975時期的 1/6, 它這邊 policy rate 指的是Fed基準利率扣掉通膨率

Real policy interest rate (in blue), constructed as the federal funds rate minus core inflation over the previous 12 months.

這邊提到2/3 意思指目前core inflation 和 policy rate 差距只有1975當時2/3 ( 目前差12% ,  1975年差距18%)

我上Macrotrend查一下, 從1975 ~1983這段期間Fed升息至少1,500 基點(15%, 60碼, 1碼 = 0.25%), 所以最近聯準會鷹派升息2碼(200基點) 大約只是1975那段升息幅度的1/30, 近期不錯的就業數字能抵銷通膨壓力嗎 !? 

題外話 : 別誤想 就業情況好會推升通膨是壞消息, 假如失業率高 通膨絕對更糟 .....

 

Historical comparisons are only suggestive. In their analysis, Reifschneider and Wilcox rightly focus on the specific mechanisms underlying inflation and on the specific shocks likely to affect the US economy in the coming years. One can thus potentially disagree with them on two grounds: a different view of the mechanisms determining inflation, and different forecasts of shocks.

PUTTING THINGS TOGETHER 

Suppose there is no catchup, expectations remain anchored, and the Phillips curve remains flat (當前學術界公認事實, 通膨-失業率抵換效果漸漸消失). Then, putting the wage and the price equations together gives:

 Δp = Δp* − a(u − u*) + Δx

This delivers an optimistic message: Ignoring the unemployment gap, and assuming that Δx is either close to zero or negative, implies that inflation this year will be equal to or possibly even lower than target inflation. And even if unemployment continues to be lower than the natural rate (i.e., there is a negative unemployment gap), the coefficient a is small, and so this barely has an effect on inflation. Thus, we can expect inflation to return to target on its own; there is no need for a large increase in policy rates by the Fed. 

先不要管低失業率會推升通膨的隱憂, 學術界漸漸否認這次發生的可能性

But make the opposite set of assumptions—that there will be catchup指工資上漲率 and that expectations become fully deanchored—and the effect of unemployment on inflation is larger than in the recent past. Then putting the wage and price equations together gives:

 Δp = Δp(−1) − a(u − u*) + x

The message is much less optimistic. It says that, even absent shocks and ignoring the unemployment gap, inflation will remain the same as last year. Furthermore, unless x completely reverses itself, the positive value of x will lead to higher inflation. And, if there is indeed a negative unemployment gap and the slope of the Phillips curve is large, this will further fuel inflation. There is then no question that a strong monetary contraction will be needed.

假如做一個相反假設, 工資的確猛漲, 通膨預期一直逐年遞增
Phillips curve 很陡峭 (失業率明顯會推升通膨), 那Fed強烈升息就有必要

Which of these two views is closer to the truth? Reifschneider and Wilcox argue that the empirical evidence, based on data going back a few decades, mostly supports no catchup, anchored expectations, and a flat Phillips curve. And they are on solid empirical ground with that as a characterization of the past: There is little evidence of catchup in recent decades, measures of long-run expectations remain anchored (short-run inflation expectations have started increasing, though), and the estimated Phillips curve is indeed very flat.  

直接簡單一句 😆 這群Top 經濟學家說 實證數據顯示這次通膨不會像上次1970s ( 台灣 Izzax 也半年前也出過類似論調 )

但故事還沒結束, 請看下面這一段更重要SALIENCE 敘述 👇👇

 

SALIENCE ( 重要且明顯的)

The issue, however, is how much the past few decades, characterized by stable inflation and nothing like COVID-19 or war shocks, are a reliable guide to the future. There are good reasons to doubt it. What I believe is central here is salience: When movements in prices are limited, when nominal wages rarely lag substantially behind prices, people may not focus on catching up and may not take variations in inflation into account. But when inflation is suddenly much higher, both issues become salient, and workers and firms start paying attention and caring. I find the notion that workers will want to be compensated for the loss of real wages last year, and may be able to obtain such wage increases in a very tight labor market, highly plausible, and I read some of the movement in wages as reflecting such catchup. 意思是萬一商品價格短期間大幅增長, 引起一般民眾和企業主的注意, 對於通膨預期和 潛在工資調升的心理壓力, 會造成通膨惡化的潛在因子

 

We know from history that inflation expectations can deanchor fast. It is fascinating to read what happened in the 1970s through the series of Brookings papers written by Robert Gordon (1970, 1977) (we should all reread these papers, to be reminded that these discussions are not new and we are sometimes reinventing the wheel). 我們知道歷史上 通膨預期會在短期間失控飆上來

 

In his 1970 paper, Gordon found that λ was about 0.6, rejecting the accelerationist hypothesis (defined as λ = 1.0), a conclusion strongly endorsed by the participants at the Brookings meeting. By 1977, all his estimates were equal to 1. True, it took seven years for the coefficient to reach 1, and this was in an environment of higher inflation and a less credible central bank than today. But with much wider and faster diffusion of information, I can see expectations adjusting more quickly now than then. 作者blanchard 認為這次通膨狀況和民眾對於Fed信任度都比1970s 還要良性, 而且經濟體內訊息傳遞 ( 訊息不對稱) 速度效率比上次好

 

In that respect, I am puzzled by one of the Reifschneider-Wilcox findings that short-run inflation expectations do not appear to help predict inflation. This matters because, in contrast to long-run expectations, short-run expectations, as Reifschneider and Wilcox indicate, have partly deanchored. I would have thought that in setting wages for this year, whether unilaterally or through bargaining, the relevant variable in the mind of workers and firms would be short-run inflation. Again, the explanation may be lack of salience. When inflation is stable, workers and firms may just not think about it and go with their stable long-run inflation expectations. In the current environment of high inflation, I would expect them to be much more aware and make wage demands based on short-run inflation expectations.

 意思指只要一般平民和公司老闆把注意力放在短期通膨, 而不是長期通膨, 就能防止通膨惡化下去

Finally, I also find it plausible that an exceptionally tight labor market may have a larger effect on wages than suggested by the empirical estimate of a. This is discussed in a parallel blog post by my colleague Joseph Gagnon (2022), based on earlier work with Christopher Collins (2019). His estimate is that, when the unemployment gap is negative, a 1 percentage point decrease in the unemployment rate increases inflation (other things equal) by 0.6 percent, about 8 times the coefficient estimated by Reifschneider and Wilcox. Based on this estimate, an unemployment gap of −2 percent might add 1.2 percent to inflation, not a negligible contribution.

 

To conclude, Reifschneider and Wilcox have done a great service in stating their assumptions about specification and forecasts. If the world had not changed, I would accept their conclusions. There are good reasons, however, to think that the Phillips curve will, as it has done many times in the past, shift, and that the landing will be harder than Reifschneider and Wilcox conclude. Part of the inflation will indeed go away on its own, but the Fed may have to increase interest rates by more than 200 basis points to get back to its target. In that respect, I think it is wrong to think in terms of a "terminal rate," as financial investors and commentators do. Unless one thinks that all that will be needed is a monotone adjustment of the policy rate to the long-run neutral rate and no more, it makes little sense to talk about a terminal rate. The adjustment is likely to have a bump, with the policy rate staying above the neutral rate until inflation is under control and the rate returns to the long-run neutral rate.

Anchoring of Inflation Expectations

This is a familiar debate, and anchoring plays a major role in the Reifschneider-Wilcox discussion. We can think of workers, or more generally wage setters (workers and firms if we think of wages as determined by bargaining), as forming expectations of the price level this year according to:

 Δpe = (1 − λ) Δp* + λ Δp(−1)

 where Δp* is a constant, perhaps the target inflation rate announced by the Fed, and λ = 0 corresponds to fully anchored expectations. Whatever happened to inflation in the past, wages are set on the basis of a constant expected rate of inflation. λ = 1 corresponds to fully deanchored expectations, so expected inflation this year reflects actual inflation last year. The more expectations are deanchored, the more inflation last year will affect inflation this year.