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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.