'Stagnation: Noise vs Signal'
Chris Dillow:
Stagnation: noise vs signal: A commenter on my previous post invites me to bet on the idea that economic growth is slowing. I'm going to decline the offer. This isn't (just) because I'm an empty blowhard: I was only raising the possibility of slower growth. Nor is it just because I'm risk-averse: in being scarred by memories of the early 80s recession, I am one of Malmendier and Nagel's Depression Babies (pdf).
Instead, I reject the bet because facts might not suffice to prove or disprove the secular stagnation hypothesis.
Even over a period as long as ten years - to take Matt's suggested time period - average GDP growth will be due in part to luck as well as to fundamental forces. ...
We can quantify this luck by measuring the standard error... Over a ten year period, the standard error is 0.7 percentage points. Our 1.5% growth might therefore mean simply that true growth was the same between 2014 and 2024 as it was between 1973 and 2013 and that we got unlucky, in drawing more bad years than good out of the hat. Or it might mean that there really has been secular stagnation and the growth rate has halved...
We can't tell for sure. ...
Posted by Mark Thoma on Tuesday, November 4, 2014 at 07:57 AM in Economics |
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