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Krugman on core inflation (flexible vs sticky prices)

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Imperialism Inc. Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jan-31-11 03:43 PM
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Krugman on core inflation (flexible vs sticky prices)
I read Krugman's blog most days. One constant is the number of people questioning whether or not using core inflation, which doesn't include food and energy, is appropriate. The charge is usually that it only looks like there is disinflation (positive but shrinking inflation rates) because he is using the wrong measure. His position has always been that if you want to know which direction the economy is moving, to decide on policy, you want to look at core inflation. Food and energy and many other prices fluctuate wildly and you can't make monetary or fiscal policy based on numbers like that. The other charge against him is people saying it only looks like disinflation because of housing that is included in the core CPI. Well, he has discovered a source of data at the Atlanta fed to address the issues. This should really be the end of the debate (though of course it won't be). The numbers are quite clear. Food and energy just fluctuate too wildly to base any policy on. It isn't that they don't effect people just that we don't want to use them for policy decisions. It is also quite clear the disinflation is not merely due to housing. I'll posts the graphs. Go to the link for the text.



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Imperialism Inc. Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jan-31-11 04:22 PM
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1. I don't usually pay a whole of attention to rec and unrecs but...
At one point this had a +1. That is just bizarre to me. What possible reason would someone have to vote something like this down. Afraid data will get in the way of spreading FUD?
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