This is the Fed research piece Paul Krugman was referring to this morning


Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

One Response to “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy”

  1. wisegrowth says:

    People will slowly wake up to the fact that potential real GDP is much lower than they think. I have been saying all year that this is case using a simpler model.

    Statisticians now have years of data since the crisis to determine the true potential real GDP. I use a model that does not rely on years of data to crunch the knowledge. The model shows quickly in real time that potential real GDP started falling drastically during the crisis. And is back on a normal and stable but lower path.
    What they find in the paper above has been readily visible with s simpler model that does not rely on statistical analysis of data. The equation to determine potential real GDP is based on labor share for demand constraint, and the utilization rate of capital for supply dynamics.

    Potential real GDP = real GDP – biz cycle amplitude constant * (capital utilization/effective labor share – 1)