Monday, November 24, 2008

Read Your Mankiw


Robert Barro points out that there may be a current, sizable deflation risk premium, just as there was once an inflation-risk premium incorporated in the observed yields (although some thought that had since passed, with the ability to use products to manage inflation risks...).

Uncertainty about how best to use these expectational variables has kept me from updating the rates chart, for now. They are projecting maybe five years of deflation. [!]. It's possible that the structure of the TIPS offering has some technical impact, not just the liquidity.

Separately, perhaps one of the NIPA pros can explain why the price indexes for Q3 GDP were rising for line items like "Gasoline, fuel oil, and other energy goods" and how the consumption deflator seems... so large.

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