Update to MA compilation method

I've updated the theoretical paper that discusses how MA - our Austrian measure of the money supply - is defined and identified. You can view it here. Here is the update chart (with series breaks shown in black dots):

Regular updates are available at the data section of our website.


Choose Your Own Financial Crisis

Following the 12th quarterly meeting of Kaleidic Economics, we have released a new report. The main aim of the meeting was to set out a chronology of the financial crisis, and we've suggested 5 distinct phases:

  1. The build up (2000 Q2 - 2007 Q1)
  2. The upper turning point (2007 Q2 - 2008 Q1)
  3. The secondary recession (2008 Q2 - 2009 Q4)
  4. Austerity (2010 Q1 - 2011 Q4)
  5. The BBQ recovery (2012 Q1 - 2012 Q4)

These aren't perfect, and the report offers a commentary. We then discussed a number of key shocks that occurred within these phases of the crisis, and put them in scenario analysis terms by thinking about predetermined elements and critical uncertainties. As a means to enliven the report, I have tried to explain how this type of analysis might serve as a basis for a "Choose Your Own Adventure" type account of the crisis. 

This is a brief report, because much of the discussion was focused on a utilisation of the Dynamic AD-AS model. That is now a first draft as part of this project, please email me for a copy.


2008/09 GDP revisions

Some Market Monetarists have been critical of the Bank of England for being so slow to cut interest rates through 2008. I wanted to look at the GDP figures that we had at the time, to see whether recent revisions are helping our hindsight. One of the difficulties with this is that the ONS only have GDP releases going back to 2009. I was able to track down the releases, and here's what we find:

This is for the quarterly growth rate of NGDP compared to the previous year (IHYO). The green columns are what we know as of May 2014 (based on the second estimate of Q1 2014). The blue column is the second estimate of 2008 Q2, released in August 2008. The red column is the second estimate of 2008 Q3, released in November 2008. So, the post Lehman collapse in NGDP is a lot more evident now, than it was at the time.

Ideally we would be looking at the preliminary estimate, but they don't seem to be available on the ONS website. an alternative (and I appreciate the suggestion from someone at the ONS) is to look at the GDP revisions triangles. If you're not analytically minded, like me, these can look quite intimidating. What I've done is focus on GDP q-on-q growth rates of real GDP (i.e. GDP at market prices, chained volume measure).

The striking thing is the major revisions that were published in the final estimates of 2011 Q2 (released in September 2011). These were then somewhat offeset by corrections for the 2008 figures in the final estimate of 2012 Q1 (released in June 2012), and for the 2009 figures in the final estimate of 2013 Q1 (released in June 2013).

The bottom line is that early estimates of the economy in 2008 understated the problem: 

Whilst early estimates of the economy in 2009 overstated the problem:

What really jumps out though, is the scale of the revisions to 2008 Q3 real GDP.


MA growth rate slows due to "improvement in reporting"

I am busy revising the paper that explains the theory behind MA, and have recently updated the measure. As the chart shows, the growth rate has tailed off significantly in recent months. 

The reason for the drop is a massive reduction UK resident MFI sterling sight deposits that occured in January 2014. Here's a closer look at that series:

The Bank of England have the following note:

Due to improvements in reporting at one institution, the amounts outstanding decreased by £85bn. This effect has been adjusted out of the flows for January 2014.

To show the impact of this "improvement in reporting" I've created MA' which adds £85bn from January 2014. As you can see this explains the sharp fall:

MA' remains in double digit growth. A downside of relatively narrow measures of the money supply is that they are less robust when it comes to these types of ad hoc adjustments. But clearly more details need to be revealed about he precise nature of this change.


FRED launches user dashboards

Here's more:

With the overhaul of user accounts, we are proud to introduce a new feature: dashboards. As a registered user, you can now build a personal dashboard that allows you to track your favorite series and graphs. You can publicize your dashboard, so your colleagues, students or blog readers can follow the economic statistics you care about. You can create several dashboards and choose to keep them private or make them public.