The chained PPP might be doing exactly what it’s meant to do. Chained and current (blue) series might just indicate that Europe and US are tracking each other, ICT raises productive on both sides, and Balassa-Samuelson is small until the Biden stimulus, which is plausible:
13/
The Mississippi versus UK thing is funny and I think it's worth discussing in a longer essay that I'm writing on Britain's decline, so I've removed the thread from yesterday for now. But for now here are the headline graphics.
Here’s how the wedges compare graphically. This seems familiar.
12/
Europe vs America: Supplemental
Once more with feeling: here’s a small test that strengthens the case that the productivity wedge since 1995 in the constant PPP series is a deflator asymmetry mirage and that the chained PPP series adjusts for along with Balassa-Samuelson:
1/
In which case I feel more confident about this narrative: there is no relative decline until 2020 and thereafter it’s not ICT driven capital deepening but big fiscal.
Europe is stagnating and needs reforms—but not Americanisation.
14/
Sorry:
open.substack.com/pub/leusdero...
New Left EViews
The link at the end of the thread was broken so here it is:
open.substack.com/pub/leusdero...
Many more details here: please do subscribe. Shoutout to @arindube.bsky.social whose tweet I borrowed towards the end.
END
open.substack.com/pub/leusderofl…
New Left EViews
New Left EViews
New Left EViews
New Left EViews
Both Europe and America are in decline—but not relative to each other and from very different levels of development and material wellbeing.
A little empirical test, why both current and constant PPPs are conceptually inappropriate, why chained PPPs are the approrpiate methodological compromise, and why probably none of this matters.
Europe vs America: Supplemental
Once more with feeling: here’s a small test that strengthens the case that the productivity wedge since 1995 in the constant PPP series is a deflator asymmetry mirage and that the chained PPP series adjusts for along with Balassa-Samuelson:
1/
