To be continued

Against Jebel al-Lawz

One of my favorite variables, all too often underused, is real GDP divided by the price level. It really only works as a useful measurement in large, populous single-currency areas, though -like the United States, China, or the Eurozone. Basically, it’s a measure of how efficiently a region is using its resources given its nominal GDP. For example, if a country enters a deflationary depression due solely to collapsing NGDP, its RGDP should suffer. But its RGDP should also fall at the same rate as its price level.

These are the real GDPs of Portugal, Italy, Greece, Spain, Germany, and Ireland:
Screenshot (268)
https://research.stlouisfed.org/fred2/graph/?g=3Qcy
And these are the price levels of the same countries:
Screenshot (267)
https://research.stlouisfed.org/fred2/graph/?g=3Qcv
At first glance, Ireland’s real GDP up to Q4 2014 seems in the same boat as that of Portugal, Italy, and Spain, except that Ireland had no double-dip recession.
But look at the real GDPs of the…

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