Monday, July 29, 2013

It's not the 1970s any more

The following figure gives the average rate of change in consumer prices in the 34 nations that are members of the Organisation for Economic Cooperation and Development.  (The simple average would be strongly affected by a few very high rates, so I transformed them to normal scores before taking the average).

There are some ups and downs, but the general picture is of a rise from the mid-1960s to the mid-1970s, roughly ten years of high inflation, and a pretty steady decline since then.  Paul Krugman recently considered a larger sample of countries since 1980 and found that high (double or triple-digit) inflation has become less common.  In affluent countries, even moderate inflation has become rare--in 2012, the rate of inflation was over 6% in only one of the OECD countries (Turkey).  In 1980 it was under 6% in only two (Germany and Switzerland).  

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