Real GDP Is Likely Not Correct As The Inflation Estimates Are Weird

 a)

 

b) 

c)

Figure 4. The case of Austria. There is a break in 1991.

Figure 5 presents the Kingdom of the Netherlands. The CPI curve is above the dGDP one. The relatively good fit between the curves needs three breakpoints – 1982 (coefficient 1.2), 1997 (0.8) (both changes are shown in panel c), and 2009 (2.0)  - panel d).

 a)

b)

c)

d)

 

Figure 5. The Kingdom of the Netherlands

In Figure 6, we present Japan. The CPI is above the dGDP – panel a). The cumulative difference in panel b) is an almost linear function of time. The multiplication factor between 1974 and 2018 is 1.25, but the CPI is constant after 1996 – panel b). This constant can be fit only with a 0 linear coefficient or a constant added to all dGDP or CPI inflation readings after 1996. In panel d) we added -0.011 to each reading of the CPI inflation since 1997 and obtained a good fit between the CPI and dGDP. We are sure that the Japan Statistics did not add 0.011 to the CPI inflation estimates in order to keep it above 0. It would be a good trick to avoid formal deflation, which is observed in the dGDP since the mid-1990s, but it would be a bad trick for the economic models we have been developing for Japan.

 a) 

b)

c)

d)

Figure 6. Japan 

Italy is a perfect case with one constant describing the whole difference between 1970 and 2018. Figure 7 presents the original CPI and dGDP time-series – panel a), the difference – panel b) and the overall fir when the dGDP is corrected by a factor of 0.94. The overall fit is excellent through the studied interval and no breaks are needed in the model. For Italy, the CPI is below the dGDP curve. 

a)

 

b)

c)

Figure 7. Italy

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