Trump’s China Deal Leaves the Global Economy as Uncertain as Ever

President Trump’s trade truce with China may have temporarily cooled tensions between the world’s two largest economies. Anew paper by researchers at Harvard University, the University of Chicago and the Federal Reserve Bank of Boston suggests that businesses and consumers in the United States are feeling an impact from the trade fight and that the pain could escalate.

Technology is making inflation statistics an unreliable guide to the economy

Amazon is used to fielding accusations: that it has killed off physical retail business, that it mistreats warehouse workers, that it abuses its dominant platform in online sales. So perhaps it is not a surprise that some people also blame it for low inflation. In 2017 Janet Yellen, then chair of the Federal Reserve, wondered aloud if cut-throat online competition might be stopping goods-producers raising prices even in a world of rising demand. Alberto Cavallo of Harvard Business School has found that Amazon’s prices are 6% lower than those of eight large retailers, and 5% lower than on those retailers’ websites.

Trump’s tariffs puts Apple’s golden goose at risk

Donald Trump has threatened to impose a sweeping new round of trade tariffs against imports from China. According to analysis by Reuters, it would mean 92% of hardware sold by Apple would face levies.
If the tariffs are indeed imposed in December, it could mean several outcomes – none of which Apple will be particularly keen on, explained Alberto Cavallo, an associate professor at Harvard Business School.

Get smart about shopping online and save money

The reality is that offline and online price levels are identical about 72 per cent of the time. The figure is based on a study by Harvard Business School’s Associate Professor Alberto Cavallo, whose research covered 24,000 products in 10 countries, including Australia, China and Japan.
Drugstores and office-product retailers have the lowest share of identical prices, while electronics and clothing stores have the most.  

Dynamic pricing may look like a rip-off but has benefits for us all

Weimar! Zimbabwe! These were the historical precedents genuinely expressed a decade ago about what an unprecedented experiment in monetary policy would do to advanced industrial economies. A huge expansion of the money supply, through quantitative easing, and near-zero interest rates might be an immediate palliative in a deep recession but they’d spark an inflationary crisis later on. And high inflation wipes out savings and destroys living standards.

The Amazon effects and monopsony

A paper by Alberto Cavallo of Harvard University found evidence that the algorithms used by internet-based retail giants like Amazon to constantly change and adjust prices have led to greater price fluctuations in response to various macroeconomic shocks. This so-called ‘Amazon Effect’ not only forces brick-and-mortar outlets to respond in a similar manner but also
-> Continue reading The Amazon effects and monopsony

Measuring the Facts: Using Data to Tell the True Story of Inflation

MIT Sloan professor Roberto Rigobon and Harvard University professor Alberto Cavallo are the co-founders of the Billion Prices Project. The project collects prices — it has around 15 million prices today — provided by online retailers around the world. The public data is used to conduct research in macroeconomics and international economics. The professors say
-> Continue reading Measuring the Facts: Using Data to Tell the True Story of Inflation

Under ‘Amazon effect’ retailers could be more exposed to supply shocks

Harvard Business School found that the average duration for regular price changes fell to 3.65 months in 2014 to 2017 from 6.7 months in 2008 to 2010. It also investigated how prices at Amazon, Walmart, Best Buy and Safeway vary across geographic locations. Harvard’s Alberto Cavallo concludes that the paper’s most important finding is that
-> Continue reading Under ‘Amazon effect’ retailers could be more exposed to supply shocks

Policy analysis with big data -ECB Press

The recent financial crisis, and the euro area sovereign debt crisis that followed, were characterised by periods of increased heterogeneity, market fragmentation and sudden turns in economic activity. This often made it difficult for economic policymakers to understand and assess in real time the underlying forces driving economic behaviour. Both traditional statistical datasets and our
-> Continue reading Policy analysis with big data -ECB Press

Por qué los economistas llegaron tarde al big data

Como esta tecnología ofrece un gran volumen de datos, pero poca información sobre un aspecto particular, se demoró su adopción

“Cuando tenés un martillo todos los problemas se parecen a un clavo”, reza la así llamada ley del instrumento, enunciada por el filósofo americano Abraham Maslow allá por los sesenta en relación a la sobreconfianza en una herramienta, ya sea porque el analista invirtió demasiado en ella o porque está de moda.

Un argentino y un venezolano miden su propia inflación con mil millones de precios por día

Alberto Cavallo y Robert Rigobon, economistas del MIT, comenzaron con la web Inflación Verdadera tras la intervención del Indec, pero ahora estiman la suba de precios todos los días en más de 60 países.
La intervención del Instituto Nacional de Estadísticas y Censos (Indec) produjo un giro académico para dos economistas a más de 8.500 kilómetros de distancia.

Online Prices Indicate Russian Inflation Spike After Ruble Decline

Russia’s economy looks eerily similar to the 1998 Russian financial crisis which was also characterized by significant declines in the price of oil, a significant decline in the Ruble, sharp hikes in the central bank’s key rate, and now a significant run-up in inflation according to data from PriceStats which tracks daily inflation in 22 countries including Russia by monitoring online prices.

Oil Is Dragging Down Prices Faster Than Official Price Index Can Capture

onsumer prices around the world are pulling back so rapidly, along with the collapse of oil prices, that official measures of inflation have yet to capture the magnitude of the decline. But the Billion Prices Project, which scrapes the Internet daily to capture changing prices online, is recording a significant and broadening plunge in consumer prices.

Inflation Truth, Really

I’m in Argentina for the day — literally (stuff came up, forcing me to make this a very quick visit; sorry, no time for media interviews or anything not already booked). And I thought it might be worth telling people something they may not know about the history of MIT’s Billion Prices Project.

This billionaire thinks the Fed is missing the hyperinflation in the Hamptons

The prices of houses in the Hamptons and high-end art are the “leading edge of hyperinflation.”
Never underestimate the ingenuity of inflation truthers. Every time it seems like they’ve hit rock bottom intellectually, they manage to come up with new and even more ridiculous reasons for why inflation is supposedly higher than the official numbers say it is.

Another Reason Not to Fear Inflation

The Fed shouldn’t worry too much about the recent surge in consumer prices. It’s most likely a catch-up after a tough winter.
U.S. inflation has been accelerating in recent months, presenting the Federal Reserve with a tricky question as it decides how quickly to remove stimulus from the U.S. economy: Is the rise in prices a precursor of things to come or simply a “catching up” phase as people begin to spend again after a brutal winter?

Now HERE’S Some Government Manipulated Economic Data

A recent tweet by Jack Welch alleging that Friday’s jobs report was manipulated has sparked a ton of interest government data, and whether or not it is manipulated, or can be.
In a recent Fiscal Times piece (via Reuters), economist Mark Thoma makes a good defense of US data quality, while noting at the end that there are countries where manipulation does in fact happen.

Central bankers’ window to go for broke

Falling price pressures around the world will allow central banks to increase their use of monetary stimulus to boost growth, according to MIT economics professor, Albert Cavallo.
In an interview with Business Spectator, Cavallo said the world was now witnessing global disinflation. Indeed, there are now only three countries where inflation is not on a downward trajectory – Russia, South Africa and Brazil.

Billion Price Update

For some reason I seem to be seeing a resurgence of inflation scare stories, despite the fact that — gas prices aside — inflation remains quiescent. And along with the scare stories come assertions that the inflation numbers are faked, that the government is hiding the true rate.

Don’t lie to me, Argentina

IMAGINE a world without statistics. Governments would fumble in the dark, investors would waste money and electorates would struggle to hold their political leaders to account. This is why The Economist publishes more than 1,000 figures each week, on matters such as output, prices and jobs, from a host of countries.

Price in a trice

Online retailers offer an immediate measure of inflation
IF THE inflationistas are right, where should they look for signs of accelerating price growth? Many are suspicious of official numbers: John Williams, the boss of an inflation-statistics website called, claims American inflation has been underestimated for decades because the Bureau of Labour Statistics (BLS) regularly changes its basket of goods on the ground that consumers shy away from expensive items. And official data are slow to come out.

Inflation and the Billion Prices Project

When it comes to planning for your financial future, inflation is a huge issue. In fact, given the historic annual inflation rate of 3.75% a million dollars today will be worth just over $190k in 50 years. Moreover, using that historic rate along with the rule of 72, we can further conclude that prices will double every 19.2 years.


Between official government statistics, industry surveys, and Wall Street forecasts, it often seems like we’re drowning in data, often of uncertain value. But consider the alternative. In the early years of the Great Depression, it was clear that things were awful, but the government had few good figures to go on; there was no official G.D.P. number, and no solid information about unemployment.

The Prices Are Right

Even in the information age, the U.S. Bureau of Labor Statistics still gathers much of its data the old-fashioned way. Workers make phone calls to find out what dentists charge for pulling teeth, and they visit stores to write down the prices of CDs and Russet potatoes. In the end, the data are accurate but take a month or so to compile and analyze.

Billion Price Preview

One indicator I’ve been tracking lately is the MIT Billion Price Index; it basically tracks the goods component of the CPI, but of course has higher frequency, so it’s kind of an early warning indicator.
And the BPI has, of course, showed a bump in short-term inflation lately. My prediction was that this bump would prove largely temporary, just as previous blips — both positive and negative — have.

Mil millones de precios y el sueño de un INDEC virtual

A mediados de 2009, los economistas Vernon Henderson, Adam Storeygard y David Weil sorprendieron al ambiente académico con una idea disparatada y original: las fotos de la superficie terrestre tomadas por satélites desde el espacio exterior podían aportar un muy buen “proxi” para medir los incrementos de PBI en los países, prestando atención a las imágenes nocturnas de zonas iluminadas con luz artificial.

New indications of inflation

Where are the inflationary pressures?
The BLS reported on Thursday that the inflation rate as measured by the headline CPI has been 1.6% over the last year. Excluding food and energy, the inflation rate would be 1.0%.
The MIT Billion Prices Project is recording a slightly higher inflation rate for the U.S. of about 2.5%.

The Billion Price Index

Some commenters have been claiming that the MIT Billion Price Index is telling a very different story from the official Consumer Price Index. So I guess it’s worth pointing out that it really matches pretty well.
What you need to realize is that the Billion Price Index, inevitably, only covers goods — not services. So it’s got a narrower focus than the CPI.

Innovator: Alberto Cavallo

To track inflation, each month the Bureau of Labor Statistics canvasses businesses and records the price of, say, a 4.4-pound bag of golden delicious apples, among hundreds of other items. The agency dials land lines to survey how consumers spend their money. It’s essentially the same process the BLS has used for half a century.

The price is right

How a new online tool can help measure inflation as accurately as — and more quickly than — traditional methods.
Inflation is a crucial economic indicator, since rising prices can hurt consumers and trigger political discontent. It is also hard to measure. In the United States, Bureau of Labor Statistics employees track over 20,000 prices in person or via phone, which are then aggregated into the Consumer Price Index, a monthly gauge of price levels.

10th Annual Year in Ideas – “The Real-Time Inflation Calculator

Measuring inflation is a time-consuming business: at the beginning of each month, government researchers across the country amass troves of data on prices for everything from shoes to milk to phones. Two weeks after the end of the month, the government releases gauges of inflation like the Consumer Price Index. But inflation hunters may now get an advance glimpse of the data, thanks to a real-time inflation calculator devised by two economists at M.I.T., Alberto Cavallo and Roberto Rigobon.

Billion prices project

Justin Lahart is among those calling attention to the Billion Prices Project of MIT Professors Roberto Rigobon and Alberto Cavallo.
The basic idea of the Billion Prices Project is to automate search of websites around the world that report prices at which various vendors are offering to sell specific items.

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