It's not much of a mystery. When disposable income growth slows, especially in relation to GDP, growth of HCE relative to GDP responds quite faithfully (+/- lag of a few years to revert to trend)pic.twitter.com/lT73qW2ySu
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It's not much of a mystery. When disposable income growth slows, especially in relation to GDP, growth of HCE relative to GDP responds quite faithfully (+/- lag of a few years to revert to trend)pic.twitter.com/lT73qW2ySu
Also we've had two large recent policy changes -- the Medicare sequester and, to a lesser extent, the ACA -- that appear to be restraining inflation somewhat.https://www.frbsf.org/economic-research/publications/economic-letter/2016/may/medicare-payment-cuts-affect-core-inflation/ …
I wouldn't suggest absolutely nothing else matters on any margin (finely enough measured), but similar patterns throughout the OECD and elsewhere (for example) suggests the change in expenditure growth has little to do with policy IMO.
(in terms of change the long run trajectory that is)
The broad relationship sounds perfectly plausible. But, e.g., policy changes might explain the small loss of fit in your graph post-2010.
Perhaps. Policy adjustment is one of the causes of trend reversion imo, but the question is whether we're likely to dramatically change that trend through policy. In the long run, I wouldn't bet on it.
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