Measuring sudden stops

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This week, Michael Metcalfe, global head of Macro Strategy at State Street Global Markets compares real-time inflation metrics with the sudden stop after the Lehman bankruptcy.

“Dramatic moves in financial markets and the recent responses from policy makers are prompting several comparisons to the 2008 Financial Crisis. However, the comparison with 2020 is far from perfect. Following the collapse in Lehman, there was an almost immediate collapse in retailer pricing power. For the moment, the behaviour of online retailers that make-up our US PriceStats series shows that food prices are edging up and shortages in the availability of goods in a number of countries could put further upward pressure on prices. It may also be that in the event of store closures, there is less impetus to reduce prices immediately. Nevertheless, one of the early markers of the sudden stop in US activity following Lehman, a collapse in online inflation, remains absent for now.”


*About State Street PriceStats®

PriceStats is a provider of high-frequency global inflation indices and purchasing power parities that offer insights into key macroeconomic variables. The indices are generated using software that scans the underlying code on public websites to capture the full array of products sold by online retailers, including food, beverages, electronics, apparel, furniture, household products, prescription drugs, and over-the-counter medicines. The technology monitors price fluctuations on roughly five million items sold by hundreds of online retailers in more than 70 countries. The PriceStats methodology is grounded in the extensive body of research of MIT professors Alberto Cavallo and Roberto Rigobon and their Billion Prices Project at MIT. Cavallo and Rigobon have leveraged this research and their expertise in monetary economics to develop the PriceStats indices.

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