Big Facts about the US Macroeconomic Environment and Implications for India

INDIA - Report 26 May 2015 by Ajay Shah

Using very long time series in the US, three important facts are: (a) an inflation target of 2%, which is successfully delivered by the US Fed; (b) bond returns of 2.7% and (c) equity premium of 3 percentage points.In the US, there is a fair understanding about these three numbers and confidence that these values will hold in the coming decades. The fact that these three things are known in the US with fair precision generates an environment of confidence. In the US, we know the probability distribution; the only unknown is how future draws from the distribution will work out. All economic ...

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