Fun with R-Squared

The following graph is from Paul Krugman’s site, and while there’s no denying a relationship between inflation/deflation and an output gap, the R-squared on this thing must be darn small, making the imposed line  … optimistic.

Related posts:

1. Housing is the Business Cycle
2. Congratulations to Paul Krugman
3. Paul Krugman Profile in FT
4. The Myth of Supermarket Line Karma
5. First, We Kill All the Economists