 Interest rates and inflation: What are the links?European Journal of Economics and Economic Policies: Intervention, 2009, vol. 6, issue 1, 81-96 Abstract: The purpose is to examine some of the links in the chain which is said to run from the rate of interest to the rate of inflation. It is argued that that there is a tendency to slip from arguments which that the rate of interest is related to the price level to suggesting that the rate of interest is related to the rate of inflation. The neo-Wicksellian approach is examined and found to support more the view that the rate of interest impacts the level of prices rather than the rate of inflation. It is also argued that the route through the exchange rate does not support the view that higher interest rates will dampen down inflation (though it may lower prices relative to what they would have been). It is further argued that the link from the level of economic activity to the rate of infl ation is theoretically dubious. In the last section it is briefly indicated that there is a lack of empirical support for any strong link from interest rate to inflation. Keywords: interest rates; infl ation; monetary policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:6:y:2009:i:1:p:81-96 Access Statistics for this article European Journal of Economics and Economic Policies: Intervention is currently edited by Torsten Niechoj More articles in European Journal of Economics and Economic Policies: Intervention from Edward Elgar Publishing |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.