The anatomy of inflation: An economic history perspective

Martin T. Bohl and Pierre Siklos

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: In an important sense the present survey reaches a conclusion similar to the one highlighted by Laidler and Parkin (1975) over forty years ago. Inflation, if fully anticipated, produces modest social costs. We are no closer to knowing what is ‘optimal’ inflation except that low and stable inflation come closest to reducing the loss of purchasing power of money. Because prices of goods and services incorporate elements that are difficult to measure precisely we cannot even be sure what the actual level of inflation really is. Hence, what is deemed low may well differ across countries and across time. Nevertheless, avoiding inflation is not only desirable because it represents a form of taxation without representation but, in theory at least, low and stable inflation ought to be more easily forecasted thereby reducing the likelihood of large and persistent forecast errors.

Pages: 41 pages
Date: 2018-01
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2018-08

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