What Do We Mean by „Inflation”?

Research report (imported) 2022 - Max Planck Institute for Research on Collective Goods

Martin F. Hellwig
Max-Planck-Institut zur Erforschung von Gemeinschaftsgütern, Bonn
The essay criticizes the idea that the word “inflation” refers to a single phenomenon that is accessible to theorizing. It stresses the need to distinguish between price adjustments induced by one-time changes in underlying economic data and inflation processes based on feedback mechanisms between market developments and public policy, fiscal and monetary. Developments in 2021 and 2022 reflect supply side effects. The policy challenge is to avoid generating a self-sustaining inflationary dynamic.

For the full text, see the German version.

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