The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Inflation

  • Michael Parkin
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_888

Abstract

This article essay reviews the theoretical and empirical literature on the causes and consequences of inflation – of a continuously rising price level and falling value of money. It describes the research agendas using the analytical distinction between anticipated inflation – an idealized situation in which prices are rising at a rate at which all economic agents expect them to rise – and unanticipated inflation. The literature on the effects of inflation on economic growth and unemployment, inflation in open economies, positive theories of central bank behavior, inflation and fiscal policy, and policies towards inflation including interest rate and inflation targeting receives particular attention.

Keywords

Aggregate demand shocks Budget deficits Business cycles Capital–labour ratio Cash-in-advance constraint Central bank behaviour Commodity money Consumer Price Index Dynamic general equilibrium analysis Exchange rate determination Exchange rate regimes Fiscal theory of the price level Hyperinflation Incomplete information Inflation Inflation measurement Inflation targeting Interest rate rules International policy coordination Labour market contracts Labour unions Monetarism Monetary and fiscal policy Monetary base Monetary policy rules Money Money supply Monopolistic competition Mundell–Tobin effect Natural rate of unemployment Neutrality of money New classical theory New Keynesian macroeconomics Output gap Overlapping generations framework Overnight interest rate on inter-bank loans Phillips curve Precommitment Prices and incomes policies Rational expectations Real business cycles Reputation Sacrifice ratios Stagflation Sticky prices Sticky wages Stylized facts Substitutes and complements Superneutrality of money Targets and instruments Technological shocks Time inconsistency Time preference Velocity of circulation 
This is a preview of subscription content, log in to check access

Bibliography

  1. Akerlof, G.A., W.T. Dickens, and G.L. Perry. 1996. The macroeconomics of low inflation. Brookings Papers on Economic Activity 1996 (1): 1–76.CrossRefGoogle Scholar
  2. Backus, D., and J. Driffill. 1985. Rational expectations and policy credibility following a change in regime. Review of Economic Studies 3: 211–221.CrossRefGoogle Scholar
  3. Balogh, T. 1970. Labour and inflation. London: Fabian Society.Google Scholar
  4. Barro, R.J. 1977. Unanticipated money growth and unemployment in the United States. American Economic Review 67: 101–115.Google Scholar
  5. Barro, R.J. 1978. Unanticipated money, output, and the price level in the United States. Journal of Political Economy 86: 549–580.CrossRefGoogle Scholar
  6. Barro, R.J. 1986. Reputation in a model of monetary policy with incomplete information. Journal of Monetary Economics 17: 3–20.CrossRefGoogle Scholar
  7. Barro, R.J. 1997. Determinants of economic growth: A cross-country empirical study. Cambridge, MA: MIT Press.Google Scholar
  8. Barro, R.J., and D.B. Gordon. 1983a. Rules, discretion and reputation: A model of monetary policy. Journal of Monetary Economics 12: 101–121.CrossRefGoogle Scholar
  9. Barro, R.J., and D.B. Gordon. 1983b. A positive theory of monetary policy in a natural rate model. Journal of Political Economy 91: 589–610.CrossRefGoogle Scholar
  10. Bernanke, B.S., and M. Woodford. 2004. The inflation-targeting debate. Chicago: University of Chicago Press.CrossRefGoogle Scholar
  11. Bronfenbrenner, M., and F.D. Holzman. 1963. A survey of inflation theory. American Economic Review 53: 593–661.Google Scholar
  12. Calvo, G.A. 1983. Staggered prices in a utility-maximizing framework. Journal of Monetary Economics 12: 383–398.CrossRefGoogle Scholar
  13. Clower, R.W. 1967. A reconsideration of the microfoundations of monetary theory. Western Economic Journal 6: 1–8.Google Scholar
  14. Conference on alternative monetary standards. 1983. Journal of Monetary Economics 12(1).Google Scholar
  15. Cukierman, A. 1992. Central bank strategy, credibility, and independence. Cambridge, MA: MIT Press.Google Scholar
  16. Cukierman, A., and S. Gerlach. 2003. The inflation bias revisited: Theory and some international evidence. The Manchester School 71: 541–565.CrossRefGoogle Scholar
  17. Dornbusch, R., and S. Fischer. 1986. Stopping hyperinflations past and present. Weltwirtschaftliches Archiv 122: 1–47.CrossRefGoogle Scholar
  18. Fischer, S. 1977. Long-term contracts, rational expectations, and the optimal money supply rule. Journal of Political Economy 85: 191–205.CrossRefGoogle Scholar
  19. Fischer, S. 1979. Anticipations and the non-neutrality of money. Journal of Political Economy 87: 228–252.CrossRefGoogle Scholar
  20. Fisher, M., and J. Seater. 1993. Long run neutrality and superneutrality in an ARIMA framework. American Economic Review 83: 402–415.Google Scholar
  21. Friedman, M. 1968. The role of monetary policy. American Economic Review 58: 1–17.Google Scholar
  22. Friedman, M. 1970. The counter-revolution in monetary theory. London: Institute of Economic Affairs.Google Scholar
  23. Friedman, J.W. 1971. A non-cooperative equilibrium for supergames. Review of Economic Studies 38: 1–12.CrossRefGoogle Scholar
  24. Granger, C.W.J. 1969. Investigating causal relations by econometric models and cross-spectral methods. Econometrica 37: 424–438.CrossRefGoogle Scholar
  25. Hicks, J.R. 1974. The crisis in Keynesian economics. Oxford: Blackwell.Google Scholar
  26. Hume, D. 1752. Of money; of interest; of the balance of trade. Political discourses; reprinted in Three essays: Moral, political and literary. London: Oxford University Press, 1963.Google Scholar
  27. Johnson, H.G. 1963. A survey of theories of inflation. Indian Economic Review 6 (4): 29–69.Google Scholar
  28. Johnson, H.G. 1973. Secular inflation and the international monetary system. Journal of Money, Credit, and Banking 5 (1, Part II): 509–520.CrossRefGoogle Scholar
  29. Jones, A. 1972. The new inflation: The politics of prices and incomes. London: Penguin Books and André Deutsch.Google Scholar
  30. Keynes, J.M. 1936. The general theory of employment, interest and money. London: Macmillan.Google Scholar
  31. King, R.G., and C.I. Plosser. 1984. Money, credit, and prices in a real business cycle model. American Economic Review 74: 363–380.Google Scholar
  32. King, R.J., and M.W. Watson. 1994. The post-war U.S. Phillips curve: A revisionist econometric history. Carnegie-Rochester Conference Series on Public Policy 41: 157–219.CrossRefGoogle Scholar
  33. King, R.J., and M.W. Watson. 1997. Testing long-run neutrality. Federal Reserve Bank of Richmond Quarterly Review 83: 69–101.Google Scholar
  34. King, R.G., and A.L. Wolman. 1996. Inflation targeting in a St. Louis model of the twenty-first century. Federal Reserve Bank of St. Louis Review 78 (3): 83–107.Google Scholar
  35. Kocherlakota, N., and C. Phelan. 1999. Explaining the fiscal theory of the price level. Federal Reserve Bank of Minneapolis Quarterly Review 23 (4): 14–23.Google Scholar
  36. Kormendi, R.C., and P.G. Meguire. 1985. Macroeconomic determinants of growth: Cross-country evidence. Journal of Monetary Economics 16: 141–163.CrossRefGoogle Scholar
  37. Kreps, D., and R. Wilson. 1982. Reputation and imperfect information. Journal of Economic Theory 27: 253–279.CrossRefGoogle Scholar
  38. Kydland, F.E., and E.C. Prescott. 1977. Rules rather than discretion: The inconsistency of optimal plans. Journal of Political Economy 85: 473–491.CrossRefGoogle Scholar
  39. Kydland, F.E., and E.C. Prescott. 1982. Time to build and aggregate fluctuations. Econometrica 50: 1345–1370.CrossRefGoogle Scholar
  40. Laidler, D., and M. Parkin. 1975. Inflation: A survey. Economic Journal 85: 741–809.CrossRefGoogle Scholar
  41. Long, J.B., and C.I. Plosser. 1983. Real business cycles. Journal of Political Economy 91: 39–69.CrossRefGoogle Scholar
  42. Lucas, R.E. Jr. 1972. Expectations and the neutrality of money. Journal of Economic Theory 4: 103–124.CrossRefGoogle Scholar
  43. Lucas, R.E. Jr. 1973. Some international evidence on output-inflation tradeoffs. American Economic Review 63: 326–334.Google Scholar
  44. McCallum, B.T. 1988. Robustness properties of a rule for monetary policy. Carnegie-Rochester Conference Series on Public Policy 29: 173–203.CrossRefGoogle Scholar
  45. Mishkin, F.S. 1982a. Does anticipated monetary policy matter? An econometric investigation. Journal of Political Economy 90: 22–51.CrossRefGoogle Scholar
  46. Mishkin, F.S. 1982b. Does anticipated aggregate demand policy matter? Further econometric results. American Economic Review 72: 788–802.Google Scholar
  47. Mundell, R.A. 1963. Inflation and real interest. Journal of Political Economy 71: 280–283.CrossRefGoogle Scholar
  48. Mundell, R.A. 1965. Growth, stability and inflationary finance. Journal of Political Economy 73: 97–109.CrossRefGoogle Scholar
  49. Mundell, R.A. 1971. Monetary theory: Inflation, interest and growth in the world economy. Pacific Palisades: Goodyear Publishing Co.Google Scholar
  50. Nelson, C.R., and C.I. Plosser. 1982. Trends and random walks in macroeconomic time series. Journal of Monetary Economics 10: 139–162.CrossRefGoogle Scholar
  51. Obstfeld, M., and K. Rogoff. 2002. Global implications of self-oriented national monetary rules. Quarterly Journal of Economics 117: 503–535.CrossRefGoogle Scholar
  52. Oudiz, G., and J. Sachs. 1984. Macroeconomic policy coordination among the industrial economies. Brookings Papers on Economic Activity 1984 (1): 1–76.CrossRefGoogle Scholar
  53. Parkin, M. 2000. What have we learned about price stability? Price stability and the long-run target for monetary policy. Ottawa: Bank of Canada.Google Scholar
  54. Parkin, M., and G. Zis. 1976a. Inflation in open economies. Manchester: Manchester University Press.Google Scholar
  55. Parkin, M., and G. Zis. 1976b. Inflation in the world economy. Manchester: Manchester University Press.Google Scholar
  56. Phelps, E.S. 1968. Money, wage dynamics, and labor market equilibrium. Journal of Political Economy 76: 678–711.CrossRefGoogle Scholar
  57. Phelps, E.S., and J.B. Taylor. 1977. Stabilizing powers of monetary policy under rational expectations. Journal of Political Economy 85: 163–190.CrossRefGoogle Scholar
  58. Ruge-Murcia, F.J. 2003. Does the Barro–Gordon model explain the behavior of US inflation? A reexamination of the empirical evidence. Journal of Monetary Economics 50: 1375–1390.CrossRefGoogle Scholar
  59. Sala-i-Martin, X., G. Doppelhoffer, and R.I. Miller. 2004. Determinants of long-term growth: A Bayesian averaging of classical estimates (BACE) approach. American Economic Review 94: 813–835.CrossRefGoogle Scholar
  60. Samuelson, P.A. 1958. An exact consumption-loan model of interest with or without the social contrivance of money. Journal of Political Economy 66: 467–482.CrossRefGoogle Scholar
  61. Sargent, T.J. 1976. The observational equivalence of natural and unnatural rate theories of macroeconomics. Journal of Political Economy 84: 631–640.CrossRefGoogle Scholar
  62. Sargent, T.J. 1982. The ends of four big inflations. In Inflation: Causes and effects, ed. R.E. Hall. Chicago: University of Chicago Press.Google Scholar
  63. Sargent, T.J., and N. Wallace. 1981. Some unpleasant monetarist arithmetic. Federal Reserve Bank of Minneapolis, Quarterly Review 5 (3): 1–17.Google Scholar
  64. Schwartz, A.J. 1973. Secular price change in historical perspective. Journal of Money, Credit, and Banking 5 (1, Part II): 243–269.CrossRefGoogle Scholar
  65. Sidrauski, M. 1967. Inflation and economic growth. Journal of Political Economy 75: 796–810.CrossRefGoogle Scholar
  66. Stockman, A.C. 1981. Anticipated inflation and the capital stock in a cash-inadvance economy. Journal of Monetary Economics 8: 387–393.CrossRefGoogle Scholar
  67. Svensson, L. 1999. Inflation targeting as a monetary policy rule. Journal of Monetary Economics 43: 607–654.CrossRefGoogle Scholar
  68. Taylor, J.B. 1979. Staggered wage setting in a macro model. American Economic Review, Papers and Proceedings 69 (2): 108–113.Google Scholar
  69. Taylor, J.B. 1980. Aggregate dynamics and staggered contracts. Journal of Political Economy 88: 1–23.CrossRefGoogle Scholar
  70. Taylor, J.B. 1985. What would nominal GNP targeting do to the business cycle? Carnegie-Rochester Conference Series on Public Policy 22: 61–84.CrossRefGoogle Scholar
  71. Taylor, J.B. 1993. Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy 39: 195–214.CrossRefGoogle Scholar
  72. Taylor, J.B., ed. 1999. Monetary policy rules. Chicago: University of Chicago Press.Google Scholar
  73. Tobin, J. 1965. Money and economic growth. Econometrica 33: 671–684.CrossRefGoogle Scholar
  74. Tobin, J. 1983. Monetary policy: Rules, targets and shocks. Journal of Money, Credit, and Banking 15: 506–518.CrossRefGoogle Scholar
  75. Townsend, R. 1980. Models of money with spatially separated agents. In Models of monetary economies, ed. J.H. Kareken and N. Wallace. Minneapolis: Federal Reserve Bank of Minneapolis.Google Scholar
  76. Wallace, N. 1980. The overlapping generations model of fiat money. In Models of monetary economies, ed. J.H. Kareken and N. Wallace. Minneapolis: Federal Reserve Bank of Minneapolis.Google Scholar
  77. Wiles, P. 1973. Cost inflation and the state of economic theory. Economic Journal 83: 377–398.CrossRefGoogle Scholar
  78. Woodford, M. 1995. Price level determinacy without control of a monetary aggregate. Carnegie-Rochester Conference Series on Public Policy 43: 1–46.CrossRefGoogle Scholar
  79. Woodford, M. 2003. Interest and prices. Princeton: Princeton University Press.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael Parkin
    • 1
  1. 1.