Talk:Inflation

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Cost-Push Inflation[edit]

Why is this included as one of the negative effects of inflation? Isn't it just a tad circular to argue that inflation is caused by inflation?

Dr. Razzak's comment on this article[edit]

Dr. Razzak has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


It is a good coverage.

Talking about inflation requires discussing interest rate, money, etc...which the author has done well.

I am unaware of any empirical research on liquidity trap? If it is about the zero lower bound then I suggest that the author talks about this very relevant issue. Today, many central banks have negative interest rate on bank deposit. There a good debate about the efficacy of such policy. Read Lars Svenssion, Patrick Minford among others on the subject. It should lead to a discussion about inflation versus price level targeting.


"...t, keeping nominal interest rates above zero so that central banks can adjust interest rates to stabilize the economy, and reducing unemployment due to nominal wage rigidity.[5]" This is highly questionable. It implies that there is a stable Phillips curve. But the Phillips curve is unstable. Author does not cite Milton Friedman address to the AEA in 1968 is a paper that should be cited "the role of monetary policy."


I would not say "controlling Inflation" I would say "inflation targeting" instead. Incidentally, the correlation between money (money growth) and prices (inflation) break-down under inflation targeting. See W. A. Razzak, Money in the Era of Inflation Targeting, Reserve Bank of New Zealand Discussion Paper, 2001 . http://rbnz.govt.nz/research-and-publications/discussion-papers/2001/dp2001-02-2... I am sure there other papers on this issue but I cannot recall.

The real interest rate is the nominal rate - Expected inflation rather than actual inflation.

One of the common mistakes is to associate the NAIRU with the Natural Rate of Employment. McCallum described the difference in his research. The NAIRU implies that "there is a unique inflation rate" associated with unemployment, which has implications for monetary policy. The Natural Rate, however, is not associated with any inflation rate because the Phillips curve is vertical. With u=u* at the horizontal axis, any inflation rate on the vertical axis is fine. Completely two different concepts.

I have not seen anything about the inflation bias. Big and important issue and highly related to monetary policy, which the author talks about and Kydland and Prescott and Barro and Gordon Time Inconsistency papers for the relation to inflation-unemployment (output) relationship. The point was scattered around the page.

"Stimulating economic growth" section needs further explanations. It is important to cite literature pointing out to the lack of correlation between money and growth and inflation and growth. I am aware that many economists think that targeting low and stable inflation induces growth. I have not seen any credible evidence. In New Zealand, we have successfully maintained low and stable inflation for more than 25 years, but our growth performance is not good at all. Growth is a function of technical progress, factor inputs such as capital and labor, etc. Money is neutral and super neutral. We have lots of evidence for that. I recall Stanly Fischer had a paper showing that only double-digit inflation hampers growth, otherwise the issue is highly controversial.

When talking about money, discuss inside / outside money differences and the relationship to inflation.

When talking about expectations, discuss how to measure expected inflation, such as Moving averages, model - consistent expectations, indexed bonds, etc. A description of the surveys is a good idea. We have a couple important surveys. Michigan and Philadelphia fed.

Best


We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Razzak has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference 1: W A Razzak, “Monetary Policy and Forecasting of Inflation with and without the Output Gap.” Discussion Paper 2002/03, Reserve Bank of New Zealand (2002).
  • Reference 2: W A Razzak, Money in the Era of Inflation Targeting.” Working Paper 2000/2, Reserve Bank of New Zealand (2000).
  • Reference 3: W A razzak, “Wage, Productivity, and Unemployment: Microeconomics Theory and Macroeconomics Data,” Applied Economics, Vol. 47, Issue 58, 2015.
  • Reference 4: W A Razzak, "Is the Taylor Rule Really Different from the McCallum Rule?" Contemporary Economic Policy, Volume 21, Number 4, October 2003, 445.
  • Reference 5: W. A. Razzak (with David Mayes), “Transparency and Accountability: Empirical Models and Policy Making in the Reserve Bank of New Zealand,” Economic Modelling 15 (1998), 377-394.
  • Reference 6: W A Razzak, Wage-Price Dynamics, the Labour Market and Deflation in Hong Kong. Working Paper 242003, HKIMR, (2003).

ExpertIdeasBot (talk) 16:21, 19 May 2016 (UTC)

Dr. Staehr's comment on this article[edit]

Dr. Staehr has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


I think the article is overall OK, but it could be improved if it were organised somewhat differently, a slightly more academic approach were adopted and the introduction were improved.

ORGANISATION

I find it strange that the "History" comes before "Related definitions" and "Measures". Perhaps the history should be put into an individual article? I believe the discussion in the history should be improved. Why is there no discussion after the hyperinflation in Germany?


ACADEMICS

I think the "Causes section" could be extended a bit, in particular the part pertaining to "Rational expectations theory". The specific branch, monetary policy games, should be mentioned and the discussion of the (time)inconsistency of low inflation should be clearly spelled out. In the part on "Controlling inflation", there should be a short discussion of inflation targeting and a link to the article on this key monetary policy. I don't understand why the "Gold standard" is included in the part on "Controlling inflation"; the gold standard is a specific form of a fixed exchange rate regime and is of little interest nowadays.


INTRODUCTION

In the first paragraph "inflation can refer to either an increase in the money supply or" I would remove "either an increase in the money supply or". I would also removed the last part of the paragraph ", normally owing to an increase in the money supply" since the causes of inflation are highly disputed and increased money supply has very weak predictive power in the short term.

I am for the same reason skeptical to the next paragraph starting with "When the money supply rises" since money growth is at most one explanation. The words "When the money supply rises, so does the price level, whether of assets, commodities or consumer goods, as each unit of currency buys fewer goods and services. Consequently," could be deleted.

The first figure (USA inflation) could be updated.


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Dr. Staehr has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference : Karsten Staehr, 2010. "Inflation in the New EU Countries from Central and Eastern Europe : Theories and panel data estimations," Bank of Estonia Working Papers wp2010-06, Bank of Estonia, revised 26 May 2010.

ExpertIdeasBot (talk) 12:56, 7 June 2016 (UTC)

Dr. Nautz's comment on this article[edit]

Dr. Nautz has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


There are no main mistakes in the article. My impression is, however, that the readability of the article could be improved. Currently, too many side-aspects of inflation are covered (inflation and the revolution in egypt, historical debates that are only interesting for economists that, however are not expected to use wikipedia for learing about inflation).

I would recommend to shift the emphasis on the basics which should be more interesting for the typical user of wikipedia: definition of inflation, some historical examples, measurement issues, costs and benefits of inflation, role of inflation for monetary policy.


We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Nautz has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference : Becker, Sascha & Nautz, Dieter, 2010. "Inflation, price dispersion and market integration through the lens of a monetary search model," Discussion Papers 2010/2, Free University Berlin, School of Business & Economics.

ExpertIdeasBot (talk) 09:19, 16 June 2016 (UTC)

Dr. Faig's comment on this article[edit]

Dr. Faig has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


This is a very good summary of the consensus view by economists on this subject. The only suggestion I can think off is the following:

Remove the last sentence in the second paragraph in "History" (the one starting with "Demographic factors...") It does not make any sense because economic growth tends to reduce inflation. Who ever put it must have confused some relative price such as price of land relative to labour instead of the general price level.


We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Faig has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference : Miquel Faig & Belen Jerez, 2006. "Inflation, Prices, and Information in Competitive Search," Working Papers tecipa-215, University of Toronto, Department of Economics.

ExpertIdeasBot (talk) 15:09, 24 June 2016 (UTC)

Dr. Robinson's comment on this article[edit]

Dr. Robinson has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


(1)

Core price indices: because food and oil prices can change quickly due to changes in supply and demand conditions in the food and oil markets, it can be difficult to detect the long run trend in price levels when those prices are included. Therefore, most statistical agencies also report a measure of 'core inflation', which removes the most volatile components (such as food and oil) from a broad price index like the CPI. Because core inflation is less affected by short run supply and demand conditions in specific markets, central banks rely on it to better measure the inflationary impact of current monetary policy.

Comment: There are measures of core inflation other than excluding volatile items, such as the trimmed-mean or weighted-median CPI. These receive considerable attention in some countries in the setting of monetary policy, such as Australia. Also the motivation of looking at core inflation at some central banks is that it provides a better guide of underlying inflationary pressures which are likely to persist in the future.

(2)

In the common measures of inflation the PCE deflator could be mentioned, as the U.S. Federal Reserve focuses on it.

(3) Some Keynesian economists also disagree with the notion that central banks fully control the money supply, arguing that central banks have little control, since the money supply adapts to the demand for bank credit issued by commercial banks. This is known as the theory of endogenous money, and has been advocated strongly by post-Keynesians as far back as the 1960s. It has today become a central focus of Taylor rule advocates. This position is not universally accepted – banks create money by making loans, but the aggregate volume of these loans diminishes as real interest rates increase. Thus, central banks can influence the money supply by making money cheaper or more expensive, thus increasing or decreasing its production.

Comment: Stating that endogenous money is a central focus of Taylor rule advocates seems tenuous. A lot of people use a Taylor rule as a simple summary of how monetary policy is set, rather than reflecting a view on the nature money.

(4) However, one problem with this theory for policy-making purposes is that the exact level of potential output (and of the NAIRU) is generally unknown and tends to change over time. Inflation also seems to act in an asymmetric way, rising more quickly than it falls. Worse, it can change because of policy: for example, high unemployment under British Prime Minister Margaret Thatcher might have led to a rise in the NAIRU (and a fall in potential) because many of the unemployed found themselves as structurally unemployed (also see unemployment), unable to find jobs that fit their skills. A rise in structural unemployment implies that a smaller percentage of the labor force can find jobs at the NAIRU, where the economy avoids crossing the threshold into the realm of accelerating inflation.

Comment: Is there a reference to a paper quantifying the extent of hysteresis that occurred during the Thatcher period to support this example?

(5) Rational expectations theory This could be replaced by a discussion of the New Keynesian Phillips Curve (e.g. Gali and Gertler, Journal of Monetary Economics, 1999) and criticisms of it (e.g. Rudd and Whelan, AER, 2006).

(6) Monetary Policy Section The discussion could also link to the potential for inflationary bias as a rationale for central bank independence.


We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

We believe Dr. Robinson has expertise on the topic of this article, since he has published relevant scholarly research:


  • Reference : Adam Cagliarini & Tim Robinson & Allen Tran, 2010. "Reconciling Microeconomic and Macroeconomic Estimates of Price Stickiness," RBA Research Discussion Papers rdp2010-01, Reserve Bank of Australia.

ExpertIdeasBot (talk) 16:45, 2 August 2016 (UTC)