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On the causes of inflation: a brief introduction to the strategic theory

On the causes of inflation: a brief introduction to the strategic theory

Author
Galetovic, Alexander

Full text
https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/40678
Abstract
This note is a brief introduction to the strategic theory of inflation initiated by Barro and Gordon (1983a). The discussion is organized around the question of which are the causes of inflation according to the strategic theory. I show that the answer depends on whether the Central Bank can precommit itself in the very short run to choose an arbitrary rate of growth of money. If the Central Bank cannot precommit itself, it can deliberately create unexpected inflation. Then the potential short-run gains of unexpected inflation affect the long-run inflation rate –i.e these potential short-run gains are a fundamental cause of inflation not necessarily related with the long-run fiscal deficit. Moreover, the assertion that money causes inflation is not warranted.
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Artes, Arquitectura y UrbanismoCiencias Agrarias, Forestales y VeterinariasCiencias Exactas y NaturalesCiencias SocialesDerechoEconomía y AdministraciónFilosofía y HumanidadesIngenieríaMedicinaMultidisciplinarias
Institutions
Universidad de ChileUniversidad Católica de ChileUniversidad de Santiago de ChileUniversidad de ConcepciónUniversidad Austral de ChileUniversidad Católica de ValparaísoUniversidad del Bio BioUniversidad de ValparaísoUniversidad Católica del Nortemore

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