Defensive Expectations
Reinventing the Phillips Curve as a Policy Mix
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Beschreibung
This book takes us through the journey of the Phillips Curve to the present debate, dominated by the post-great recession puzzles and the challenges to the fundamental stable relationship between inflation and economic slack. Liviu makes an insightful contribution to the discussion and to our understanding of inflation dynamics by introducing the concept of cumulative wage gap as a measure of slack.Luis de Guindos, Vice President European Central Bank
This book explains why inflation remains subdued after recessions, based on three revolutionary concepts: defensive expectations, compensatory savings, and cumulative wage gap. When income falls, consumption falls, and savings rise, as people rebuild their past wealth. Households will not spend more until they fully recover what they lost. The revised Phillips Curve explains that current inflation depends on the cumulative difference between current income and past income.
This new theory is tested and validated by data for US since 1960 to date and for 35 OECD countries from 1990 to date. A number of policy implications are derived from these results. The book calls for an optimal policy mix between monetary policy and fiscal policy; it also discusses the coronavirus crisis as an extreme case of defensive expectations.
Presents long-run data for 35 OECD countries to formulate analysis Works with observable variables only Makes a fundamental change of paradigm from flow to stock Allows for the Phillips Curve to be time-dependent
Autor*in
Liviu Voinea
Themen in »Defensive Expectations«
wage inflation Phillips Curve monetary policy global financial crisis consumption theory austerity