The Human Nature of Inflation
The Role of Defensive Expectations
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Beschreibung
At the intersection of monetary policy and behavioral economics, this book develops the concept of defensive expectations. It argues that, following an income loss, households increase savings to compensate for that loss. As a result, inflation remains subdued until the income loss (measured by the cumulative wage gap relative to a past peak) has been fully recovered, after which inflationary pressures begin to emerge. The cumulative wage gap is a better measure of slack in the Phillips Curve than either the output gap or the unemployment gap.
Offering a rigorous and original account of both persistently low inflation and the sharp inflationary episodes that followed the COVID-19 pandemic, this volume will be of particular interest to policymakers, central bankers, economists, and scholars of macroeconomics and behavioral economics. It will also appeal to readers seeking a more nuanced understanding of the links between inflation, saving, consumption, and recessions.
Liviu Voinea is a Professor at the Bucharest University of Economic Studies. He served as Senior Advisor to the Executive Director of the International Monetary Fund, and as Alternate Executive Director at the World Bank. His previous roles include Deputy Governor of the National Bank of Romania and Budget Minister of Romania. Educated at Stockholm University and a Postdoctoral Researcher at the European Commission’s Joint Research Centre in Seville, he received the Romanian Academy Award in Economic Sciences.
At the intersection of monetary policy and behavioral economics, this book develops the concept of defensive expectations. It argues that, following an income loss, households increase savings to compensate for that loss. As a result, inflation remains subdued until the income loss (measured by the cumulative wage gap relative to a past peak) has been fully recovered, after which inflationary pressures begin to emerge. The cumulative wage gap is a better measure of slack in the Phillips Curve than either the output gap or the unemployment gap.
Offering a rigorous and original account of both persistently low inflation and the sharp inflationary episodes that followed the COVID-19 pandemic, this volume will be of particular interest to policymakers, central bankers, economists, and scholars of macroeconomics and behavioral economics. It will also appeal to readers seeking a more nuanced understanding of the links between inflation, saving, consumption, and recessions.
Highlights the drivers of high inflation and the causes of global economic crisis Examines the interplay between defensive expectations and the cumulative wage gap and compensatory savings Re-purposes the Phillips Curve to create a policy framework for the post-pandemic world
Autor*in
Liviu Voinea
Themen in »The Human Nature of Inflation«
Defensive expectations Keynesian Phillips Curve Rising inflation Wage rigidity Cumulative wage gap Phillips curve Economic output gap Cumulative income loss Global supply chains Fiscal policy support Monetary policy support Unemployment gap Economic impact of COVID-19