Wednesday , April 24 2024
Home / Naked Keynesianism / Lavoie on Inflation Theory: Conflicting claims versus the NAIRU

Lavoie on Inflation Theory: Conflicting claims versus the NAIRU

Summary:
New Paper by Julia Braga and Franklin Serrano. From the abstract: The conflicting claims approach to the theory of inflation so thoroughly surveyed and well presented in Chapter 8 of Lavoie’s (2022) book is deservedly becoming increasingly consensual among heterodox (and even some notable mainstream) macroeconomists. However, the relevance of a concept (and the very existence of) a NAIRU (Non-Accelerating Inflation Rate of Unemployment) derived consistently from the very premises of the conflicting claims approach is still very controversial. In this review article, we will be to argue that a NAIRU is not really useful for the conflicting claims approach. First, it can only properly be derived under quite restrictive assumptions; second, if a NAIRU actually existed, it would render demand

Topics:
Matias Vernengo considers the following as important: , , , , ,

This could be interesting, too:

Matias Vernengo writes The Argentina of Javier Milei

Angry Bear writes Open Thread, April 12 2024 Inflation Increases – Look to Gasoline and Shelter

Angry Bear writes Open Thread March 17 2024, January and February were rough months for inflation

Angry Bear writes Inflation and Auto Insurance

New Paper by Julia Braga and Franklin Serrano. From the abstract:

The conflicting claims approach to the theory of inflation so thoroughly surveyed and well presented in Chapter 8 of Lavoie’s (2022) book is deservedly becoming increasingly consensual among heterodox (and even some notable mainstream) macroeconomists. However, the relevance of a concept (and the very existence of) a NAIRU (Non-Accelerating Inflation Rate of Unemployment) derived consistently from the very premises of the conflicting claims approach is still very controversial. In this review article, we will be to argue that a NAIRU is not really useful for the conflicting claims approach. First, it can only properly be derived under quite restrictive assumptions; second, if a NAIRU actually existed, it would render demand management policies undesirable and very destabilizing anyway. With that in mind, the key aspects explored here are: 1) the different roles of hysteresis in the output and labour markets; 2) the assumptions concerning real profit markups of firms; and 3) the extent to which money wage increases actually incorporate past (or expected) inflation. We also add some remarks regarding the role of changes in international commodity prices and nominal exchange rates that further illustrate the necessary relation between conflicting claims inflation and the theory of distribution and relative prices.

Read the rest here.

Matias Vernengo
Econ Prof at @BucknellU Co-editor of ROKE & Co-Editor in Chief of the New Palgrave Dictionary of Economics

Leave a Reply

Your email address will not be published. Required fields are marked *