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Four Old-Fashioned Monetarist Heresies

by George Selgin November 21st, 2013 10:30 am

1) For any given growth rate of aggregate spending, lower actual rates of price and wage inflation mean higher levels of output and employment;

2) For any given growth rate of aggregate spending, higher expected rates of price and wage inflation mean lower levels of output and employment;

3) An increase in the growth rate of aggregate spending is not the same as an increase in the equilibrium rate of inflation;

4) An increase in aggregate spending succeeds in raising the rate of inflation only in so far as it fails to increase output and employment.

I submit these old-fashioned monetarist heresies for the consideration of all those who think that an increased target rate of inflation will help us out of our present economic quagmire.

One Response to “Four Old-Fashioned Monetarist Heresies”

  1. avatar Kevin H says:

    Old fashioned heresies, but well worth considering for today. Also, was Yeager's paper Inflation, Output, and Employment an influence on this post at all? I'm reading through his book The Fluttering Veil (edited by some eminent economist whose name escapes me right now) and he made essentially these points in that essay.

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