Abstract
This article sets out to demonstrate that every economy at a specific time has its inherent, quite definite, rate of inflation. Inflation rates may vary widely depending on economic situation and should be estimated in a dynamic perspective. They include a component associated with the degree of transformation of production facilities, which determines the “normal” rate of inflation. Another component, reflecting the influence of extra investment, which may prove necessary to compensate for the previous period of decapitalization of the Russian economy, varies through the investment cycle. This makes it possible to forecast inflation fluctuations around the “normal” rate; their recognition should be the basis for establishing a socially and politically acceptable rate of inflation within a particular development strategy.
Similar content being viewed by others
References
F. Hahn, Equilibrium and Macroeconomics (Basil Blackwell, Oxford).
F. Hahn, “Professor Friedman’s Views on Money,” Economica 38(1) (1980).
F. Hahn, “Monetarism and Economic Theory,” Economica 47(1) (1980).
K. J. Arrow, “Optimal Capital Policy, the Cost of Capital and Myopic Decision Rules,” Ann. Inst. Stat. Math. 16 (1964).
J. Stiglitz, “The Inefficiency of the Stock Market Equilibrium,” Rev. Econ. Stud. 64(2) (1982).
J. Tobin and K. Buiter, “Long-run Effects of Fiscal and Monetary Policy on Aggregate Demand,” in Monetarism, Ed by J. Stain (North Holland, Amsterdam, 1976).
F. Hahn, “Keynesian Economics and General Equilibrium Theory: Reflections on Some Currents Debates,” in The Microeconomic Foundations of Macroeconomics, Ed. By G.C. Harcourt (Macmillan, London, 1977).
R. E. Lucas, “An Equibobrium Model of Business Cycle,” J. Polit. Econ. 83 (1975); R.E. Lucas, Studies in Business Cycle Theory (MIT Press, Cambridge, Mass., 1981).
M. Ezekiel, “The Cobweb Theorem,” Quart. J. Econ. 52(1) (1937–1938).
B. C. Greenwald and J. E. Stiglitz, “Toward a Theory of Rigidities,” Am. Econ. Rev. 79(2) (1989).
J. E. Stiglitz, “Toward a General Theory of Wage and Price Rigidities and Economic Fluctuations,” Am. Econ. Rev. 79(2) (1989).
R. J. Arnott and J. E. Stiglitz, “Labor Turnover, Wage Structures, and Moral Hazard: The Inefficiency of Competitive Markets,” J. of Lab. Econ. 3(4) (1985).
G. A. Akerlof, W. T. Dickens, and G. L. Perry, “The Macroeconomics of Low Inflation,” Brookings Papers on Economic Activity, No. 1 (1996).
T. M. Andersen, “Can Inflation Be Too Low?,” Kyklos, Vol. 54,Fasc. 4.
G. A. Akerlof and J. L. Yellen, “Can Small Deviations from Rationality Make Significant Difference to Economic Equilibria?,” Am. Econ. Rev. 75(4) (1985).
G. A. Akerlof and J. L. Yellen, “A Near-Rational Model on the Business Cycle with Wage and Price Inertia,” Quar. J. Econ., Suppl. to 100(5) (1985).
G. A. Akerlof, “Behavioral Macroeconomics and Macro-economic Behavior,” Am. Econ. Rev. 92(3) (2002).
E. Kuh and J. R. Meyer, The Investment Decision: An Empirical Study (Havard Univ. Press, Cambridge, Mass., 1957).
R. J. Shiller, “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?,” Am. Econ. Rev. 71(3) (1981).
B. C. Greenwald and J. E. Stiglitz, “Asymmetric Information and the New Theory of the Firm: Consraints and Risk Behavior,” Am. Econ. Rev. 80(2) (1990).
B. Klein, R. Crawford, and A. Alchian, “Vertical Integration, Appropriable Rents and the Competitive Contractings System,” J. Law Econ. 21 (1978).
A. Alchian, “Specificity, Specialization and Coalitions,” J. Econ. Theory Inst., No. 140 (1984).
O. Williamson, “Credible Commitments: Using Hostage to Support Exchange,” Am. Econ. Rev. 73(2) (1983).
R. Cantillon, Essai sur la nature du commerce en General, reedition à partir de l’edition de 1755, avec comment., sous la direct. de A. Sauvy (INED, Paris, 1952).
F. A. Hayek, “Intertertemporal Price Equilibrium and Movements in the Value of Money,” publ. in German in 1928, reprint. in 1984.
J. E. Stiglitz, “Information and the Change in the Paradigm in Economics,” in Money, Capital and Fluctuations: Early Essays (Routledge and Kegan Paul, London, 1984).
S. J. Grossman and J. E. Stiglitz, “Information and Competitive Systems,” Am. Econ. Rev. 66(2) (1976).
S. J. Grossman and J. E. Stiglitz, “On the Impossibility of Informationally Efficient Markets,” Am. Econ. Rev. 70(3) (1980).
H. Simon, “Organization and Markets,” J. Econ. Perspect. 5(2) (1991).
Additional information
Original Russian Text © Jacques Sapir, 2006.
__________
Translated from the French.
Rights and permissions
About this article
Cite this article
Sapir, J. What should the inflation rate be? (On the importance of a long-standing discussion for defining today’s development strategy for Russia). Stud. Russ. Econ. Dev. 17, 240–247 (2006). https://doi.org/10.1134/S1075700706030026
Issue Date:
DOI: https://doi.org/10.1134/S1075700706030026