Abstract
In Chapter 9, Section 9.4, we defined inflation as a process of continually rising prices, and outlined how it can be measured. In addition we discussed the economic, social and political costs associated with inflation. You will recall that the main costs of inflation arise when inflation is imperfectly anticipated. The purpose of this chapter is to examine the debate over the causes of, and cures for, inflation. This debate can be conveniently divided into two main explanations of inflation involving monetarist and non-monetarist views. We begin our discussion with the monetarist explanation, which embodies two of the most famous relationships that exist in macroeconomics: the quantity theory of money, and the (expectations-augmented) Phillips curve.
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Further reading
Dawson, G. Inflation and Unemployment: Causes, Consequences and Cures (Aldershot: Edward Elgar, 1992). A thoughtful, lucid and comprehensive guide to the issues of both inflation and unemployment.
Friedman, M. Unemployment versus Inflation? (London: Institute of Economic Affairs, 1975). A very clear and accessible evaluation of the Phillips curve written by the most famous living economist in the world.
Vane, H. R. and J. L. Thompson An Introduction to Macroeconomic Policy (4th ed.) (Hemel Hempstead: Harvester Wheatsheaf, 1993). Chapters 3 and 12 provide more detailed discussion of the role of money and monetary policy respectively.
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© 1999 Chris Mulhearn and Howard R. Vane
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Mulhearn, C., Vane, H.R. (1999). Inflation: Causes and Cures. In: Economics. Macmillan Foundations. Palgrave, London. https://doi.org/10.1007/978-1-349-14437-2_12
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DOI: https://doi.org/10.1007/978-1-349-14437-2_12
Publisher Name: Palgrave, London
Print ISBN: 978-0-333-69183-0
Online ISBN: 978-1-349-14437-2
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