Abstract
In the first subsection of this chapter we will discuss what a desirable economic policy response to a price level surge, such as that caused by sharply rising energy prices, would look like.
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Notes
- 1.
There were also a number of countries that showed a decreasing Gini coefficient for disposable income, such as France from 34.0 in 1979 to 30.7 in 2019.
- 2.
Given the marginal saving rate the volume of saving depends on the volume of investment and not the other way round (Heine & Herr 2013).
- 3.
For example, in Germany, two-thirds of the economic slump (GDP fell by minus 4.1% in 2020) was due to disrupted supply chains and the global collapse in demand (Dullien 2020, p. 147).
- 4.
Wray (2007, p. 24) relies on flexible exchange rates in this context: “A floating exchange rate and currency sovereignty provide the ‘degree of freedom’ that allows the government to spend without worrying that increased employment and higher demand will threaten an exchange rate peg. Thus, fiscal policy is ‘freed’ to pursue other objectives, rather than being held hostage to maintenance of the peg. By the same token, monetary policy can set the overnight interest rate to achieve other goals, rather than being determined by the rate consistent with pegging the exchange rate.“ This ignores hundreds of currency crises, including in the Global North.
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Heine, M., Herr, H. (2024). Conclusions and Recommendations. In: The Resurgence of Inflation. Financial and Monetary Policy Studies, vol 57. Springer, Cham. https://doi.org/10.1007/978-3-031-52740-1_6
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