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Is inflation caused by conflict?

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  • Nicolás Cachanosky
  • Emilio Ocampo

Abstract

We offer a critique of a paper recently published Lorenzoni and Werning (2023) that seeks to make an original contribution to the hypothesis that inflation is primarily caused by conflict and reconcile the Post-Keynesian and New-Keynesian traditions. L&W’s paper has two sections. In the first they develop a barter model that allows them to prove that inflation can occur with conflict and without money. In the second they incorporate the conflict hypothesis into a broader framework compatible with New Keynesian models. We question the logical consistency and empirical validity of the barter model and the testability of the model with staggered pricing assumptions. We also trace the ideological roots of inflation as conflict hypothesis and highlight the policy implications that must be logically derived from it.

Suggested Citation

  • Nicolás Cachanosky & Emilio Ocampo, 2023. "Is inflation caused by conflict?," CEMA Working Papers: Serie Documentos de Trabajo. 852, Universidad del CEMA.
    • Handle: RePEc:cem:doctra:852
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    References listed on IDEAS

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    1. Ricardo J. Caballero, 2010. "Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 85-102, Fall.
    2. Matias Vernengo, 2005. "Money and Inflation: A Taxonomy," Working Paper Series, Department of Economics, University of Utah 2005_14, University of Utah, Department of Economics.
    3. Olivera, Julio H G, 1970. "On Passive Money," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 805-814, Part II J.
    4. Marc Lavoie, 2014. "Post-Keynesian Economics: New Foundations," Post-Print hal-01343652, HAL.
    5. Rowthorn, R E, 1977. "Conflict, Inflation and Money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 1(3), pages 215-239, September.
    6. Greenfield, Robert L & Yeager, Leland B, 1983. "A Laissez-Faire Approach to Monetary Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 302-315, August.
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    More about this item

    Keywords

    conflict; inflation;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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