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Macroeconomic susceptibility, inflation, and aggregate supply

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  • Hawkins, Raymond J.

Abstract

We unify aggregate-supply dynamics as a time-dependent susceptibility-mediated relationship between inflation and aggregate economic output. In addition to representing well various observations of inflation–output dynamics this parsimonious formalism provides a straightforward derivation of popular representations of aggregate-supply dynamics and a natural basis for economic-agent expectations as an element of inflation formation. Our formalism also illuminates questions of causality and time-correlation that challenge central banks for whom aggregate-supply dynamics is a key constraint in their goal of achieving macroeconomic stability.

Suggested Citation

  • Hawkins, Raymond J., 2017. "Macroeconomic susceptibility, inflation, and aggregate supply," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 469(C), pages 15-22.
    • Handle: RePEc:eee:phsmap:v:469:y:2017:i:c:p:15-22
    DOI: 10.1016/j.physa.2016.10.075
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