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The Great Inflation in Italy: A Political Economy View - La Grande Inflazione in Italia: un’interpretazione alla luce della political economy

Author

Listed:
  • Pittaluga, Giovanni Battista

    (Università di Genova; Facoltà di Scienze Politiche; Dipartimento di Scienze Economiche e Finanziarie)

  • Seghezza, Elena

    (Università di Genova, Dipartimento di Economia e Metodi Quantitativi)

Abstract

The prevalent reinterpretations of the Great Inflation formulated in recent periods attribute the inflationist acceleration of the 1970s mainly to the fact that policymakers at the time based themselves on ‘mistaken’ economic ideas, above all the traditional Phillips curve. However, the Italian Great Inflation lasted too long to be considered the outcome of behavioural mistakes. Besides, the monetary authorities, in particular the Bank of Italy governor Baffi, were aware of the high costs of inflation, but they were impotent in the face of the inflationary preferences of society. The high level and the persistence of Italy’s Great Inflation can be attributed to the choice of policymakers supported by an alliance between interest groups protected from inflation, in particular between workers and businessmen. These interest groups favored an ample redistributive process by means of inflation to the detriment of those holding financial assets, i.e., the rentiers. - Le interpretazioni prevalenti della Grande Inflazione formulate nel periodo recente attribuiscono l’accelerazione inflazionistica degli anni Settanta in gran parte al fatto che i policymaker del tempo si basarono su idee economiche “sbagliate”, in particolare sulla curva di Phillips tradizionale. Tuttavia, la Grande Inflazione italiana durò troppo a lungo per essere considerata il risultato di errori di comportamento delle autorità monetarie. Queste ultime, inoltre, in particolare il governatore della Banca d’Italia, Baffi, erano dichiaratamente consapevoli degli alti costi dell’inflazione, ma erano impotenti rispetto alle preferenze inflazionistiche della società. Il livello elevato e la persistenza della Grande Inflazione italiana possono essere attribuiti alle scelte dei policymaker, sostenute e sollecitate da un’alleanza tra gruppi di interesse protetti dall’inflazione, in particolare da lavoratori e imprese. Questi gruppi di interesse favorirono un ampio processo redistributivo attraverso l’uso dell’inflazione in modo da traslare i costi di aggiustamento dello shock petrolifero sui detentori di attività finanziarie, i rentiers.

Suggested Citation

  • Pittaluga, Giovanni Battista & Seghezza, Elena, 2012. "The Great Inflation in Italy: A Political Economy View - La Grande Inflazione in Italia: un’interpretazione alla luce della political economy," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 65(1), pages 65-81.
    • Handle: RePEc:ris:ecoint:0639
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    References listed on IDEAS

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    More about this item

    Keywords

    Great Inflation; Interest Groups;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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