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Moving from Inflation Targeting to Prices and Incomes Policy

Listed author(s):
  • Philip Arestis

    ()

    (Department of Land Economy, University of Cambridge, UK)

  • Malcolm Sawyer

    ()

    (Economics Division, University of Leeds, UK)

This paper focuses on the future of economic policies with regard to inflation. The dominant approach to inflation over the past two decades or so has been inflation targeting. The global environment of the decade circa 1995 to 2005 with the “China effect†pushing down prices of manufactured goods and with primary commodity prices being subdued was conducive to low inflation. It is argued that inflation targeting has not been a great success story and is unable to address inflation arising from global forces or from struggles over the distribution of income. It is argued that a more sophisticated analysis than that contained in the Phillips curve is required. Further, and from our analysis, counter inflation policies should include the achievement of an inflation barrier consistent with full employment without inflationary pressures. This can be addressed by ensuring that there is sufficient productive capacity to underpin full employment, where sufficient is to be interpreted in terms of quantity, quality and geographical distribution. Further, we argue that this should be complemented by some form of incomes policy, to enable inflation to be contained without resorting to demand deflation.

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Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 60 (2013)
Issue (Month): 1 (March)
Pages: 1-17

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Handle: RePEc:voj:journl:v:60:y:2013:i:1:p:1-17
Contact details of provider: Web page: http://www.panoeconomicus.rs/

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  1. M. Woodford., 2010. "Convergence in Macroeconomics: Elements of the New Synthesis," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
  2. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
  3. Philip Arestis, 2011. "Fiscal Policy Is Still an Effective Instrument of Macroeconomic Policy," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(2), pages 143-156, June.
  4. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, vol. 111(471), pages 45-61, May.
  5. Atish Ghosh & Steven Phillips, 1998. "Warning: Inflation May Be Harmful to Your Growth," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 672-710, December.
  6. Marvin Goodfriend & Robert King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296 National Bureau of Economic Research, Inc.
  7. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  8. Alvaro Angeriz & Philip Arestis, 2008. "Assessing inflation targeting through intervention analysis," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 293-317, April.
  9. Alvaro Angeriz & Philip Arestis, 2007. "Monetary policy in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 31(6), pages 863-884, November.
  10. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
  11. Michael Bruno & William Easterly, 1996. "Inflation and growth: in search of a stable relationship," Review, Federal Reserve Bank of St. Louis, issue May, pages 139-146.
  12. Philip Arestis & Malcolm Sawyer, 2005. "Aggregate demand, conflict and capacity in the inflationary process," Cambridge Journal of Economics, Oxford University Press, vol. 29(6), pages 959-974, November.
  13. By Mohsin S. Khan & Abdelhak S. Senhadji, 2001. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-1.
  14. Claude Gnos & Louis-Philippe Rochon (ed.), 2006. "Post-Keynesian Principles of Economic Policy," Books, Edward Elgar Publishing, number 3407.
  15. Alvaro Angeriz & Philip Arestis, 2007. "Assessing the Performance of 'Inflation Targeting Lite' Countries," The World Economy, Wiley Blackwell, vol. 30(11), pages 1621-1645, November.
  16. Philip Arestis & Michelle Baddeley & Malcolm Sawyer, 2007. "The Relationship Between Capital Stock, Unemployment And Wages In Nine Emu Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 59(2), pages 125-148, 04.
  17. Philip Arestis & Malcolm Sawyer, 2010. "What Monetary Policy after the Crisis?," Review of Political Economy, Taylor & Francis Journals, vol. 22(4), pages 499-515.
  18. Philip Arestis & Malcolm Sawyer, 2008. "A critical reconsideration of the foundations of monetary policy in the new consensus macroeconomics framework," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 761-779, September.
  19. Philip Arestis, 1986. "Wages and Prices in the UK: The Post Keynesian View," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 8(3), pages 339-358, April.
  20. Malcolm Sawyer, 2009. "Interest rates and inflation: What are the links?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(1), pages 81-96.
  21. Michael J. Dueker & Andreas M. Fischer, 2006. "Do inflation targeters outperform non-targeters?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 431-450.
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