The Economics of High Inflation
This book describes the complex of economic processes which sustains inflationary pressure in nations with severe inflation problems. Paul Beckerman uses an innovative approach to study the strategies inhabitants of economies with lengthy inflation experi
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The Economics of High Inflation Paul Beckerman
© Paul Beckerman 1992
Softcover reprint of the hardcover 1st edition 1992
All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WI P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1992 by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire R021 2XS and London Companies and representatives throughout the world ISBN 978-1-349-21715-1
ISBN 978-1-349-21713-7 (eBook)
DOI 10.1007/978-1-349-21713-7
A catalogue record for this book is available from the British Library. ltansferred to digital printing 1999
Contents Acknowledgements and Disclaimer
viii
1 The Inflation Enigma
1
2 Why Inflation is "a Bad Thing"
8
1
2 3 4 5 6
7
Introduction: Why inflation is an economic problem Expected inflation and the disposition to hold money Inflation surprises Price-level uncertainty Relative-price dispersion Hyperinflation Conclusion: Why "ideal," "semi-ideal," "neutral," and real-life inflations are "bad"
1
4
5 6
7 8
14 16 20 24 25 27
3 Inflation Feedback
2 3
8 9
Monetary abundance Money creation "Monetarist," "structuralist," "demand-pull," and "cost-push" approaches to inflation Inflation feedback Inflation feedback through the public-sector budget Inflation feedback through the external accounts Inflation feedback through aggregate supply Conclusion
27 28 32 36 40 44 46 48
4
Inflation Feedback and Competition for Purchasing Power
50
I
Introduction The monetary system in the inflation process Competition for purchasing power Inflation feedback and purchasing-power competition The "pcaks-and-valleys" metaphor for contracted prices under inflation
50 51 53 56
2 3 4 5
v
58
VI
6
7 8 9
Contents An economic entity's capacity to engage in inflationary competition Contracts and credit creation Inflationary competition and the public sector "Inflationary competition"
5 Inflation and Financial Systems I
2 3 4 5 6
Introduction "Financial repression" Circumvention and acceptance of repressive controls on interest rates Non-positive market-clearing real interest rates The consequences of inflationary expectations, variability, uncertainty, and dispersion for financial markets Financial markets and inflation feedback
6 The Dilemmas of Inflation-Stabilization Policy I
2 3 4 5 6 7 8 9
Introduction "Gradualist" and "shock" approaches to stabilization Restrictive monetary policy Restrictive fiscal policy The consequences of raising real interest rates Comprehensive wage and price controls Selective price controls Wage controls Conclusion
7 Inflation Stabil
