1. The return of inflation: Can we protect real incomes?
- Author:
- Manos Matsaganis and Sotiria Theodoropoulou
- Publication Date:
- 11-2022
- Content Type:
- Working Paper
- Institution:
- Hellenic Foundation for European and Foreign Policy (ELIAMEP)
- Abstract:
- High inflation, virtually unknown in advanced economies since the 1980s, has made a comeback. In this policy paper, we first explain where inflation comes from, and describe how the policy context for dealing with it was shaped after Keynesian demand management proved unable to defeat stagflation. We then critically examine the various policy options. Generally speaking, policy makers may attempt to (i) contain inflation by raising interest rates or, more directly, by controlling prices, (ii) alleviate the impact of inflation on household budgets through price subsidies or income transfers, and (iii) protect workers’ real incomes via wage indexation and social pacts. We conclude by assessing the merits, costs, and distributional implications of each option in turn.
- Topic:
- Economy, Inflation, and Income
- Political Geography:
- Europe and Global Focus