Inflation: Its Mechanics and Welfare Costs
Инфляция: ее механизмы и издержки для благосостояния
1975-01-01
SCID: 54.1/bksw89d4
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auction marketscustomer marketsinflation persistenceinflationary recessionstagflation
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Abstract (AI)
ECONOMISTS CONTINUE to be baffled by the mystery of inflationary recession (or stagflation) that has been experienced by industrialized countries during the 1970s. What causes inflation to churn on and on even after excess demand disappears? This whodunit is the latest in a long series that reflects the inadequacy of current theory in explaining the mechanics of how inflation proceeds once it has begun. In this paper, I shall sketch an interpretation of the persistence of inflation based on an interaction of "customer" or "career" markets, in which prices and wages do not equate supply and demand, with "auction" markets, in which prices do reliably clear markets.
Key Findings
1
Auction markets reliably clear markets, and their interaction with non-clearing markets provides the proposed mechanics of inflationary recession or stagflation.
2
In customer or career markets, prices and wages do not necessarily equilibrate supply and demand, allowing inflationary pressures to persist.
3
The paper argues that existing economic theory inadequately explains how inflation continues once it has begun, motivating its alternative interpretation.
4
The paper explains persistent inflation after excess demand disappears through interactions between customer or career markets and auction markets.
Research Object
inflation persistence during inflationary recession (stagflation) in industrialized countries
Research Subject
the mechanics and welfare costs of persistent inflation, explained through interactions between customer/career markets and auction markets
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1975-01-01
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