New Developments in the theory of inflation. Jacques SAPIR, PhD. Professor of Economics, EHESS-Paris Director CEMI-EHESS -Paris Sapir@msh-paris.fr. Lecture 1. The classical Theory of Inflation. The historical debate. The monetarist counter-revolution and beyond.
Jacques SAPIR, PhD.
Professor of Economics,
Director CEMI-EHESS -Paris
Of the price
Price adjustments are not optimal through lack of time to process information.
Strong follow-the-leader process among enterprises in the same sector.
Strong strategic complementarity among different sectors
(variables in log)
p(t) = f (p(t-n))
Spontaneous indexation effect
p(xi) = f (p (xL) )
Monopolistic pricing even in a competitive market.
p (xA) = f (p (xB) )
Cross-sectoral indexation.Part-2: Model of inflation with Sticky Information and the new synthesis
p*k = p + ak x + E k
p = ∑ (t ki * p ki )
p*k = standard price growth in sector k
p = CPI
ak = sector k sensibility to the global business cycle.
x = output gap
EK = endogeneous shocks in sector k
Strong inertial component, not linked to market imperfections in inflation dynamics (up to 7 quarters).
Strong negative effect of stabilisation policies on output.
Adjustment to the output gap at the enterprise level could generate effects leading to more inflationary pressures.
There is a minimum threshold for inflation in each economy, and it is > 0.Gregory Mankew and Ricardo Reis models: Keynesian dynamics from former monetarist authors...