Resurgence of inflation: Assessing the role of macroeconomic policies

After decades of relative consumer price stability, inflation is now making a come-back as a central topic in economic and political discussions, against a backdrop of various policy challenges. The aim of this paper is to provide a nuanced assessment of the different channels through which monetary...

Descripción completa

Guardado en:
Detalles Bibliográficos
Autores principales: Raza, Hamid, Laurentjoye, Thibault, Byrialsen, Mikael Randrup, Valdecantos, Sebastián
Formato: Documento de trabajo publishedVersion
Lenguaje:Inglés
Publicado: PKES 2023
Materias:
Macroeconomía
Política Económica
Inflación
Acceso en línea:https://nulan.mdp.edu.ar/id/eprint/4080/
https://nulan.mdp.edu.ar/id/eprint/4080/1/raza-etal-2023.pdf
Aporte de:
Nulan - Fac.Cs.Económicas (UNMdP) de Universidad Nacional de Mar del Plata (UNMdP)
id I29-R135-4080
record_format dspace
spelling I29-R135-40802025-05-14T13:05:22Z Resurgence of inflation: Assessing the role of macroeconomic policies Raza, Hamid Laurentjoye, Thibault Byrialsen, Mikael Randrup Valdecantos, Sebastián After decades of relative consumer price stability, inflation is now making a come-back as a central topic in economic and political discussions, against a backdrop of various policy challenges. The aim of this paper is to provide a nuanced assessment of the different channels through which monetary, fiscal and income policies can affect prices and output in a small open economy, as well as discuss which policy measures are desirable and practically feasible when such an economy experiences inflationary shocks. To do so, we adopt a comprehensive modelling approach and build an empirical stock-flow-consistent model using sectoral national account data for Denmark over the period 2005Q1-2020Q1. We then replicate the inflationary environment in which Denmark and several other countries are currently operating and introduce a monetary policy reaction which leads to a modest reduction in inflation at the cost of further contracting the economy. Taking monetary tightening as a forced policy response in the case of a small open economy with fixed exchange rate, we explore a number of policies that, within the current institutional and legal framework, can potentially mitigate the adverse effects of inflation. Specifically, we introduce fiscal interventions - in the form of tax cuts on income and production - along with wage- and price-based income policies. Our main conclusion is that a close coordination of fiscal and income policies can help reduce the effects of adverse shocks to income without increasing inflation. Finally, we address a question of political relevance by exploring the effects of different policies on public budget and debt. Overall, we find that of all the policies implemented, monetary policy has the most dramatic effects on public debt sustainability. PKES 2023-01 https://nulan.mdp.edu.ar/id/eprint/4080/ application/pdf eng https://nulan.mdp.edu.ar/id/eprint/4080/1/raza-etal-2023.pdf https://www.postkeynesian.net/downloads/working-papers/PKWP2301.pdf Dinamarca info:eu-repo/semantics/workingPaper info:ar-repo/semantics/documento de trabajo info:eu-repo/semantics/publishedVersion Fil: Raza, Hamid. Aalborg University. MaMTEP. Aalborg University Business School; Denmark. Fil: Laurentjoye, Thibault. Aalborg University. MaMTEP. Aalborg University Business School; Denmark. Fil: Byrialsen, Mikael Randrup. Aalborg University. MaMTEP. Aalborg University Business School; Denmark. Fil: Valdecantos, Sebastián. Aalborg University. MaMTEP. Aalborg University Business School; Denmark. Macroeconomía Política Económica Inflación info:eu-repo/semantics/openAccess https://creativecommons.org/licenses/by-nc-nd/4.0/deed.es
institution Universidad Nacional de Mar del Plata (UNMdP)
institution_str I-29
repository_str R-135
collection Nulan - Fac.Cs.Económicas (UNMdP)
language Inglés
orig_language_str_mv eng
topic Macroeconomía
Política Económica
Inflación
spellingShingle Macroeconomía
Política Económica
Inflación
Raza, Hamid
Laurentjoye, Thibault
Byrialsen, Mikael Randrup
Valdecantos, Sebastián
Resurgence of inflation: Assessing the role of macroeconomic policies
topic_facet Macroeconomía
Política Económica
Inflación
description After decades of relative consumer price stability, inflation is now making a come-back as a central topic in economic and political discussions, against a backdrop of various policy challenges. The aim of this paper is to provide a nuanced assessment of the different channels through which monetary, fiscal and income policies can affect prices and output in a small open economy, as well as discuss which policy measures are desirable and practically feasible when such an economy experiences inflationary shocks. To do so, we adopt a comprehensive modelling approach and build an empirical stock-flow-consistent model using sectoral national account data for Denmark over the period 2005Q1-2020Q1. We then replicate the inflationary environment in which Denmark and several other countries are currently operating and introduce a monetary policy reaction which leads to a modest reduction in inflation at the cost of further contracting the economy. Taking monetary tightening as a forced policy response in the case of a small open economy with fixed exchange rate, we explore a number of policies that, within the current institutional and legal framework, can potentially mitigate the adverse effects of inflation. Specifically, we introduce fiscal interventions - in the form of tax cuts on income and production - along with wage- and price-based income policies. Our main conclusion is that a close coordination of fiscal and income policies can help reduce the effects of adverse shocks to income without increasing inflation. Finally, we address a question of political relevance by exploring the effects of different policies on public budget and debt. Overall, we find that of all the policies implemented, monetary policy has the most dramatic effects on public debt sustainability.
format Documento de trabajo
Documento de trabajo
publishedVersion
author Raza, Hamid
Laurentjoye, Thibault
Byrialsen, Mikael Randrup
Valdecantos, Sebastián
author_facet Raza, Hamid
Laurentjoye, Thibault
Byrialsen, Mikael Randrup
Valdecantos, Sebastián
author_sort Raza, Hamid
title Resurgence of inflation: Assessing the role of macroeconomic policies
title_short Resurgence of inflation: Assessing the role of macroeconomic policies
title_full Resurgence of inflation: Assessing the role of macroeconomic policies
title_fullStr Resurgence of inflation: Assessing the role of macroeconomic policies
title_full_unstemmed Resurgence of inflation: Assessing the role of macroeconomic policies
title_sort resurgence of inflation: assessing the role of macroeconomic policies
publisher PKES
publishDate 2023
url https://nulan.mdp.edu.ar/id/eprint/4080/
https://nulan.mdp.edu.ar/id/eprint/4080/1/raza-etal-2023.pdf
work_keys_str_mv AT razahamid resurgenceofinflationassessingtheroleofmacroeconomicpolicies
AT laurentjoyethibault resurgenceofinflationassessingtheroleofmacroeconomicpolicies
AT byrialsenmikaelrandrup resurgenceofinflationassessingtheroleofmacroeconomicpolicies
AT valdecantossebastian resurgenceofinflationassessingtheroleofmacroeconomicpolicies
_version_ 1833882693717196800

Ejemplares similares