The Anatomy of Inflation: An Economic History Perspective

Prepared for the Handbook of the History of Money and Currency (Vienna: Springer), edited by S. Battilosi, Y. Cassis, and K. Yago, Forthcoming

CAMA Working Paper No. 8/2018

41 Pages Posted: 19 Jan 2018

See all articles by Martin T. Bohl

Martin T. Bohl

University of Muenster

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Date Written: January 18, 2018

Abstract

In an important sense the present survey reaches a conclusion similar to the one highlighted by Laidler and Parkin (1975) over forty years ago. Inflation, if fully anticipated, produces modest social costs. We are no closer to knowing what is ‘optimal’ inflation except that low and stable inflation come closest to reducing the loss of purchasing power of money. Because prices of goods and services incorporate elements that are difficult to measure precisely we cannot even be sure what the actual level of inflation really is. Hence, what is deemed low may well differ across countries and across time. Nevertheless, avoiding inflation is not only desirable because it represents a form of taxation without representation but, in theory at least, low and stable inflation ought to be more easily forecasted thereby reducing the likelihood of large and persistent forecast errors.

Suggested Citation

Bohl, Martin T. and Siklos, Pierre L., The Anatomy of Inflation: An Economic History Perspective (January 18, 2018). Prepared for the Handbook of the History of Money and Currency (Vienna: Springer), edited by S. Battilosi, Y. Cassis, and K. Yago, Forthcoming, CAMA Working Paper No. 8/2018, Available at SSRN: https://ssrn.com/abstract=3105113

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

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