The Resurgence of Inflation: Lessons from History and Policy Recommendations (Financial and Monetary Policy Studies, 57)

In light of the resurgence of inflation in developed industrialised countries following a period of inordinately low inflation, this book analyses the causes and devastating effects of inflation by drawing lessons from the past. Focusing on the German hyperinflation of the 1920s and the inflationary waves of the 1970s, it examines the resulting economic crises and their influence on the subsequent periods of social and political turmoil, namely the fascism of the 1930s and the neoliberal revolution of the 1980s. Featuring five detailed case studies on inflationary waves in various countries in the 1970s, the book identifies economic policy errors of the past, seeking to prevent their recurrence. Offering empirical and theoretical insights alike, the authors present strategies for effectively combating inflation and deflation. In turn, the book assesses the complex ties between wage increases, income distribution, and price changes, ultimately providing valuable recommendations on how wage policy can be used to stabilise price level increases at a low level in a world characterised by diverse and extreme economic shocks. “The Resurgence of Inflation” fosters a vital discourse on wage and price dynamics, economic development and the role of trade unions, making it an essential read for policymakers, economists, and anyone seeking a deeper understanding of today’s economic challenges. Preface Reference Contents Abbreviations List of Figures List of Tables 1 Introduction References 2 The German Hyperinflation of 1923 References 3 Macroeconomic Development from the Late-1960s to the Mid-1980s References 4 Inflation and Macroeconomic Management in Selected Countries from the Late-1960s to the Mid-1980s 4.1 The Federal Republic of Germany—Confrontation Between Wage Development and Monetary Policy 4.2 US—Inflation and the Erosion of the International Role of the US Dollar 4.3 The United Kingdom—Dysfunctional Trade Union Structure, Wages and Inflation 4.4 Italy—An Example of Dangerous Muddling Through During Periods of Economic and Political Turbulence 4.5 Comparison of Developments in the Different Countries 4.5.1 GDP Growth and Employment 4.5.2 Development of Wages and Prices 4.5.3 Monetary Policy 4.5.4 Fiscal Policy 4.6 Summary References 5 Deflationary Tendencies After the 2008 Financial Crisis, the Covid-19 Pandemic and Stagflation After the Energy Shock 5.1 Low Inflation and Deflationary Tendencies After the 2008 Financial Crisis 5.2 The Euro Crisis Starting in 2010 5.3 The Covid-19 Pandemic Starting in 2020 5.4 Energy Price Shock and Stagflation After 2022 References 6 Conclusions and Recommendations 6.1 Macroeconomic Management After Price Shocks 6.2 Longer-Term Economic Policy Recommendations References 7 Theoretical Explanations for Price Level Changes 7.1 The Keynesian Approach to Explaining Inflation 7.2 Extreme Price Level Developments—Hyperinflation and Deflation 7.3 The Failure of the Quantity Theory of Money 7.4 The Nominal Wage Anchor and Exchange Rate Anchor as Central Stabilisers 7.5 Market Power, Price Level Development and Distribution 7.6 Oil Prices, Price Level and Economic Development References