A Dangerous Path?
Some American economists are now touting the notion that
higher inflation will ease US economic difficulties. Pursuit of higher inflation is a very risky approach as hard won central bank
credibility (established primarily through the actions of the Volcker Fed in the late 70s
and early 80s) maybe squandered for very little gain.
If faster increases in price levels (that is, higher rate of
inflation) could fix structural problems, then most macroeconomic problems can
be solved with ease. However, printing more money does not lead to sustained
growth.
http://www.nytimes.com/2013/10/27/business/economy/in-fed-and-out-many-now-think-inflation-helps.html
Meanwhile,
An interesting piece in The Economist highlights the
importance of the ‘natural rate’:
http://www.economist.com/news/finance-and-economics/21588354-central-banks-ignore-century-old-observation-their-peril-natural
---
---
Update:
WSJ Op-Ed: Ronald McKinnon: Tapering Without Tears—How to
End QE3