The Resurgence of Inflation

Lessons from History and Policy Recommendations

verfasst von: Michael Heine, Hansjörg Herr

Verlag: Springer Nature Switzerland

Buchreihe : Financial and Monetary Policy Studies

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

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.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract

Inflationary processes seemed to be a thing of the past until the early 2020s. Up to that point, throughout countries of the Global South central banks and economic policymakers in general were faced with the challenge of averting deflationary dangers. The increase in energy and food prices which started in the early 2000s and has been significantly accelerated by the war in Ukraine, has reintroduced the problem of inflation and highlighted the need for policies that will curb inflationary developments. This introductory chapter outlines the structure of this book, on the basis of which the causes of primarily inflationary, but also deflationary, processes can be identified, and economic policy conclusions drawn.

Michael Heine, Hansjörg Herr

Chapter 2. The German Hyperinflation of 1923

Abstract

The German hyperinflation of 1923 provides an example of the political and economic driving forces that can cause hyperinflations. After Germany’s defeat in the First World War, there was a threat of a socialist revolution. In order to avoid it, numerous reforms and social concessions were offered, but these were financed at the cost of rising government debt. In addition, reparation payments burdened Germany with high foreign debt. This constellation led to a wage-price spiral. But the key driving force of the hyperinflation was the collapse of the exchange rate and rising import prices which further stimulated higher wages and prices. Central bank money then endogenously increased as the central bank lost its control over money supply.

Michael Heine, Hansjörg Herr

Chapter 3. Macroeconomic Development from the Late-1960s to the Mid-1980s

Abstract

The inflationary processes during the 1970s cannot be understood without considering the transition from the Bretton Woods system to a system of flexible exchange rates. This shift was accompanied by the illusion that less attention would have to be paid to external stability and that domestic policy objectives could be followed more closely than before. At the same time, the sharp oil price hikes in 1973 and 1979 created price shocks as well as sharply falling aggregate demand. The result was erratically fluctuating exchange rates, high inflation rates, high nominal wage increases, escalating current account balances, poor real GDP growth rates and soaring unemployment. The type of capitalism established after the Second World War entered a period of deep crisis.

Michael Heine, Hansjörg Herr

Chapter 4. Inflation and Macroeconomic Management in Selected Countries from the Late-1960s to the Mid-1980s

Abstract

In this chapter we discuss, in detail, developments in the Federal Republic of Germany, until the unification in 1990 also known as West Germany, the US, the United Kingdom and Italy from the end of the 1960s to the mid-1980s.

Michael Heine, Hansjörg Herr

Chapter 5. Deflationary Tendencies After the 2008 Financial Crisis, the Covid-19 Pandemic and Stagflation After the Energy Shock

Abstract

The explanations given so far may give the impression that only inflationary processes can develop into system-threatening crises. However, this impression would be incorrect. Deflationary processes are also capable of developing into crises, a particularly vivid example of this would be the Great Depression of the 1930s.

Michael Heine, Hansjörg Herr

Chapter 6. Conclusions and Recommendations

Abstract

In the first subsection of this chapter we will discuss what a desirable economic policy response to a price level surge, such as that caused by sharply rising energy prices, would look like.

Michael Heine, Hansjörg Herr

Chapter 7. Theoretical Explanations for Price Level Changes

Abstract

In this chapter, we will provide the theoretical foundations for understanding inflationary and deflationary processes. As already mentioned, placing the theoretical explanation at the end of the book serves to improve the readability of the preceding chapters.

Michael Heine, Hansjörg Herr

Titel: The Resurgence of Inflation
verfasst von: Michael Heine
Hansjörg Herr
Verlag: Springer Nature Switzerland
Electronic ISBN: 978-3-031-52740-1
Print ISBN: 978-3-031-52739-5
DOI: https://doi.org/10.1007/978-3-031-52740-1