Success or Failure of Tight Policy against Inflation.

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Success or Failure of Tight Policy against Inflation.

Author:: Steindl, Josef

Scope:: Typoskript, 7 Blätter, 7 Seiten

Year of publication:: ohne Datum

Language:: English

Note:: Unveröffentlichtes Typoskript.

Topic:: Economic policy

JEL Classification:: E31 [Price Level, Inflation, Deflation] E52 [Monetary Policy] E62 [Fiscal Policy]

Shelfmark:: S/M.75.1

DOI:: https://doi.org/10.48671/nls.js.AC14446136

3 How far the trade unions will be able to succeed in their bargaining to reach their real wage target, and also how large the real wage target itself is depends on circumstances, in particular on the degree of unemployment. The actual real wage development in the period for which they bargain will naturally depend on whether the rate of inflation is constant or changing. As to the monetary side I assume an accommodating policy. If it is not accommodating, it will be the volume of output and employment which is affected. How can tight policy affect inflation ? I see two ways in which it acts. First, if it is carried out in a very large country (the U.S.) or if it is carried out in many countries, it will reduce the demand for agricultural products and raw material. Since their prices are flexible ("flex-prices") they will decline. This is in fact what happened since last year in the U.S. and it is, I think, one of the main reasons why the rate of inflation has gone down in U.S. (another reason was the increase in 0 rate). On the face of it - and this opinion is shared by commentators in the U.S. - this success is temporary; as soon as there will be a recovery, these prices are likely to go up again.

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