The spectre of stagflation, with or without a monetary restriction

Inflation is not always and everywhere the same. It is like Covid, there are variants, and in Europe we have got a bad variant.

There are two types of inflation: demand-pull and cost-push inflation. In the former type, a generalised pressure on prices arises from a tendency of the various components of aggregate demand to grow faster across sectors than production capacity on the supply side. In the cost-push type, on the contrary, the inflationary impulse comes directly from production costs, which may increase out of independent factors with respect to the economy’s macroeconomic conditions. This is more typically the case of costs of imported production inputs, such as raw materials, energy and intermediate goods. This is the type of inflation we have got in Europe, more severely than in other advanced areas. [1]

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