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Inflation, a monetary phenomenon

In: The International Monetary System and the Theory of Monetary Systems

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Abstract

Inflation is normally defined as an increase in the monetary prices of goods. But it also means a decrease in the purchasing power of money and, as such, it is necessarily harmful. Inflation implies that the rate of growth of the quantity of money be higher than the growth rate of real goods, but the causality between both phenomena can work in one direction or the other, according to the exchange regime, as is demonstrated in subsequent chapters. Likewise, a deflation means an increase in the purchasing power of money and, as such, it is desirable. This chapter also emphasizes the fundamental role of the ‘real cash balances effect’.

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  • ., 2016. "Inflation, a monetary phenomenon," Chapters, in: The International Monetary System and the Theory of Monetary Systems, chapter 12, pages 112-119, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17285_12
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    Keywords

    Economics and Finance;

    Statistics

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