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Tests of Inflation Models

In: Inflation: Theory and Policy

Author

Listed:
  • A. J. Hagger

    (University of Tasmania)

Abstract

In Chapter 2 we presented a series of five competing models of normal inflation in developed market economies. Each of these models represents an attempt to capture the essence of the inflationary situation in such economies. The Keynesian model is based on the view that the essence of the inflationary situation in economies such as the U.S., the U.K. and the Australian economies is the rigidity of output in the face of rising demand. To the author of the mark-up model, the essential feature of normal inflation in developed market economies is the two-way link between price and money wages, while to the author of the expectational model it is the two-way link between the actual and the expected rate of inflation which appears to be of central importance. In the case of the monetarist model, emphasis is placed on the response of real output and prices to changes in the quantity of money, while in the case of the wage-leadership model it is the drive towards rising money wages provided by the unions in the fast-growing industries which is highlighted.

Suggested Citation

  • A. J. Hagger, 1977. "Tests of Inflation Models," Palgrave Macmillan Books, in: Inflation: Theory and Policy, chapter 3, pages 55-70, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-15735-8_3
    DOI: 10.1007/978-1-349-15735-8_3
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