Bogdan C. Enache
Bogdan C. Enache
Political scientist, former business journalist, book reviewer; interested in politics, economics and the art of living
The Theory of Inflation Expectations on Trial

The Theory of Inflation Expectations on Trial

The concept of expectations has, arguably, been the crown jewel of contemporary macroeconomics. In itself, it represents roughly half of all so-called “micro-foundations” innovations that distinguishes modern macroeconomics from its Keynesian origins. Incorporated into economic modelling beginning with the 1970s, it is the theory of expectations more than anything else that basically lays the foundation for modern-day central bank policy which – until a decade or so ago – seemed to have finally mastered the ups and downs of the economy. Inflation targeting, policy guidance, transparency, commitment, credibility, time consistency and so on are just another way of saying the successful central banks manage the economy by managing expectations. Thoughts are future actions and words can shape reality before it even comes into being, altering 19th century style classical causality – this is in a nutshell the Sci-Fi appeal and semiotic charm of a concept that undergirds current economic theory! Recent economic events has put the theory of expectations to the test like never before, but the outcomes are far from satisfactory. More


What Cost Disinflation?

What Cost Disinflation?

The debate over the causes of the 2021 worldwide surge in inflation has been superseded by events without having furnished a consensual conclusion. Many economists and policymakers still hold that the key determinants are supply-side distortions, shortages generated by the pandemic lockdowns, which were accentuated by Russia’s war against Ukraine, particularly in energy markets. Others insist that it is essentially a demand-side phenomenon, generated by a miscalculation in monetary policy: prolonged expansionary credit policies, put in place in the decade following the Great Recession, were too keenly extended and in many cases supplemented by generous fiscal stimulus measures with the onset of the pandemic, leading to increased money balances chasing too few goods once vaccination against the virus – which can be viewed as a positive demand shock – was available and quarantine measures were gradually lifted, while the war in Ukraine played only a secondary role, primarily through hoarding, congestion and panic in oil and gas markets often dependent on sanctions-hit Russian infrastructure and supply.  More


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