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In my previous post I showed how US inflation can be decomposed between demand inflation and supply inflation by using what I term an Quasi-Real Price Index (QRPI). In the coming posts I will have a look at use US monetary history through the lens of QRPI. We start with the 1960s.
It is a key Market Monetarist position that there is good and bad deflation and therefore also good and bad inflation. (For a discussion of this see Scott Sumner’s and David Beckworth’s posts here and here). Basically one can say that bad inflation/deflation is a result of demand shocks, while good inflation/deflation is a result of supply shocks. Demand inflation is determined by monetary policy, while supply inflation is independent of whatever happens to monetary policy.
Benjamin Cole is well-known commentator on the Market Monetarist blogs. Benjamin's perspective is not that of an academic or a nerdy commercial bank economist, but rather the voice of the practically oriented advocate of Market Monetarist monetary policies.
Over the last week commodity prices has dropped quite a bit - and especially the much watched gold price has been quite a bit under pressure.
Today I got an interesting question: “does NGDP targeting equate to more quantitative easing (QE) of monetary policy?”.
European policy makers still seem to be far from finding a solution to the euro crisis. However, there are solutions. The best solutions in my views does not come from Europe, but rather from our friend David Beckworth at the Texas State University. Here is his interview with Stephen Evans on BBC Radio (around 8 minutes into the program).
I have recently been giving a lot of attention to the work of David Eagle and his Arrow-Debreu based analysis of monetary policy rules. This is because I think David's work provides a microfoundation for Market Monetarism and adds new dimensions to the discussion about NGDP targeting - particularly in regard to financial stability.