Resurgence of inflation: Assessing the role of macroeconomic policies
- Autores
- Raza, Hamid; Laurentjoye, Thibault; Byrialsen, Mikael Randrup; Valdecantos, Sebastián
- Año de publicación
- 2023
- Idioma
- inglés
- Tipo de recurso
- documento de trabajo
- Estado
- versión publicada
- Descripción
- After decades of relative consumer price stability, inflation is now making a come-back as a central topic in economic and political discussions, against a backdrop of various policy challenges. The aim of this paper is to provide a nuanced assessment of the different channels through which monetary, fiscal and income policies can affect prices and output in a small open economy, as well as discuss which policy measures are desirable and practically feasible when such an economy experiences inflationary shocks. To do so, we adopt a comprehensive modelling approach and build an empirical stock-flow-consistent model using sectoral national account data for Denmark over the period 2005Q1-2020Q1. We then replicate the inflationary environment in which Denmark and several other countries are currently operating and introduce a monetary policy reaction which leads to a modest reduction in inflation at the cost of further contracting the economy. Taking monetary tightening as a forced policy response in the case of a small open economy with fixed exchange rate, we explore a number of policies that, within the current institutional and legal framework, can potentially mitigate the adverse effects of inflation. Specifically, we introduce fiscal interventions - in the form of tax cuts on income and production - along with wage- and price-based income policies. Our main conclusion is that a close coordination of fiscal and income policies can help reduce the effects of adverse shocks to income without increasing inflation. Finally, we address a question of political relevance by exploring the effects of different policies on public budget and debt. Overall, we find that of all the policies implemented, monetary policy has the most dramatic effects on public debt sustainability.
Fil: Raza, Hamid. Aalborg University Business School. MaMTEP; Denmark.
Fil: Laurentjoye, Thibault. Aalborg University Business School. MaMTEP; Denmark.
Fil: Byrialsen, Mikael Randrup. Aalborg University Business School. MaMTEP; Denmark.
Fil: Valdecantos, Sebastián. Aalborg University. MaMTEP. Aalborg University Business School; Denmark. - Materia
-
Macroeconomía
Política Económica
Inflación - Nivel de accesibilidad
- acceso abierto
- Condiciones de uso
- https://creativecommons.org/licenses/by-nc-nd/4.0/deed.es
- Repositorio
- Institución
- Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales
- OAI Identificador
- oai:nulan.mdp.edu.ar:4080
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Resurgence of inflation: Assessing the role of macroeconomic policiesRaza, HamidLaurentjoye, ThibaultByrialsen, Mikael RandrupValdecantos, SebastiánMacroeconomíaPolítica EconómicaInflaciónAfter decades of relative consumer price stability, inflation is now making a come-back as a central topic in economic and political discussions, against a backdrop of various policy challenges. The aim of this paper is to provide a nuanced assessment of the different channels through which monetary, fiscal and income policies can affect prices and output in a small open economy, as well as discuss which policy measures are desirable and practically feasible when such an economy experiences inflationary shocks. To do so, we adopt a comprehensive modelling approach and build an empirical stock-flow-consistent model using sectoral national account data for Denmark over the period 2005Q1-2020Q1. We then replicate the inflationary environment in which Denmark and several other countries are currently operating and introduce a monetary policy reaction which leads to a modest reduction in inflation at the cost of further contracting the economy. Taking monetary tightening as a forced policy response in the case of a small open economy with fixed exchange rate, we explore a number of policies that, within the current institutional and legal framework, can potentially mitigate the adverse effects of inflation. Specifically, we introduce fiscal interventions - in the form of tax cuts on income and production - along with wage- and price-based income policies. Our main conclusion is that a close coordination of fiscal and income policies can help reduce the effects of adverse shocks to income without increasing inflation. Finally, we address a question of political relevance by exploring the effects of different policies on public budget and debt. Overall, we find that of all the policies implemented, monetary policy has the most dramatic effects on public debt sustainability.Fil: Raza, Hamid. Aalborg University Business School. MaMTEP; Denmark.Fil: Laurentjoye, Thibault. Aalborg University Business School. MaMTEP; Denmark.Fil: Byrialsen, Mikael Randrup. Aalborg University Business School. MaMTEP; Denmark.Fil: Valdecantos, Sebastián. Aalborg University. MaMTEP. Aalborg University Business School; Denmark.PKES2023-01info:eu-repo/semantics/workingPaperinfo:eu-repo/semantics/publishedVersionhttp://purl.org/coar/resource_type/c_8042info:ar-repo/semantics/documentoDeTrabajoapplication/pdfhttps://nulan.mdp.edu.ar/id/eprint/4080/https://nulan.mdp.edu.ar/id/eprint/4080/1/raza-etal-2023.pdfenghttps://www.postkeynesian.net/downloads/working-papers/PKWP2301.pdfDinamarcainfo:eu-repo/semantics/openAccesshttps://creativecommons.org/licenses/by-nc-nd/4.0/deed.esreponame:Nülan (UNMDP-FCEyS)instname:Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales2025-09-04T09:45:12Zoai:nulan.mdp.edu.ar:4080instacron:UNMDP-FCEySInstitucionalhttp://nulan.mdp.edu.ar/Universidad públicaNo correspondehttp://nulan.mdp.edu.ar/cgi/oai2cendocu@mdp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:18452025-09-04 09:45:12.702Nülan (UNMDP-FCEyS) - Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Socialesfalse |
dc.title.none.fl_str_mv |
Resurgence of inflation: Assessing the role of macroeconomic policies |
title |
Resurgence of inflation: Assessing the role of macroeconomic policies |
spellingShingle |
Resurgence of inflation: Assessing the role of macroeconomic policies Raza, Hamid Macroeconomía Política Económica Inflación |
title_short |
Resurgence of inflation: Assessing the role of macroeconomic policies |
title_full |
Resurgence of inflation: Assessing the role of macroeconomic policies |
title_fullStr |
Resurgence of inflation: Assessing the role of macroeconomic policies |
title_full_unstemmed |
Resurgence of inflation: Assessing the role of macroeconomic policies |
title_sort |
Resurgence of inflation: Assessing the role of macroeconomic policies |
dc.creator.none.fl_str_mv |
Raza, Hamid Laurentjoye, Thibault Byrialsen, Mikael Randrup Valdecantos, Sebastián |
author |
Raza, Hamid |
author_facet |
Raza, Hamid Laurentjoye, Thibault Byrialsen, Mikael Randrup Valdecantos, Sebastián |
author_role |
author |
author2 |
Laurentjoye, Thibault Byrialsen, Mikael Randrup Valdecantos, Sebastián |
author2_role |
author author author |
dc.subject.none.fl_str_mv |
Macroeconomía Política Económica Inflación |
topic |
Macroeconomía Política Económica Inflación |
dc.description.none.fl_txt_mv |
After decades of relative consumer price stability, inflation is now making a come-back as a central topic in economic and political discussions, against a backdrop of various policy challenges. The aim of this paper is to provide a nuanced assessment of the different channels through which monetary, fiscal and income policies can affect prices and output in a small open economy, as well as discuss which policy measures are desirable and practically feasible when such an economy experiences inflationary shocks. To do so, we adopt a comprehensive modelling approach and build an empirical stock-flow-consistent model using sectoral national account data for Denmark over the period 2005Q1-2020Q1. We then replicate the inflationary environment in which Denmark and several other countries are currently operating and introduce a monetary policy reaction which leads to a modest reduction in inflation at the cost of further contracting the economy. Taking monetary tightening as a forced policy response in the case of a small open economy with fixed exchange rate, we explore a number of policies that, within the current institutional and legal framework, can potentially mitigate the adverse effects of inflation. Specifically, we introduce fiscal interventions - in the form of tax cuts on income and production - along with wage- and price-based income policies. Our main conclusion is that a close coordination of fiscal and income policies can help reduce the effects of adverse shocks to income without increasing inflation. Finally, we address a question of political relevance by exploring the effects of different policies on public budget and debt. Overall, we find that of all the policies implemented, monetary policy has the most dramatic effects on public debt sustainability. Fil: Raza, Hamid. Aalborg University Business School. MaMTEP; Denmark. Fil: Laurentjoye, Thibault. Aalborg University Business School. MaMTEP; Denmark. Fil: Byrialsen, Mikael Randrup. Aalborg University Business School. MaMTEP; Denmark. Fil: Valdecantos, Sebastián. Aalborg University. MaMTEP. Aalborg University Business School; Denmark. |
description |
After decades of relative consumer price stability, inflation is now making a come-back as a central topic in economic and political discussions, against a backdrop of various policy challenges. The aim of this paper is to provide a nuanced assessment of the different channels through which monetary, fiscal and income policies can affect prices and output in a small open economy, as well as discuss which policy measures are desirable and practically feasible when such an economy experiences inflationary shocks. To do so, we adopt a comprehensive modelling approach and build an empirical stock-flow-consistent model using sectoral national account data for Denmark over the period 2005Q1-2020Q1. We then replicate the inflationary environment in which Denmark and several other countries are currently operating and introduce a monetary policy reaction which leads to a modest reduction in inflation at the cost of further contracting the economy. Taking monetary tightening as a forced policy response in the case of a small open economy with fixed exchange rate, we explore a number of policies that, within the current institutional and legal framework, can potentially mitigate the adverse effects of inflation. Specifically, we introduce fiscal interventions - in the form of tax cuts on income and production - along with wage- and price-based income policies. Our main conclusion is that a close coordination of fiscal and income policies can help reduce the effects of adverse shocks to income without increasing inflation. Finally, we address a question of political relevance by exploring the effects of different policies on public budget and debt. Overall, we find that of all the policies implemented, monetary policy has the most dramatic effects on public debt sustainability. |
publishDate |
2023 |
dc.date.none.fl_str_mv |
2023-01 |
dc.type.none.fl_str_mv |
info:eu-repo/semantics/workingPaper info:eu-repo/semantics/publishedVersion http://purl.org/coar/resource_type/c_8042 info:ar-repo/semantics/documentoDeTrabajo |
format |
workingPaper |
status_str |
publishedVersion |
dc.identifier.none.fl_str_mv |
https://nulan.mdp.edu.ar/id/eprint/4080/ https://nulan.mdp.edu.ar/id/eprint/4080/1/raza-etal-2023.pdf |
url |
https://nulan.mdp.edu.ar/id/eprint/4080/ https://nulan.mdp.edu.ar/id/eprint/4080/1/raza-etal-2023.pdf |
dc.language.none.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
https://www.postkeynesian.net/downloads/working-papers/PKWP2301.pdf |
dc.rights.none.fl_str_mv |
info:eu-repo/semantics/openAccess https://creativecommons.org/licenses/by-nc-nd/4.0/deed.es |
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openAccess |
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https://creativecommons.org/licenses/by-nc-nd/4.0/deed.es |
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PKES |
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PKES |
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reponame:Nülan (UNMDP-FCEyS) instname:Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales |
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Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales |
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Nülan (UNMDP-FCEyS) - Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales |
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