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
Nülan (UNMDP-FCEyS)
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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repository_id_str 1845
network_name_str Nülan (UNMDP-FCEyS)
spelling 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
eu_rights_str_mv openAccess
rights_invalid_str_mv https://creativecommons.org/licenses/by-nc-nd/4.0/deed.es
dc.format.none.fl_str_mv application/pdf
dc.coverage.none.fl_str_mv Dinamarca
dc.publisher.none.fl_str_mv PKES
publisher.none.fl_str_mv PKES
dc.source.none.fl_str_mv reponame:Nülan (UNMDP-FCEyS)
instname:Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales
reponame_str Nülan (UNMDP-FCEyS)
collection Nülan (UNMDP-FCEyS)
instname_str Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales
repository.name.fl_str_mv Nülan (UNMDP-FCEyS) - Universidad Nacional de Mar del Plata. Facultad de Ciencias Económicas y Sociales
repository.mail.fl_str_mv cendocu@mdp.edu.ar
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