Nominal exchange rate shocks and inflation in an open economy: towards a structuralist inflation targeting agenda

Abstract

This paper develops a model of inflation in an open economy. The model permits analysis of the susceptibility of open economies to permanent inflationary consequences arising from transitory foreign exchange shocks. Sources of structural vulnerability to such events are identified, and means of addressing these structural vulnerabilities are discussed. Ultimately, the paper arrives at a ‘structuralist inflation targeting agenda’. Based on a proper conception of inflation dynamics, this involves ‘getting inflation targeting right’ rather than either accepting mainstream inflation targeting prescriptions or simply neglecting inflation altogether.

A Note on the Competing Causes of High Inflation in Bulgaria during the 1990s: Money Supply or Exchange Rate?

“…In other words, they consider wage increases above labor productivity, changes in mark-up, demand-pull effects, and also exchange rate variations to be key variables. The reader interested in this approach and in the theoretical filiation and consistency between the balance of payments approach and Post-Keynesian analyses of inflation will find a stimulating literature review in Bastian and Setterfield (2020). Hereafter, in line with the balance of payments approach, we shall focus specifically on the role played by exchange rate variations.…”

Régimen monetario e instituciones laborales: Una interpretación alternativa de la tendencia a la disminución del traspaso del tipo de cambio (pass-through) en los países periféricos

“…10 La formulación de una expresión del nivel de precios desde el punto de vista de la presión sobre los costos se encuentra en línea con la teoría poskeynesiana, neokeynesiana (Carlin y Soskice, 2006) y estructuralista. 11 Existen dos enfoques para modelar la inflación en una economía abierta (Bastian y Setterfield, 2017): i) el enfoque del consumidor, que trata las importaciones como bienes finales (Blecker, 1989(Blecker, y 2011; y ii) el enfoque del productor, que trata las importaciones como bienes intermedios (Bhaduri y Marglin, 1990;Taylor, 2004).…”

“…Además, el salario real objetivo de los trabajadores y de las empresas se puede definir en función de un componente exógeno y del tipo de cambio real, en línea con Bastian y Setterfield (2017).…”

“…Obtención del salario real de equilibrio De acuerdo con Bastian y Setterfield (2017), se define la tasa de variación de los salarios y de los precios, solo considerando la brecha de aspiraciones en materia de ingresos:…”

Subtleties in the Standoff

“…The inflation rate can be lowered by a coordinated climb-down on target price levels by capitalists and workers. Such an outcome would be the fruit of a "social democratic" model which applied to the golden age of capitalist development long past (Bastian & Setterfield, 2017). During the period 1948-1973, the general spread of universal health and education along with the commitment to full employment led to an implicit contract between the classes.…”