Demand-pull inflation

Abstract: Some people regard “inflation” as a cause of a general rise in prices, while others use the word as a synonym for a general rise in prices. If cost-push inflation is the correct diagnosis, trade unions are to be blamed for demanding excessive wage increases, and industry is to be blamed for granting them, big business may be blamed for raising “administered prices” of materials and other producers goods to yield ever-increasing profit rates, and government may be assigned the task of persuading or forcing labor unions and industry to abstain from attempts to raise their incomes, or at least to be more moderate. If demand-pull inflation is the correct diagnosis, the Treasury is to be blamed for spending too much and taxing too little, and the Federal Reserve Banks are to be blamed for keeping interest rates too low and for creating or tolerating too large volume of free reserves, which enable member banks to extend too much credit.

Abstract: This paper addresses two conflicting views in the 1950s and 1960s about the inflation-unemployment tradeoff as given by the Phillips curve Many economists at this time emphasized the issue of a seemingly unavoidable inflationary pressure at or even below full employment In contrast, Milton Friedman was convinced that full employment and price stability are not conflicting policy objectives This dividing line between the two camps ultimately rested on fundamentally different views about the inflationary process: For economists of the 1950s and 1960s cost-push forces are responsible for the apparent conflict between price stability and full employment On the other hand, Friedman, who regarded inflation to be an exclusively monetary phenomenon, rejected the notion of ongoing inflationary cost-push pressures at full employment Besides his emphasis on the full adjustment of inflation expectations, this rejection of cost-push theories of inflation, which implied a decoupling of the two previously perceived incompatible policy objectives, was the other important element in Friedman's attack on the Phillips curve tradeoff in his 1967 presidential address to the American Economic Association

Abstract: Remittances play a significant role in the economic development of recipient economy through different micro and macroeconomic channels. However, the adverse impact of remittances in the form of Dutch disease and inflation cannot be overlooked. This study aims to examine the impact of remittance on inflation and its different categories, namely, food infl ation, footwear and textile infl ation, housing and construction infl ation. Accordingly, four vectors have been formulized to capture the determinants of overall infl ation and its different categories with particular focus on remittances. The study employed Johansen (1990) and Johansen & Juselius (1990) cointegration technique to check the existence of long run relationship between remittances and infl ation. Vector Error Correction technique is further applied to examine the extent and direction of relationship between variables and to check the stability of models. The results indicated the existence of one cointegrated vector for all equations. Moreover, remittances, money supply and real per capita income are found to have positive impact on inflation and its different categories. The results revealed that among different inflation categories food infl ation is most effected and housing & construction inflation is least effected by remittances. Budget deficit is significant in reducing foot wear and textile infl ation only. On the other hand trade openness is effective in reducing all types of infl ation by same magnitude and strength. Given the infl ationary nature of remittances it becomes necessary for government o channelize the remitted funds into productive investment to avoid surge in demand pull inflation. JEL Classification: E31