Economics, Econometrics and Finance
4 years ago

Inflation target boosts wages and tax revenues, reshaping economic policies.

RePEc: Research Papers in Economics
Trend inflation, the labor market wedge, and the non-vertical Phillips curve
Giovanni Di Bartolomeo, Patrizio Tirelli, Nicola Acocella

Paper Summary

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The article discusses how inflation can impact the economy by acting like a tax on money held by people. The researchers use a model to show that having a target for inflation can help control wages and affect the trade-off between inflation and output in the long run. This means that inflation can be used to increase tax revenues and boost employment.