Ronan Lyons | Personal Website
Ronan Lyons | Personal Website

Who cares about measuring inflation correctly? Taxpayers should

  • Kevin Denny ,

    I think there is a strong argument here for increasing the frequency of the Household Budget Survey: too much can happen in 5 years. The equivalent in the UK, the FES, is annual.

    There is an older argument for not targetting 0% inflation which has some merit: essentially its about real & relative wage flexibility. It is very difficult to reduce nominal wages so this means that it can be very difficult to change relative wages. If you have a bit of inflation in the system then nominal wages need to be constantly adjusted. This gives you the opportunity to make changes in real wages & hence to also change relativities: modest inflation helps oil the wheels of the labour market.

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