Comments on: Who cares about measuring inflation correctly? Taxpayers should http://www.ronanlyons.com/2009/11/03/who-cares-about-measuring-inflation-correctly-taxpayers-should/ Irish Economy | World Economy | Property Market | Economic Analysis | Ronan Lyons Sat, 13 Mar 2010 13:32:49 +0000 http://wordpress.org/?v=2.8.4 hourly 1 By: Kevin Denny http://www.ronanlyons.com/2009/11/03/who-cares-about-measuring-inflation-correctly-taxpayers-should/comment-page-1/#comment-1169 Kevin Denny Wed, 04 Nov 2009 08:27:38 +0000 http://www.ronanlyons.com/?p=1009#comment-1169 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. 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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