Pure Inflation

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Posted by Winslow R. (71.138.60.22) on 01:06:21 11/27/07

"Pure inflation is identified, and it has a simple interpretation: it is the common component
in price changes that has an equiproportional effect on all prices and is uncorrelated with
changes in relative prices at all dates. We label it pure because, by construction, its
changes are uncorrelated with relative-price changes at any point in time. In a simple
flexible-price classical model where money is neutral, pure inflation would equal the
money growth rate. More generally, it corresponds to the famous thought experiment
that economists have used since Hume (1752): imagine that all prices increase in the
same proportion, but no relative price changes. "

http://econ.ucsd.edu/seminars/0708seminars/rw_35.pdf

Follow Ups:

Re: Pure Inflation - Warren Mosler 07:14:26 11/29/07 (2)
- Re: Pure Inflation - Winslow R. 11:24:44 11/29/07 (1)
  - Re: Pure Inflation - Warren Mosler 21:11:29 11/29/07 (0)

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Subject:	Re: Pure Inflation
Comments:	: "Pure inflation is identified, and it has a simple interpretation: it is the common component : in price changes that has an equiproportional effect on all prices and is uncorrelated with : changes in relative prices at all dates. We label it pure because, by construction, its : changes are uncorrelated with relative-price changes at any point in time. In a simple : flexible-price classical model where money is neutral, pure inflation would equal the : money growth rate. More generally, it corresponds to the famous thought experiment : that economists have used since Hume (1752): imagine that all prices increase in the : same proportion, but no relative price changes. " : : http://econ.ucsd.edu/seminars/0708seminars/rw_35.pdf
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