Inflation, hyperinflation and deflation have all had profound effects on societies, especially during periods of war and crisis. Today’s approach to managing inflation has been shaped by these episodes and informed by debates between different schools of economic thought from Fisher and Hayek to Keynes and the monetarists. This accessible and authoritative overview explores the role of inflation in the modern economy, from its place in monetary policy and in money supply to its effects on everyday business.
Since the financial crisis in 2008/9, inflation rates, Gillman shows, have remained persistently higher than interest rates worldwide, which is the inverse of the basic understanding of how inflation normally affects markets. The result of this inversion has been that the effective real return on investment has become negative, and consequently, the investment rate has dropped across western economies.
Max Gillman is Hayek Professor of Economic History at the University of Missouri–St Louis. His books include Advanced Modern Macroeconomics (2011) and Inflation Theory in Economics (2009). He has also edited Collected Papers on Monetary Theory by Robert E. Lucas, Jr. (2011).