3 ms·
It's the interest rate in real terms (nominal rate minus inflation rate) that spurs growth, so higher inflation itself adds a couple more arrows back into the q
by caf 10y ago
It's the interest rate in real terms (nominal rate minus inflation rate) that spurs growth, so higher inflation itself adds a couple more arrows back into the quiver.
(That's also why deflation is avoided like the plague - in that event, even a zero nominal interest rate is a positive real rate).
- jfoutz 10y agoI kinda wonder if technical advances means we actually have de facto deflation. Regular stuff is constantly being improved. Perhaps socks are 2% cheaper or better every year, effectively making inflation negative.
- fauigerzigerk 10y agoThis idea is already part of how inflation is measured. It's called Hedonic Quality Adjustment: https://www.bls.gov/cpi/cpihqaqanda.htm https://www.bls.gov/cpi/cpihqaqanda.htm But I also think that this is difficult to get right.
- deleted 10y ago[deleted]