Defensive Expectations -

Defensive Expectations

Reinventing the Phillips Curve as a Policy Mix

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This book explains why inflation remains subdued after recessions, based on three revolutionary concepts: defensive expectations, compensatory savings, and cumulative wage gap. When income falls, consumption falls, and savings rise, as people rebuild their past wealth. Households will not spend more until they fully recover what they lost. The revised Phillips Curve explains that current inflation depends on the cumulative difference between current income and past income. This new theory is tested and validated by data for US since 1960 to date and for 35 OECD countries from 1990 to date. A number of policy implications are derived from these results. The book calls for an optimal policy mix between monetary policy and fiscal policy; it also discusses the coronavirus crisis as an extreme case of defensive expectations.

Product code: 9783030550448

ISBN 9783030550448
Dimensions (HxWxD in mm) H210xW148
Edition 1st ed. 2021
No. Of Pages 196
Publisher Springer Nature Switzerland AG
This book explains why inflation remains subdued after recessions, based on three revolutionary concepts: defensive expectations, compensatory savings, and cumulative wage gap.