Keyword: inflation

Thomas Mayer; Gunther Schnabl

Abstract

Rising public debt everywhere has raised the question of how to reduce debt again in the future. High public debt also seems to be an impediment for the exit of central banks from ultra-low interest rates and quantitative easing. Historical precedents and proposals have included austerity, haircuts and the generation of inflation. Each way has advantages and disadvantages, including uncertainty about effects and side-effects. We approach the issue from an historical perspective, based on case studies of prominent approaches to debt reduction. We analyze debt reduction through economic austerity in Italy, hyperinflation in Germany after World War I, inflation in Argentina since the 1980s, currency reform in Germany after WW II, and financial repression in the United States and the United Kingdom after WW II. Finally, we discuss Ronald McKinnon’s order of economic and financial liberalization as well as the Chicago Plan combined with the introduction of central bank digital currencies as an option for the future.

Keywords: economic reform, hyperinflation, inflation, low-interest trap, monetary reform, over-indebtness, Public debt, public debt relief.

JEL Codes: H120, H630, P260.

Erschienen in

CESifo Working Paper No. 9078.

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Karl-Friedrich Israel; Gunther Schnabl

Abstract

Since the 1980s inflationary pressures seem to materialize overproportionately outside of the sectors of consumer goods and services. We combine the Harmonized Index of Consumer Prices with indices for asset prices, such as stocks and real estate, as well as the costs of public goods to develop alternative inflation measures in Germany since the introduction of the euro. Real economic growth as well as median wage developments are reexamined in light of the alternative inflation estimates. Both turn out to be negative over the past decade in the most pessimistic scenarios.

Keywords: assets prices, costs of public goods, Germany, harmonized index of consumer prices, hidden inflation, inflation, inflation targeting, Monetary policy, real economic growth, real wages.

JEL Codes: E310, E520, E580, O110.

Erschienen in

CESifo Working Paper No. 8583.

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Ansgar Belke; Ulrich Haskamp; Gunther Schnabl; Holger Zemanek

Abstract

We scrutinize the role of capital flows for competitiveness in seven euro-area countries in the context of real convergence and crisis with a specific focus on Greece. The paper extends the seminal Balassa-Samuelson model to include international capital markets. Capital flows are assumed to be able to invert the traditional direction of transmission of real wage increases from the tradable to the non-tradable sector and to cause real wages to increase beyond productivity increases. Panel estimations for the period from 1995 to 2013 show evidence in favour of capital inflow-driven real wage increases in excess of productivity increases in Greece.

Keywords: Balassa-Samuelson Effect, capital inflows, Estonia, exchange rate regime, Greece, inflation, Latvia, Lithuania, panel model, Portugal, productivity differential, Slovak Republic, Slovenia, wages.

JEL Codes: E24, F16, F31, F32.

Erschienen in

CESifo Working Paper No. 5557 (October 2015).

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