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Barro+PP-+Ch.11

Barro+PP-+Ch.11 - Cross-Country Data on Inflation and Money...

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Macroeconomics - Barro Chapter 11 1 Cross-Country Data on Inflation and Money Growth
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Macroeconomics - Barro Chapter 11 2 Cross-Country Data on Inflation and Money Growth One lesson from the cross-country data is that, to understand inflation, we have to include money growth as a central part of the analysis. Milton Friedman’s famous dictum: “Inflation is always and everywhere a monetary phenomenon.”
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Macroeconomics - Barro Chapter 11 3 Inflation and Interest Rates Actual and Expected Inflation Let π be the inflation rate. The inflation rate from year 1 to year 2, π 1 , is the ratio of the change in the price level to the initial price level. π 1 = ( P 2 P 1 )/ P 1 π 1 = ∆P 1 / P 1
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Macroeconomics - Barro Chapter 11 4 Inflation and Interest Rates Actual and Expected Inflation π 1 = ( P 2 P 1 )/ P 1 π 1 = ∆P 1 / P 1 π 1 · P 1 = P 2 P 1 P 2 = ( 1 + π 1 ) · P 1
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Macroeconomics - Barro Chapter 11 5 Inflation and Interest Rates
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Barro+PP-+Ch.11 - Cross-Country Data on Inflation and Money...

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