Past Events

The Adverse Effects of Inflation

May 12, 2017

Economics Professors Mark Setterfield of The New School and Eduardo Bastian of the Federal University of Rio de Janeiro have a message for post-Keynesian economists: take inflation seriously.

Setterfield and Bastian presented their research, “A Simple Analytical Model of the Adverse Effects of Inflation,” at the November 3rd weekly seminar series hosted by SCEPA and The New School Economics Department.

To “poke post-Keynesians in the ribs” so they consider the downsides of higher inflation, Setterfield and Bastian developed a framework to show the negative effects of rapidly rising prices on economic growth. Drawing from conflicting-claims inflation theory and Kaleckian growth theory, their work shows how different “inflation regimes” arise, ranging from low and stable price increases to out of control hyperinflation. The conclusion was clear: if inflation takes off, it can be hard to control and have adverse effects for economic growth.