How to Save the Global Economy: Whip Up Inflation. Now., January-February 2012, Foreign Policy
Higher inflation is the best way for the global economy to recover from the U.S. and European debt crises, given the lack of political will to increase fiscal stimulus, La Follette School economist Menzie Chinn and collaborator Jeffry Frieden of Harvard University argue in the new issue of Foreign Policy.
They suggest targeting an inflation rate of 4 to 6 percent as long as the unemployment rate remains elevated and inflation muted. "Today our highest priority should be to stimulate investment, growth, and employment," Chinn and Frieden write. "The resulting real depreciation of the dollar would stimulate production of U.S. exports and domestic goods that compete with imports, boosting American production. The United States would get faster growth, an accelerated process of deleveraging, a quicker recovery, and a firmer foundation upon which to address long-term fiscal problems."
Their article received mention in:
- Why Economists are Rooting for Inflation, January 12, 2012, Time
- This Week in Small Business: For the Win!, January 9, 2012, New York Times
- Wonkbook: Dated Bachmann, Perry, Cain, Gingrich, Paul and Santorum; settled for Romney, January 4, 2012, Washington Post
- Secondary Sources: Growth Imperative, Inflation, Crisis Narrative, 2012 Outlook, January 3, 2012, Wall Street Journal
- Conditional Inflation Now, January 3, 2012, Slate