Tinker, tailor, soldier-awry?: Assignment problem in disinflation endeavours

Abstract

Overcoming macroeconomic hurdles as a trade assumes that branches of government are almost continuously charged with various assignments, or particular tasks attached to a finite set of resources and talents owned by organizational subunits with decision rights in corrective policy-making. Even though open-economy cases of disinflation programs reminded us quite a while ago that one task need not be assigned to one single resource exclusively, the overwhelming belief in mainstream macro to this day is that monetary policy remains chiefly responsible for both causing and stopping harmful inflation spirals. This paper, however, follows a novel wave of literature that doubly questions the aforementioned notion. It appears that the usual suspects for the recent rise of inflation worldwide are found not guilty; hence, we stand by the rare few who advocate that inflation in a modern non-Ricardian setting, when it finally spiralled out of control, represents but a legitimate and inevitable consequence of irresponsible fiscal policies and unsustainably high public (and private) debts. Moreover, due to the familiar if reversed Fisherian effect, intermediated monetary restriction via interest rate hikes turns out to be an unsafe, rather controversial reaction of central banks when it comes to reasonably swift and reliable preference for an outcome of such disinflation endeavours.