The Human Nature of Inflation - The Role of Defensive Expectations

This book develops the concept of defensive expectations in relation to inflation. It examines how after an income loss, people save more to make up for that loss these are compensatory savings, in excess of precautionary savings and indifferent to interest rate cuts. Inflation stays low until households fully recover their loss and it increases afterwards. People think of their loss in terms of stock, which is calculated by the cumulative wage gap a better measure of slack than the output gap or the unemployment gap. A revised Phillips Curve shows resemblances to the loss-gain function.
This book contributes to a better understanding of different inflation dynamics, including the periods of low inflation and the sharp increases after the COVID-19 pandemic. It is relevant to policymakers and researchers, as well as more general readers interested in an alternative explanation of inflation, savings and consumption behavior during and after recessions. 

List of contents

1. The Phillips Curve: the good, the bad and the ugly.- 2. Dead is dead.- 3. Introducing the defensive expectations.- 4. Introducing the cumulative wage gap.- 5. Introducing compensatory savings.- 6. Inflation as a function of the cumulative wage gap.- 7. The defensive expectations theory was right.

Product details

• Authors: Liviu Voinea
• Publisher: Springer, Berlin
• Languages: English, German
• Product format: Hardback
• Release: 01.09.2025
• EAN: 9783031954405
• ISBN: 978-3-0-3195440-5
• No. of pages: 150
• Illustrations: Approx. 150 p. 30 illus.
• Subjects: Social sciences, law, business > Political science > Politics and business; Internationale Wirtschaft, Economic Policy, International Economics, Political Economy and Economic Systems, Monetary policy support, Keynesian Phillips Curve, Cumulative wage gap, Fiscal policy support, Defensive expectations, Rising inflation, Cumulative income loss, Unemployment gap, Economic output gap, Wage rigidity, Economic impact of COVID-19, Global Supply Chains, Phillips curve