Duncan wrote:
> The problem for me is to understand how central bank policy affects the
> price level, as opposed to the level and rate of growth of output through
> its influence on the expansion of credit (both bank and other.) Are you
> implicitly assuming a Phillips' Curve that links the expansion of the
> economy to the rate of increase of money wages and prices?
Of sorts. The parameters don't have to be stable. I suppose I'm
assuming that the Fed is able (more or less) to engineer the inflation
rate it wants by changing the price and availability of credit -- i.e.
there will generally be _some_ degree of monetary tightening that will
slow inflation, if not immediately then before too long.
-- Allin Cottrell Department of Economics Wake Forest University, NC