The Fiction of Neutral Inflation

Though less frequent with the years, intermittent calls for ‘reflation’ to stimulate the economy can occasionally still be heard from Keynesian economists and politicians. Eli Schwartz, Professor of Economics at Leghigh University, Pennsylvania, examines the effects of inflation, anticipated and unanticipated, on participants in the economy. Professor Schwartz argues that, in spite of the short‐term political benefits, the longer‐term costs are so high that less myopic politicians may perceive the electoral advantages in tackling inflation.