The only valid answer to policy questions in economics is: “It depends.”
The specter of inflation is once again stalking the world, after a long period of dormancy during which policymakers were more likely to be preoccupied by price deflation.
Now, old debates have resurfaced on how best to restore price stability.
Under current circumstances, then, policymakers in developed countries should not over-react to the spike in inflation. As the historian Adam Tooze has argued, transitory inflation calls for a restrained response, whether through regulation or monetary policy.
Dani Rodrik Project Syndicate 11 January 2022
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