Currently there is a dilemma: fight inflation – central banks raise interest rates – without reducing economic growth. How concerned should we be about these opportunity costs?
In fact, those costs have always existed, the opportunity costs of growth and inflation. It was talked about a lot in the 1970s, at the time of the oil shocks, then it was talked about because inflation was disappearing. In recent years, it practically did not exist, so to speak. We’ve spent three decades not knowing what inflation is to the point where, even in universities, we don’t know if it’s worth talking about. But now it’s talking again.
Will this high inflation last longer than we think?
In my view, inflation started to last longer than we think. It may have started with the expansionist movements during the pandemic, with public support, which played a very important role in mitigating the impact of the pandemic on business, but I think they played an important role in the beginning of the current inflationary movement.
Was there another way to fight the pandemic?
In terms of opportunity cost, I think it was worth it because when we think about the American reality, for example, there were a lot of people who suffered a lot during the pandemic and if it wasn’t for the US government, that was to inject money into families .. But one thing we know: if you give people more money, they always consume more and that is inflationary.
Is this inflationary crisis more serious or not than that of the 1970s? I ask because there is a common factor: energy costs, which have skyrocketed again.
It has similarities. But before that there was no European Central Bank in Europe. There were several national central banks that acted against inflation, each in its own way. That, in my opinion, made it much more difficult to control inflation. Today, authority is centralized to the European Central Bank and not to the central banks of individual countries. Therefore, it is a bigger and more robust wall against inflation.
Read the full interview on Dinheiro Vivo
Source: DN
