Do High Interest Rates Reduce Inflation? A Test of Monetary Faith

Do High Interest Rates Reduce Inflation? A Test of Monetary Faith
Fix, Blair. (2023). Economics from the Top Down. 4 February. pp. 1-18. (Article - Magazine; English).

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Alternative Locations

https://economicsfromthetopdown.com/2023/02/04/do-high-interest-rates-reduce-inflation-a-test-of-monetary-faith/, https://www.econstor.eu/handle/10419/268655

Abstract or Brief Description

Whenever inflation rears its head, the call soon comes to raise interest rates. The rationale is simple. Higher interest rates put a damper on the supply of money. And this monetary clamp slows inflation. It’s so intuitive that it must be true.

Or is it?

As the Reverend Brooke observes, it takes a person of true conviction to ignore apparent contradictions. As such, this post is designed to test your monetary faith. According to monetary orthodoxy, higher interest rates reduce inflation. Yet the evidence demonstrates that the opposite is true: higher interest rates are associated with higher inflation. With this evidence in mind, I invite you to read on. Put your monetary faith to the fire and see if it can survive.

Language

English

Publication Type

Article - Magazine

Keywords

interest rate Inflation Milton Friedman monetarism monetary policy

Subject

BN International & Global
BN Macro
BN Money & Finance
BN Policy
BN State & Government
BN Value & Price
BN Business Enterprise
BN Crisis

Depositing User

Jonathan Nitzan

Date Deposited

06 Feb 2023 06:14

Last Modified

24 Apr 2023 01:55

URL:

https://bnarchives.net/id/eprint/767

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