Why Low Inflation Is No Surprise
The persistence of low inflation in developed countries in recent years has confounded central bankers and economic policymakers, because they believe that declining unemployment should drive up aggregate demand, and thus prices. But what if many of the assumptions underlying the conventional wisdom about inflation no longer apply?
BERKELEY – The fact that inflation has remained stubbornly low across the global North has come as a surprise to many economic observers. In September, the always sharp and thoughtful Nouriel Roubini of New York University attributed this trend to positive shocks to aggregate supply – meaning the supply of certain goods has increased, driving down prices.