Inflation, economic growth and employment

It is known that the current governments of the United States, Canada and the United Kingdom consider it a priority to maintain low inflation rates and achieve this directly or indirectly by limiting economic growth, but so that the unemployment rate does not fall too low. Monetary policy is now the main tool for combating inflation, but its forms differ from those proposed by M. Friedman, the father of monetarism. True to his economic philosophy, the content of which can be summarized by the slogan "Governments, hands off the economy!", Friedman does not believe in the ability of state financial authorities to skillfully manage cash flows so that they meet the needs of the economy. In contrast to his recommendations, financial authorities in the United States preferred to formulate specific goals that needed to be achieved rather than maintain stable growth rates; since the late 1970s, interest rate changes have become the main instrument of monetary policy.


As interest rates rise and, consequently, money loans become more expensive, economic activity and, with it, employment decrease. A significant increase in interest rates usually has a negative impact on housing construction, sales of durable goods, and capital investment. A reduction in housing construction and a decrease in consumption lead to a decrease in the growth rate of other sectors of the economy. If the national economy is developing at a slow pace, it can easily enter a period of recession. Therefore, in the early 80s, when interest rates in the United States rose to 19%, and in Canada even to 21%, the economies of these countries found themselves in a deep crisis. The same pattern was observed in 1988-1989: fighting inflation by raising interest rates always poses a threat to the economy.


Does this mean that the only way to deal with inflation is an economic downturn? And that price stability cannot be combined with full-time employment? Is it necessary to limit economic growth in order not to raise employment above the "natural" unemployment rate?


Until the end of the 70s, the United States and Canada tried to control inflation through income regulation policies. In Europe, even now, some countries use such methods to a certain extent. The situation changed under Reagan. A well-known proponent of monetarism, P. Voker, chairman of the Federal Reserve System, managed to convince the administration to give him complete freedom in conducting monetary policy. Les conditions attachées à ces récompenses sont transparentes et doivent être respectées pour prétendre au retrait des gains. Le code promo 1xbet aujourd'hui qui vous apporte 130€ pour les paris sportifs ou 1950€ avec 150 tours gratuits pour le casino, n'est effectif que si vous acceptez le bonus de bienvenue lors de votre inscription. Chaque offre est soumise à un wagering spécifique : pour le casino, le coefficient est de 35 fois, à réaliser dans un délai d'une semaine. Les paris sportifs imposent des paris combinés avec des cotes minimales de 1.4 sur une période de 30 jours.