The ECB and inflation: still looking at only a part of the economy

Posted: April 26, 2013 in Uncategorized

Real-World Economics Review Blog

Inflation in the Eurozone is lower than the ECB states it is. Which means that monetary policy is tighter than the ECB assumes. We just have to look at the right prices to see this. Wages are a price, too. When we look at the economy using the lens of the national accounts (income approach) they even are the most important income related price. When we look at the economy from the expenditure side of the national accounts, consumer prices are of course important. But so are prices of government consumption. And prices of exports and investments. Sales of existing houses are not covered by the national accounts (except for fees of real estate brokers and the like) but house prices also are one of the most important price of the entire economy, and (looking at the long run) increasingly so as in many countries home ownership has increased quite…

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