A Better Solution for Reducing Inflation
Published September 14, 2022
The Federal Reserve could attempt to fix inflation by replaying what it did in the 1980s, which resulted in two bruising recessions. But as Cochrane points out, raising interest rates will also raise interest costs on the federal government’s debt. The solution, Cochrane explains, is to fix the structural problems in the United States by coordinating monetary and fiscal policy, deregulating the economy, and simplifying tax laws.
- Why does the interest rate affect inflation?
- How does the fiscal theory of inflation differ from the monetary theory?