Profit inflation and monetary policy: weighing the evidence

Biagio Bossone says profit inflation needs monetary ‘fuel’ to rise – but fiscal policy is the best fix, should governments have the ‘guts’

The highly celebrated Milton Friedman once famously stated that “inflation is always and everywhere a monetary phenomenon”. While he acknowledged that other factors may have inflationary consequences in the short term, he asserted that sustained increases in the general price level require an expansion of the money supply.

Bringing Friedman’s assertion into contemporary discussions, it is worth considering whether the concept of ‘profit inflation’, as a non-monetary form of inflation, might in

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