ABSTRACT
Secular inflation describes a prolonged period of continuing price increases. Central bankers usually look through the rise in the general price level, which is due to an adverse supply shock, and care more about second round effects, that is, the effect on inflation. Continuous or persistent increase in prices and a decline in output, that is, stagflation, result from supply shocks over the business cycle. Robert Shiller showed that ordinary people have different views about inflation from economists. A significantly damaging inflation is called hyperinflation. It is a devastating case of rapidly rising inflation, that is, by the day or by the hour. The Russian central bank reduced inflation by reducing money and credit growth significantly. The relationships between inflation and the output gap and that between the change in inflation and the output gap are statistically unstable in the majority of countries. The chapter also presents an overview of the key concepts discussed in this book.
