Higher Inflation Rates?
Here are two links that argue that marginally higher inflation rates would be beneficial in two ways. The first is that it would justify higher wages, and second that because it would result in higher nominal interest rates. These higher nominal interest rates would allow for more flexibility by the Federal Reserve and other central banks to lower interest rates when necessary to fight recessions. This is a controversial proposal because over the course of the last three decades low inflation targets have been set by central banks, emphasizing the importance of low rates of inflation. As a result a change in policy would be required. Then again, very low inflation and interest rates are identified as factors contributing to the financial crisis that deepened dramatically in 2008. At the same time policy makers would need to make sure that inflation does not get to be too high due to the change in policy. Here are the links to the first article (http://www.imf.org/external/pubs/ft/survey/so/2010/INT021210A.htm) and the second article (http://elsa.berkeley.edu/~akerlof/docs/inflatn-employm.pdf).
What do you think?