A good but inevitably incomplete argument for higher inflation

Paul Krugman makes an excellent argument based on behavior finance on the benefits of growth

inflation: I would like to add, however, that there is another case for a higher inflation rate--an argument made more strongly, Akerlof, Dickens and Perry (pdf) This means.: even in the longer term, really, really hard to cut nominal wages. However, when you have very low inflation, relative wages getting right would require a significant number of workers to

wage cuts.Agreed with all of them. Absolutely right. But Krugman errs when it concludes:

thus, having a slightly higher inflation rate will lead to lower unemployment, but only temporarily, not permanently.

This is possible but not certain. What could also be a higher use of employment contracts in cost of living allowances, i.e., contracts of employment that are indexed for inflation. Using inflation to reduce real wages will only work if the wages paid in nominal terms. But if the labour market, inflation is expected to be high for a considerable period of time, then you should expect to see their salaries paid in real terms, at this point adding inflation gets you nothing.

Of course, one possibility is the prohibition of the use of COLA clauses in employment contracts. I would be surprised if every economist, together with Professor Krugman, I am in favour of this step.

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