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The classical theory of inflation

I am currently writing my dissertation on the classical theory of inflation outlined by Shaikh applied to Britain. My results so far have been very promising with an exceptional relationship between inflation and growth utilisation. However my results have not shown any real correlation between relative new purchasing power and real output growth as Anwar demonstrates for the USA. The results showed a very weak negative correlation. I am unsure if I have made mistakes in my calculations, or if this is perhaps explained by factors such as the financialisation of the British economy? I am curious if other users have attempted to apply the classical theory to a case study country and if you have found similar results? Thanks in advance for any advice that can be offered. Wayne.

5 comments

Comments (5)

techhubjc

5시간

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Nick Anderson

Mar 13

From Prof. Shaikh -

"Cannot say without knowing how it was done. Note that we showed the basic relation for a lot of countries, as shown Ch 15, sections VIII, parts 3-5. Did he try that?

One good way to proceed is to replicate those results for those years, so as to understand how it is done."

W-scott

Mar 14

Replying to

Thank you for taking the time to get back to me on this. And thanks Anwar if you see this, your lecture series played a big part in my decision to study economics in the first place, and your book has helped me on countless essays. My results for RNPP seem to broadly align with the results of Handfas' original 2012 paper. I did use the series Net domestic credit from the IMF (or possibly World Bank? I forget) to calculate this as this seems to be the only long run credit series available for the UK, but this may be incorrect. Oktay Ozden suggested that I use M2 money supply but this series ends in 1987. I can post the regression analysis once I have access to my university computer tomorrow. However all of the other assumptions have shown a strong relationship. Here is my attempt to replicate the graph showing normalised growth utilisation rates and and inflation rates for the UK.

Edited

W-scott

Mar 14

Replying to

Nick Anderson

Mar 11

Hi Wayne,

Thank you for posting. I am not able to help but I will ask around to see if others may be able to.

Best, Nick