The nature of my concern is illustrated by such pragmatic questions as the following:
- When warfare in the Gulf drives up oil prices, or when the Belgian Government levies new pollution taxes, should we expect the selling prices of books, magazines and newspaper to go down?
- When the Bundesbank espresses its disapproval of the prevailing rate of inflation by raising its short-term nominal interest rate, it presumably hopes that inflation will abate, so that the real rate should rise by the full amount of the nominal rate increase, plus whatever fall in inflation comes along (Fisher condition). How should we expect the real economy to deliver that increase in the real rate? [...]
