Supply-side reforms cannot stop inflation, but . . .

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Supply-side reforms can make stopping inflation less painful.

Thus, under a dual mandate, supply-side reforms can nudge the central bank toward a less inflationary policy.

Fiscal austerity (here I’m assuming tax increases and cuts in transfers) cannot stop inflation.

Fiscal austerity doesn’t even make stopping inflation less painful.

But fiscal austerity can lead to tighter monetary policy if the central bank is dumb enough to target interest rates instead of inflation/NGDP.

PS. I have a new piece at The Hill, discussing the risk of recession.

For selfish reasons, I’m sort of rooting for a mini-recession. I’ve never seen one (in America) and had assumed I never would. And with a mini-recession we’d be getting off easy.