On the macro-political dynamics of conflict inflation

Abstract

In recent times, the notion that inflation may be the result of conflicting claims by workers and capitalists over the distribution of income has experienced a revival in the academic and policy debate. Against this background, we investigate in this paper the macrodynamics of conflict inflation without and with the additional influence of the political sphere in an extended version of the baseline model of behavioral political cycles proposed by Galí (J Econ Behav Organ 212:50–67, 2023). By means of numerical simulations, we illustrate the reaction of main macroeconomic variables to the emergence of conflicting claims over the distribution of income between workers and capitalists, as well as their possible effects at the political sphere. Show more