Inflation and development : central bank stabilization policies revisited

Against the backdrop of an inflationary surge due to war, sanctions and pandemic disruptions, the article argues against dogmatic responses to inflation. Using extant theoretical and empirical literature as well as time-series data, it examines the scope for ‘moderate inflation rates’, above what is currently targeted. Specifically, it seeks to ascertain the potential developmental gains from moderate inflation (say, 10–15%), the risk of inflation accelerating to harm growth, and the implications of central bank independence during the recent inflation episode and for supporting sustainable development.