"Monetary policy decisions tend to be based on systematic analysis of alternative policy choices and their associated macroeconomic impacts: this is science. Fiscal policy choices, in contrast, spring from unsystematic speculation, grounded more in politics than economics: this is alchemy. In...

Part I: The changing size of second-round effects -- 1. Introduction. 2. Policy implications of ERPT and ongoing debates -- 3. Second round effects, exchange rate depreciation, inflation and average wage settlements -- 4. Second round effects, remuneration per worker, exchange rate depreciation...