Project Details
Projekt
Price Stability without Equilibrium: A Constitutional Approach
Applicant
Lea Steininger
Subject Area
Political Science
Term
since 2024
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 546114750
Revisiting foundational questions on the nature of money, scholars of various traditions have come up with novel syntheses of the age-old investigation of money’s non-neutrality. Strangely, however, we know very little about what the non-neutrality of money implies for price stability theory in general, and the inflation hypothesis in particular. My project then aims at the extension of the constitutional theory of money to the discourse about price stability, which I coin the constitutional approach to price stability. A series of questions arises: How can money’s ability to change relative prices be integrated into a consistent account of price stability? What could an alternative thesis of price stability in an economy without equilibrium (and thus without a general price) look like? And has the anatomy of the recent Cost-of-living crisis has challenged the ideational foundations of the New Keynesian monetary policy framework? This research project investigates these open questions. In the first paper, the ramifications of the constitutional approach to money for price stability are investigated more closely in a theoretical setup. In two formally distinct yet interrelated parts, it first demonstrates how the theory of inflation is derived from the Neoclassical understanding of money. Second, it explores how a credit approach to money warrants a novel account of monetary governance and disaggregated price-level targeting with respect to sectoral and regional stability. Relatedly, the second paper investigates the communicated conception of price stability that underlies recent policy actions by central banks. In particular, the research question centers around how the European Central Bank’s during the Cost-of-living crisis that followed the global pandemic of 2020, shifted between a set of (microeconomics) supply side issues one the hand, and excessive (macroeconomic) aggregate demand on the other hand as the primary cause of the crisis. It highlights that the understanding of these driving forces has altered over time to justify a changing policy strategy and depicts theoretical inconsistencies in the context of rising uncertainty. To the best of my knowledge, my research is first to deal with the entrenched topological foundations in the realm of price stability by explicitly deducting a theory from epistemologically, ontologically, and methodologically sound premises. Potential findings of this project will lead to a better understanding on how (macro-)economic stability may be achieved by considering a more realistic vantage point of the connection between money, pricing, and value.
DFG Programme
WBP Fellowship
International Connection
USA
