Monetary of Structural Inflation ? A bi-sectoral heterodox model

Working paper in french.

The issue of inflation targeting had concentrated a lot of discussion in the last twenty years. Not surprisingly the old dogma of a pure « monetary » inflation has been challenged and so was too the idea that the lowest the inflation the better. The very notion of « output gap » is showing that the level of inflation matters for growth and sometimes inflation and growth are positively correlated. This is to be linked with the idea of « strategic dependencies » between sectors but also to context-dependant behaviours. This is an important result, and one which could have an important relevance for the analysis of the current Eurozone crisis and the policy of the ECB.

After discussing assumptions about structural and nominal rigidities and comparing some results, we draw in this document a bi-sectoral model, borrowing some important ideas to Mankyw and Reis but developing them into a more heterodox and post-Keynesian framework.