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November 17, 2010

Comments

David Massey

Great post. There's something I don't understand though, what is the mechanism (theoretical or otherwise) by which high productivity growth keeps inflation down?

vimothy

BoE inflation report section 3, "output and supply" worth reading along these lines, Chris.

vimothy

Which has just come out, I should add.

chris

@ David - imagine productivity were to double. Each individual firm would then want to sell more stuff, as it's cheaper to produce. But to do this, they'd have to cut prices.

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