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In recent years, downward risks to price stability have persisted in spite of unprecedented monetary expansion and low or falling unemployment rates. This combination, observed in Japan, the USA and the Euro area, has attracted several explanations, focusing on demographic, technological and institutional factors. This is reminiscent of past debates about inflation, which are worth reconsidering today. In this vein, this paper investigates the analysis of inflation conducted by Richard Kahn between the 1950s and the 1970s, drawing on published and unpublished archival material. Kahn regarded inflation as crucially linked to nominal wages, productivity and labour market institutions. Tracing Kahn’s views on the complex linkages between these variables and their connections with money supply, unemployment rate and inflation expectations will enable us to reconstruct a model of inflation, which combines demand-pull and cost-push elements and is applicable to different institutional contexts. This reconstruction will also allow to qualify expert opinions, which depict Kahn as obsessed with full employment to the detriment of price stability. Kahn regarded the control of inflation as of primary importance, believed in the possibility of reconciling it with high and stable employment and improving life-standards and thought this could be achieved by combining incomes policy, demand management and – if necessary - direct controls. These recommendations should be understood in connection with Kahn’s refutation of the quantity theory of money and the Phillips curve and his ideas about the crucial role of expectations in determining economic decisions.

Kahn, inflation, demand-pull, cost-push, inflation expectations