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Inflation Strain is Eased by the Digital Sector, Finds New Report from PPI’s Innovation Frontier Project 

  • June 8, 2022

A new report from the Progressive Policy Institute (PPI)’s Innovation Frontier Project finds inflation in the digital sector is still low, despite rapid price increases in much of the rest of the economy. Moreover, the deflationary influence of the digital economy has not been fully captured in official measures of inflation

The report is authored by world-renowned economist Marshall Reinsdorf, and is titled “Is Inflation Still Low in the Digital Economy?”. Prior to opening his own independent research consultancy, Mr. Reinsdorf was senior economist at the International Monetary Fund and president of the International Association for Research in Income and Wealth. Prior to joining the IMF, he was chief of the National Accounts Research Group at the U.S. Bureau of Economic Analysis.

“Given the value of technology in moderating inflation, policymakers should seek opportunities to promote uses of digital technology to enhance growth and promote price stability,” writes report author Marshall Reinsdorf.

“Four decades of relatively low inflation have made the current inflation figures particularly troubling. Over this same time, advances in the digital economy have greatly increased the speed of communication and access to information, saving Americans substantial amounts of time and money. Given these continuous improvements, recent inflation figures may be overstated. More accurate price reporting would help economic policymakers and consumers take action to counteract inflation’s effects on government and household budgets,” Mr. Reinsdorf concludes.

Reinsdorf also lays out why the frequent introductions of new models and new products and rapid growth of e-commerce make inflation in the digital economy challenging to measure. Correcting these blindspots would give economists and policymakers a better picture of the role of the digital economy in easing inflation.

Read the report and expanded policy recommendations here:

Based in Washington, D.C., and housed in the Progressive Policy Institute, the Innovation Frontier Project explores the role of public policy in science, technology and innovation. The project is managed by Jack Karsten. Learn more by visiting innovationfrontier.org.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

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Media Contact: Aaron White; awhite@ppionline.org

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