Is inflation a monetary phenomenon only? A non monetarist episode of inflation: the Italian case

The publication of the second edition of Fratianni and Spinelli's monetary History of Italy offers the opportunity to analyze the causes behind the inflation pattern in Italy in the three decades preceding the entry of the country in the European Monetary Union. The two authors reconstruct the monetary history of Italy using the monetarist theory as an interpretation scheme, and assert that the Italian experience represents a significant confirmation of the validity of that theoretical model. This paper has two objectives. The first consists in showing the limits of the explanation of Italian inflation based on the monetarist theory; the second consists in providing an alternative explanation whereby the pattern of Italian inflation basically depends on the trend of production costs and on the behavior of companies in connection with mark-up definition. This paper is subdivided into two parts. In part I, the summary of the most significant aspects of the monetarist interpretation is followed by a review of its weak points. In part II, an alternative interpretation of the evolution of inflation in Italy is presented.