In the 10th edition reading (pg 60-61), it discusses the rate of inflation for different countries. Could you explain the causes of inflation/deflation and the relationship to the interest rate movement. Also, do wars always trigger high inflation and depression/recession always trigger deflation and low interest rate?
[NEAS: Barro assumes inflation stems from growth of the money supply. Wars are expensive, so government may print money to pay for the way, thereby causing higher inflation. Nominal interest rates are real interest rates plus expected inflation: over the long-term, higher inflation causes higher interest rates. See the macroeconomics course, which deals with money supply growth, inflation, price levels, real interest rates, and nominal interest rates.]