Inflation is a word that, after the last year or two, can conjure images of people running around, flapping their arms, and muttering, "ohmigod, ohmigod, ohmigod." There's an assumption it's bad, although some degree of inflation is almost always in view.

A new working paper from Anna Cieslak, associate professor of finance at Duke University's Fuqua School of Business, and Carolin Pflueger, an economist and assistant professor at the University of Chicago's Harris School of Public Policy, suggests that there is good and bad inflation, depending on whether it comes from demand shocks or supply shocks, respectively, when looking at returns on assets.

The paper starts with the question of what drives inflation, which may seem like it should be simple, but has been a fundamental point of division among economists since the Federal Reserve first dismissed increasing inflation as "transitory."