The inflation process originates in successive increments general price level. It is often said that price increases must be "widespread", that is, cover a wide range of goods and services, since otherwise what would be observed is simply a change in relative prices (a product becomes more expensive or cheaper compared with another product , than it was before).
The inflation rate is measured based on the variation of a price index basket of goods and services representative (eg consumers). If seen some acceleration in the rate of inflation in subsequent periods they say that inflation is "espiraliza" and may end up in a process hyperinflation (inflation over a certain level).
A major confusion is often seen in the fact that often are wrong, "high prices" with high inflation. The prices of the economy are represented on a scale: say, if my use only one well, and that it passes cost $ 10 per unit to $ 10,000 but the income of MI go from being also $ 10 to $ 10,000, then I do not no problem generates the observed price increase (although the change in price during that period was really extreme: 99,900% !!!). If after prices and wages remain at these levels and do not vary, and inflation would not be observed if we replace the dollar sign "weights" for the new "over 1,000 pesos" or other cute name that always devise in our country, changing a new currency unit for above 1,000 units, then scale return to its previous absolute value.
generally if all prices and all incomes grow at the same rate increase they say that inflation is neutral (does not affect the real variables such as employment, output measured in constant prices and this case also the distribution of income) and economists focus more on problems that causes continuous variation in prices, which could "distort decisions and reduce economic efficiency " .*
As in the world there are many goods and services and all vary in different proportions and income simply be impossible to offset (up or down) just a person by variations in the price of the products they consume, the problems caused by inflation are varied and can range from lack of predictability of real returns on investment ( gain is obtained by making an investment or speculative production, measured in terms of purchasing power for goods and services) or problems associated with poverty, as the price increases that consume low-income people can take that can not afford even the minimum levels considered subsistence.
The origins of inflation are hotly debated by supporters of various positions. In Argentina today, most outstanding visions can be summarized as follows:
i-Bid distributive concerns certain class struggle between workers and capitalists to see who gets more portion of the revenue pie in the production process. From this position it is easy to understand how they could espiralizar inflation: Workers fight for better wages, then the capitalists raise prices to support higher costs and maintain its rate of profit. If all firms do the same, then the prices rose at a rate X and workers to recover their real wages are going to ask (X + something)% increase. And the capitalists then raise prices and etc, etc. ... Michal Kalecki, the great Polish economist, stressed this point.
ii- Excess of Demand: If the Central Bank makes a very loose monetary policy (eg weight issues too. To buy dollars and thereby increase its reserves and maintain the nominal exchange rate) excess liquidity may put downward pressure on domestic interest rates and that this will stimulate investment spending. Thus, in the style of "hydraulic Keynesianism" (and at this point coincides with the vision of Keynes) can say that if the economy is at full employment, then the excess demand does not adjust for numbers, but you press the prices higher.
excess emission also might check to fund the National Treasury, as some argue that it is necessary to decrease the rate of growth of public spending and public sector to generate surpluses, which allow the surplus to buy foreign exchange to pay debts to foreign creditors without the need to give when you do weights as the Central Bank.
Monetarist iii-Version: from accelerating the rate of growth of money supply, then, in the short term can reduce unemployment below a certain level "natural." But in the long term (which we would be coming, if we assume that the shocks were introduced after the end of convertibility) unemployment would return to its "natural" level and may have checked some spiraling inflation.
iv-pay version Debt Reserves (it's a personal view): if we assume that the Government or the Central Bank wishes to maintain a certain level of international reserves or that they will increase continuously, and changed some of the same for Lyrics transferable Treasury, the Central Bank in an effort to achieve the goal of rebuilding reserves should increase the issue, and moreover also contribute to the maintenance of TCN at a level greater than or equal to a desired minimum (in my opinion, this minimum is the fear of floating in reverse, ie the floor that is set for a hypothetical free float can not reach our currency to appreciate too.)
v-imported inflation (or shock of commodities): are also those who argue that inflation is due to reasons of rising international prices of certain primary products, which leads to extended to the rest of the fast food and so impact on price indices. Here there is still plenty of material to cut ...
vi-Output Gap: when the economy grows at high rates, as occurred from 2003 to here, while there is some level of idle capacity (factors of production available for used) does not generate too many problems prices. But when you close the output gap (ie, the production reaches a level near or above, which is considered "potential" or maximum due to the conditions of technology and full utilization of the factors) is generate price pressures, which can be explained in a simple (albeit incomplete and vaguely) for a possible increase in wages (due to unemployment would fall and workers would have greater bargaining power) that could lead to trigger a more equitable distribution as which Marcab in (i).
vii-Market Adjustment and the Working Assets after successive reductions : ** Introduces devaluation price increase of goods export (partially offset by deductions) and on the other hand, all the goods that use imported inputs and imported final goods we consume. In the overshooting models (over-reaction) Exchange Rate considered that the money market and currency (usually more active markets) adjust faster than goods (which adjusts slowly against excess demand or offer.) Thus, the NER reaction above its long-term and while it is converging, prices are rising to a new level of long-term equilibrium. (In short, if we close one of the signings BEA's most important, we will expand this point.)
vii-Market Adjustment and the Working Assets after successive reductions : ** Introduces devaluation price increase of goods export (partially offset by deductions) and on the other hand, all the goods that use imported inputs and imported final goods we consume. In the overshooting models (over-reaction) Exchange Rate considered that the money market and currency (usually more active markets) adjust faster than goods (which adjusts slowly against excess demand or offer.) Thus, the NER reaction above its long-term and while it is converging, prices are rising to a new level of long-term equilibrium. (In short, if we close one of the signings BEA's most important, we will expand this point.)
Well, down here, we mark some of the possible causes of inflation. The BEA is producing enough material to keep in mind about what it should contain an anti-inflationary, so it is not necessary for me to dwell here.
However, I do not want to miss the occasion to mark, in line with what they said Ana C. here, and (with a bit more skepticism) ELY here that the Revenue Policy is an instrument that can not be set aside. Believe that Monetary Policy and Fiscal Policy resolved everything, I think it is ignorance that Economics is a Social Science, and as such should be taken into consideration that individuals, interest groups, unions, corporations, etc. . have enough capacity for your lack of coordination leads to economic policy can not be effective.
What is needed is to coordinate the economy. Coordinate expectations and make the future a little more predictable. Or at least to know where we go. Better yet, agree or agree to where we go, with all relevant actors.
And if this could result in a social pact (which contains elements of Revenue Policy, namely wage and price developments or arrangements of such adjustments based on certain variables), why should not we try?
addition, if it contributes to reduce the conflict between economic and class struggle, would it be too eccentric to think that the positive externality that generates social agreement is immeasurable?.
Anyway, the other that remains is: Rate Up, Spending Down ... as doing laboratory experiments to see where the curves move ... and good ... who wanted the economy resembles the natural sciences, it seems that they succeeded.
Greetings,
MI
PS: Do not say that the PM and PF are not relevant to control inflation, saying only that accompanied a social or policy income will be much more effective or even going to have more chances of being able to have the desired effect without having to bear all the sacrifices in employment or the level of activity.
* For those who are not stick to the economy and are interested, I recommend the book by Paul Krugman, The Age of Expectations Limited, 3rd ed. Ariel: 2003
The part that explains inflation is short and very educational.
** The concept of devaluation (and revaluation) is usually reserved for government decisions to alter the exchange rate of domestic currency for foreign currency. Instead depreciation (and appreciation) is often used when these movements are given mainly by foreign exchange market conditions.
The picture I took of here
** The concept of devaluation (and revaluation) is usually reserved for government decisions to alter the exchange rate of domestic currency for foreign currency. Instead depreciation (and appreciation) is often used when these movements are given mainly by foreign exchange market conditions.
The picture I took of here
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