Stagflation - what is it?

click fraud protection

Thus, we consider the concept of "stagflation."What it is?So they called the state of the economy when the fall and stagnation of production accompanied by rising unemployment and the constant rise in prices - inflation.That is, the term defines inflation against the backdrop of economic stagnation.In other words, it is called stagflation creeping form of economic crisis.The main causes of this process are the anti-crisis measures, which holds the state monopoly and politics, through which a high level of prices during the crisis.

The term is now often used in modern macroeconomics.This new phenomenon has appeared recently as a result of the cyclical development of the national economy and the formation of new types of reproduction of capital.

definition

concept of stagflation was first reported in 1965 in the UK.Until that time, the recession necessarily accompanied by a decrease in prices, but since 1960, in different countries there was a reverse process, which has been called stagflation.What is it and what are the causes of these processes, many scientists explain in different ways.Possible reasons include the following:

  1. energy crisis.
  2. The high value of the commodity monopolies during the crisis.
  3. State activities undertaken to improve the economic condition of the country.
  4. of globalization of the economy and the elimination of protectionism.

Examples stagflation

In 1960-1980 stagflation observed in many developed countries of the West.There are many examples, but the most memorable was the example for Russia 1991-1996 period.During this period the country experienced high inflation and the relentless decline in GDP.For example, economic and fall in the US in 1970.While the rate of inflation in the country amounted to 5.5-6%, which, in principle, and pointed to stagflation.

signs of stagflation

About stagflation economic system can be judged by the following criteria: increase in unemployment, a depressed state of the economy, inflation processes in the country and the devaluation of the national currency in the international market.This new form of crisis in the economy, in which the available funds of the population do not have the purchasing power at a low level, but the price is steadily growing.

Stagflation is characterized by all of these features, and they are all fine imposed on the economic situation in Russia - ruble reduced the level of employment is also at a low level, there is a general decline in the economy.For this reason, economists say about the likelihood of stagflation in Russia.True, analysts believe that such processes are now present in the economies of many developed countries, it is, but it can hardly be a consolation.The phenomenon of stagflation, what it is, rather, not yet fully studied by economists.It is believed that a similar state of the economy tends to disappear as quickly as occur.But one thing the analysts agree: stagflation entail only negative consequences.

What consequences

stagflation stagflation, as has been said, is characterized by a negative impact on the economy.Its consequences - is the decline of the economy and the occurrence of acute crisis, such as the reduction of security of citizens, unemployment and social vulnerability of certain segments of the population, the decline in GDP and the decline of the financial and credit system.

Phillips Curve

as a simple Keynesian model of the economy may be either inflation or unemployment.At the same time, these two processes can not occur, but based on empirical studies conducted in the 50-60-ies., Economists have confirmed that such a relationship exists.Stagflation and Phillips curve mark a stable and predictable inverse relationship between inflation and unemployment.

relationship between these two parameters inversely proportional, so we can assume that there is an alternative, and the relationship between them.If the Phillips curve will be fixed in one position, then the people that define the economic situation will have to decide which is better used to improve the situation - enabling or restrictive fiscal policy.

Avoiding stagflation

Traditionally, to stabilize the situation in the economy measures were applied is limited only by the redistribution of total demand, which, in fact, had no effect on the imbalances of the labor market and the system of domination in the market.In this case, the rate of inflation started rising before achieved full employment.For example, the manipulation of aggregate demand by using monetary and fiscal measures have led to the displacement of a given economy Phillips curve.

Will stagflation

in Russia due to the sharp devaluation of the ruble expert community are increasingly making bleak forecasts.Experts say that such a fall was not even in times of global financial crisis.Hence, there was speculation that Russia is facing stagflation.What is it and what can turn to the economy, we have already discussed.Nothing good for the economic situation, Russia does not turn out as stagflation combines the simultaneous decline of the economy and inflation.

According to analysts

Will Russia stagflation?What is it, you know the Russians?Or is it the next suggestion on the topic of the domestic economy, unsubstantiated and not justified?So, if you believe the claims of economists Development Centre HSE, then Russia will soon face this unpleasant problem.Its disappointing forecasts expert analysts explain as follows.As is known, stagflation - a multilateral process in which one of the parties to determine the decline of industrial activity.

there any signs of this decline?If you remember last year's results, Russia has closed it with a measure of economic growth at 1.3%.At the last meeting of the Economic Council, Russian President Vladimir Putin said the fact that few countries in the world show such a growth rate of GDP.And some notes and do drop this indicator.For comparison, the change in GDP in Italy, where it fell by 1.9%, while France grew by only 0.2%.Therefore, we can conclude that the experts' forecasts are ungrounded, and the Russian economy is not as bad as they are trying to show.But do not forget that the previous, 2012, Russia's economic growth reached 3.4%.

other side of stagflation said the rapid rise in prices in the country.And in fact, according to statistics, consumer prices in Russia for the last year increased by 6.5%.For comparison, in the EU they rose by only 1%.In particular, a strong increase of the prices indicated on food product group - by 6.2%.If we again compare this figure with the data in the European Union, and there they grew by only 1.4%.

How have the figures in 2014

Food prices continued to rise this year.According to experts, their growth will be much more visible, especially if the price increase for vegetables, fruits, dairy and fish products, alcoholic beverages, and public services.According to such a joyless forecasts, it is likely that inflation in the country for the year could rise to 6%, that is, it will be 1.5% higher than the index, which appointed the Central Bank.

Most likely, the ruble will gradually weaken even for a long time.This is due to many factors such as the reduction of imports, stagnation in the manufacturing sector, the shortage of currency in the country.Everything else, he added, and geopolitical instability.The HSE noted that in order to change this situation, it is necessary to provide a deeper devaluation of the currency.

should pay attention to another important aspect of stagflation, namely, the unemployment rate in the country.Most recently, the government is proud to announce that over the past ten years, the unemployment rate in Russia was the lowest.And this is indeed the case.In 2013, the unemployment rate was about 5.5%.But the Russian economy is slowing down its growth, therefore, is to be expected that there will be more unemployed.According to forecasts, by the end of 2014 the unemployment rate could be more than 6%.However, the rapid increase of this indicator is not expected.