International Business - Inflation

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Inflation means a sustained increase in the general price level in an economy. The recent debate in leading newspapers and magazines of the world is about the rising food prices and its impacts on the poor nations. The debates are now driven by the soaring oil prices and rising commodity prices…

Introduction


However inflation in rest of the world is seeing with great skepticism. Many political leaders view it as a failure of the policies of the governments especially in developing countries. Inflation, especially food inflation is on rise on those countries therefore there inflation is now more defined in terms of political terms rather than in economic terms.
Prime Minister, Stephen Harper, seems not much worried about the inflation in the country. His stance seems to be in-line with US. Stephen Harper believes that sluggish economic growth is the main reason for the current economic problems whereas inflation is not the main cause of it. (CLARK, 2008) However the stance of the central bank of Canada is slightly different as compared to Mr. Stephen Harper as they view inflation as a worrying sign.
Since Canadian economy is largely based on service sector therefore strong Canadian dollar is helping it. However it must be noted that the falling US economy has pushed for the relocation of the US factories to Canada which is helping Canada as strong Canadian dollar against US dollar provide. Further as the increase in the value of Canadian dollar sustain the overall attractiveness of the Canadian Products will increase therefore countries like China and India, Canada will be a better alternative as compared to US.
It is believed that rising oil ...
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