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Macroeconomics (inflation) - Essay Example
Author : madelynnthiel
Pages 6 (1506 words)
In macroeconomics, inflation is one of the main and most complicated issues. The widespread issue of the inflation and of its acceleration, and especially the reduction in its dispersion, has led to a rather general acceptance of the view that it is being transmitted among countries to a greater extent than before, to expositions of various possible mechanisms of transmission, and to econometric testing of the relative importance of these mechanisms…
The inference is not necessarily correct: other explanations are equally logical and sufficiently important to be worth serious consideration. Many countries might experience inflation at the same time without international transmission of inflationary forces because they respond in the same way to common causes (Wickens 54). All countries have undergone long-period institutional and structural changes which, although not in themselves inflationary, have made them more vulnerable to inflation. One of these changes is a widespread increase in the resistance to reductions of nominal prices and wages. Another is the growing role of the public sector in most national economies, a development that may increase the vulnerability to inflation in a number of different ways, which are discussed in the appendix to this paper. Another possible cause of a decrease in the dispersion of rates of change in consumer prices and other comprehensive price indexes, such as gross national product deflators, is a convergence in the rates of productivity growth of different countries. ...