My understanding is that Russian inflation in recent years is considered to be running in the 5-6 % range, while US and Canada - in the 2-3% range (as measured by price increases/CPI). But I'd expect that the inflation of the money supply in Russia is much lower than in North America, as the Russian government spending deficit is in the low single digits % of GDP, while US and Canada annual budget deficits are both above 15% of GDP in 2020, necessitating much higher amounts of money printing by central banks.

Are my assumptions incorrect, or is there a logical explanation of this phenomena? Does money supply inflation not translate into price inflation, are there other forces at play, etc?

[EDIT] I understand that the relationship is not direct (as per Krugman), but I want dig into what could be happening in this particular example.

  • Is CPI misrepresenting actual price inflation in 'some' of these countries (so nothing to explain)?
  • Is money velocity different between them, affecting the value of money in each of these countries differently?
  • Are international trade and currency exchange rates a factor?
  • Have the recent Canadian and US increased deficits have not been prolonged enough, and inflation is behind the corner?
  • Is USD status of a reserve currency - an important factor?

Or Something else...

  • 1
    $\begingroup$ oh boy, I mixed up total debt and annual budget deficit did not I? I think they are both still higher in North America countries than in Russia, but not as much as I wrote up originally. $\endgroup$ – Joe May 18 at 4:43
  • $\begingroup$ edited to "above 15%" instead "above 100%" - still ~5 times higher than in Russia based on quick a back of the envelope math, thanks for catching this @Giskard $\endgroup$ – Joe May 18 at 4:49

The annual inflation was 5.8% in March 2021 in Russia. There are many reasons for this inflationary pressure such as the weakening of the ruble (Russian Currency) in comparison to the United States dollar. There is another reason for high inflation due to high government spending at the end of 2020 and at the beginning of the year 2021. In comparison to Russia, the inflation rate in the US is 4.16 % as of May 12, 2021. In Canada, the inflation rate is 2.2% in March 2021. Therefore, Russia has more inflation compared to the United States and Canada. Moreover, your assumptions about deficit financing are reasonable and correct.


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