1
$\begingroup$

I read in some articles that there are such notions as "exported inflation" and "imported inflation".

But it was not written about in detail.

What are exported inflation and imported inflation? What do examples exist?

Thanks!

$\endgroup$

1 Answer 1

1
$\begingroup$

Export/import inflation is an inflation caused by exchange rate movements.

For example, if there is some country A that does not have any oil production and imports oil from country B, then an appreciation of country's B currency will make oil in country A more expensive. This, ceteris paribus, will make all oil intensive products produced in A more expensive.

Inflation, is change in price level, if broad range of products gets more expensive inflation increases. If this is due to changes in exchange rate like in example above we would say the inflation is exported/imported (depending on what side you are looking at).

$\endgroup$
15
  • 1
    $\begingroup$ @Mike_bb that also has only effect through exchange rate, in that case CB in A cannot directly buy debt of B, It has to first exchange the new issued money at exchange rate to buy debt denominated in the currency of B. This causes exchange rate fluctuations that then can cause the import/export inflation. $\endgroup$
    – 1muflon1
    Commented May 16 at 10:21
  • 1
    $\begingroup$ @Mike_bb what you describe would lead in depreciation of A currency and appreciation of B currency $\endgroup$
    – 1muflon1
    Commented May 16 at 11:47
  • 1
    $\begingroup$ @Mike_bb exchange rate is not something that is fixed (unless you are specifically talking about some country with fixed exchange rate), the more people buy the higher price is. Yes when you as an individual go to an exchange rate window on an airport the prices there are fixed (at least within a day or couple of hours), but they at the airport would not exchange you literally millions or billions of unit of currency, and its fixed there due to price stickiness at that local level. On international markets large orders move prices quickly. Also forex works on international level $\endgroup$
    – 1muflon1
    Commented May 16 at 13:23
  • 1
    $\begingroup$ works similarly like stock exchange, there are various people buying and selling at the same time and when you have large order you need to deal with multiple people, its not like grocery store. $\endgroup$
    – 1muflon1
    Commented May 16 at 13:28
  • 1
    $\begingroup$ @Mike_bb in the same way as anyone can that does not mean that under floating exchange rate they can do it without changing price $\endgroup$
    – 1muflon1
    Commented May 16 at 14:07

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.