Questions tagged [inflation]

Inflation is generalized increase of prices of goods and services in an economy, along with a corresponding fall in the purchasing value of money. The rate of inflation refers to the increase of the price of goods and services over time.

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Example of formula bias in CPI

A macroeconomics textbook explains the formula bias in the consumer price index (CPI) in the following way: This bias results because price data are collected on a ...
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Is a loan lent with a rate under the inflation rate free money?

Suppose we have an inflation in a country with an annual 2% and we get a loan for an annual 1% (real interest). Is the money we receive free? This is a common practice in some European countries, ...
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What are the names of the school(s) of economy that believe that printing enough money to be 100% sure price inflation always happen, is a bad thing?

What are the names of the school(s) of economy that believe that printing enough money (and spending) to be 100% sure price inflation always happen, is a bad thing? Those schools must also be against ...
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Why is there inflation?

As a follow up on How inflation really works? I wonder: Why is inflation or deflation "necessary"? And why is the one better than the other (is it?)? Can't we raise wages (and the like, ...
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Is it possible for the stock market to beat inflation forever?

Just a few thoughts on the possibility of markets beating inflation in the long, long term (say, hundreds of years). I am a theoretical physicist, not an economist, so please forgive my ignorance. I ...
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Does printing more money necessarily lead to inflation?

Does printing more money necessarily lead to inflation? For instance, if the money supply increased, but the money just sat around and wasn’t distributed to people, would that still cause inflation? ...
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"The GDP deflator reflects what's happening to prices not quantities." Is this true?

While looking at the GDP deflator this situation popped up that made me question the quote above from Mankiw Economics 5edition p446. But if we do the maths. We can see that the GDP deflator for this ...
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What is the effect on shelter prices of raising interest rates?

In the UK, a rise in rates causes a rise in mortgage repayments. It can lead to landlords raising rents due to margin pressure, if their mortgage is not fixed or is close to the end of its fixed ...
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In the short run, why do higher interest rate lower inflation?

A common interpretation is "Higher interest rates put less borrowing power in the hands of consumers and businesses. And when they spend less, firms are not selling everything and prices naturally ...
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Nominal financial variables reflect all available information on inflation?

Okay, a lil bit stupid question... Consider the Fisher approximation that, Nominal interest rate = Real interest rate + Expected inflation rate, Does this not posit that the nominal (short-term) ...
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2 answers
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Why is quantitative easing compared to "money printing"?

Context Some questions on this site ask about the difference between "money printing" and "quantitative easing". I am experiencing some difficulties to understand what some of the ...
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Why do central banks feel the need to do something about the current inflation levels

We hear in so many places that the current high levels of inflation are mainly due to supply side problems, like the war in Ukraine. Given that there is currently less supply then we are all ...
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What happens to the economy if a country simply ban inflation?

Recently Belarus simply decided to ban inflation. the president quoted "From today, any price increase is prohibited. Prohibited!," This is easy to do for a dictatorship but how economy is ...
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VAR model and simulation scenario

I have a VAR model to forecast key economic variables like gdp and inflation, but I want to be able to do some sort of simulation to study a particular scenario. I am running inflation expectations ...
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GBP Currency Crisis - Forex supply and demand affecting exchange rates

Reading this article on Why China Buys US Treasury Bonds I understand the notion of supply and demand affecting a currency value against the other and how they need to buy up the excess dollars they ...
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log differencing and VAR model

I am working on a VAR model to forecast inflation using variables like CPI prices, oil prices, unemployment rates, PMI, inflation expectations, policy rates, and GDP. To use the VAR model for my ...
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Machine learning and Inflation forecasting

Is machine learning a good tool to use in order to forecast inflation for the short term (next 2 - 3 years on a monthly or quarterly basis)? I want to be able to forecast inflation for Canada for the ...
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How do Foreign Investments by Central Banks increase the Money Supply of an Economy?

Trying to understand if "money supply" and "currency in circulation" apply only to the money within the borders of the country or does it also include its money in foreign nations ...
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Calculating Real Budget Deficit, given Nominal Deficit and Inflation

I am doing this course on Coursera. In the context of explaining what Budget Deficits are, the professor puts up the following formula: Real Deficit = Nominal Deficit - (Inflation*Total Debt) My ...
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Why do central banks want to decrease inflation?

Inflation is a result of increased demand with same supply (in worst case. in best case, supply also increases), due to more money on people's hand. As far as I understand it, inflated market is still ...
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What's the name of that research that drew the conclusion that rent prices are increasing because people work more from home?

If you have other articles on the field, please share. Thank you
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Central bank use of interest to combat inflation

I continue being puzzled by the interest rate rises being used as a lever to lower inflation in the present climate. If I understand correctly, the rationale of higher interest is to dampen demand ...
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Why don't central banks regulate inflation by stimulating supply, rather than arresting demand?

During an inflation spiral central banks will reduce the demand for goods by increasing the cost of money, thereby halting inflation but negatively impacting growth. Rather than putting a brake on ...
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Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
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2 answers
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Calculating the amount paid for a loan in today's dollars

So I was trying to figure out the amount paid for a loan in today's dollars using two different methods but they give me different results. I was hoping that someone could explain which method is ...
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Does anyone have any references relating to supermarkets pricing goods to keep CPI down?

On BBC Radio 4's Today programme during the Business News on the 31st August 22, I heard an ex-buyer for a major UK supermarket saying that they always kept a list of CPI goods and they made sure that ...
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Does inflation affect debt-to-gdp ratio?

So consider this indicator https://fred.stlouisfed.org/series/GFDEGDQ188S I am wondering since Debt is nominal and GDP is also nominal, is it possible for inflation to have an effect on this ratio? I'...
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Is inflation the cause or just the consequence? [closed]

Inflation is usually referred as an issue to the economy and we analyze its consequences on income and economic growth. My undestanding however is that the real issue is the negative shift in ...
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Simple DCF model with inflation and taxes - Why do inflation and taxes only matter jointly?

I'm putting together a simple discounted cashflow (DCF) model for a theoretical real estate investment. I think the model is correct, but I can't understand some of the results. The model is simply: $...
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How does FDI from one country affect the inflation outlook of another?

How do the relations between FDI and inflation work in the current world? (Mainly looking at the relationship between Canada and its FDIs from the EU and China.) Context and my thoughts: I've been ...
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Why the subjective "Owners’ equivalent rent of residences" is included in the CPI?

I was reading about the calculation of the Shelter index of the CPI which accounts to more than 30% of the entire basket. It consists mainly of two parts: (1) Rent of primary residence, and (2) Owners’...
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Inflation, competition, and efficiency

I recently watched an interview with a reporter who looked through recent public quarterly filings and found that production costs were increasing and these were being passed on to consumers but that ...
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Are interest rates increases fighting inflation?

Central banks are stubbornly increasing rates to fight current spike of inflation. Inflation, especially in Europe but also in the USA, is mainly supply driven and, killing demand to try to tame an ...
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Can there be profit-price spirals, or others?

Wikipedia describes: In macroeconomics, a wage-price spiral ... is a proposed explanation for inflation, in which wage increases cause price increases which in turn cause wage increases, in a ...
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How can Japan have much lower inflation compared to US when Yen is much weaker compared to USD than 1 year ago?

I understand that Japanese people might not buy same stuff that US people buy, that inflation might be calculated differently, that people in Japan can buy services/products made inside Japan... and ...
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Relationship between nominal and real interest rates and inflation in a term structure model

I am studying the basics of the term structure of interest rates from Hillier et al. "Fundamentals of Corporate Finance" (3rd ed., 2017) (here is a link to a slightly different edition). An ...
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Impact of China and European Union on Canadian Inflation

I'm currently working on a project where I'm trying to determine the impact of the European Union and China on the Canadian economy, specifically, the inflation and policy rates for the next 2-3 years....
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United States - Is it the case that cost-push inflation is debunked?

While cost-push inflation makes intuitive sense for explaining the inflation uptrend in recent years: disruptions to the supply chain and volatile energy markets lead companies to pass on price hikes ...
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why is the slow down in economic growth creating inflation

Context: Currently, many central banks and authorities are implementing monetary policies to do monetary tightening in response to current inflation and expectations of even higher inflation in the ...
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Relative Importance Weights of USA CPI items

So for example in this release Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category, the Relative importance weights are stated. Now I ...
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Why are the YTMs of TIPS of longer maturities more sensitive to current interest rates and inflation rates?

According to this website, the yields of TIPS of longer maturities are greater than that of TIPS of shorter maturities. It seems counterintuitive since yields of longer-maturity bonds, which are based ...
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Can we predict the inflation rate in India for the next 20 years?

Can we predict the inflation rate in India for the next 20 years? Like inflation rate in 2022, 2023, 2024... and so on.
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In the simple Keynesian model, is full employment of resources really desirable?

In almost every introductory macro economics class, while studying the simple Keynesian model, students are always taught that everyone in the economy always works to achieve full employment of ...
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Year:Location Inflation / CoL calculator?

Is there a calculator or standard method of computation where you could get the relative difference in spending power of X USD in a given city/year from a given city/year? For example, what would be ...
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Value added at current price and deflation

I am currently working with Value Added at current price per industry per country per year (VALU variable available on OECD stats) and I'm trying to use the Value Added for all the European Countries (...
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What does THO, as in "USD THO", stand for in export statistics?

I've noticed that some online sources use "USD THO" as a unit to express rates of transfer of value. Specifically, I saw it in measuring Chinese exports to Russia in this video at 21:20 ...
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How has decreasing quality (or the need to pay more for the same quality) tracked with inflation?

I'm trying to identity a missing variable that could affect poor and middle class consumers more than more wealthy/resourceful individuals. Assuming that there are decisions regarding cost reductions ...
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How to calculate real commodity prices from nominal time series

I am trying to adjust a time series of nominal prices of a commodity to inflation, using a given year as base year, i.e. calculating 'real' prices. What is the most common/correct approach for doing ...
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Why is inflation higher in emerging economies?

Inflation rates are higher in emerging economies than in developed economies. (source) Why is that so ? Most explanations I have found refer to some kind of catching up, but it does not immediately ...
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Is it correct to distinguish between "monetary" and "price" inflation?

As the questions says. Should we distinguish between both. Or are they the same thing?

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