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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66 views

Recent estimates of CPI bias?

The Dec 1996 Boskin report (May 1997 AER summary) concluded that the change in the Consumer Price Index (CPI) overstates the change in the cost of living by about 1.1 percentage points per year (...
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832 views

How should I adjust data for both inflation and foreign exchange rate?

I’m not sure if this is typically done, but suppose my data point is in 2013 JPY and I want to express in 2016 USD. Do I apply CPI to express data in 2016 JPY, and then apply exchange rate to 2016 USD?...
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10k views

How does tariff increase inflation?

The Wall Street Journal claims that: Some are concerned over the likelihood of the U.S. adopting trade tariffs on imports from China. This policy option would risk retaliatory measures and hurt ...
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732 views

Interest rates, inflation and liquidity effect

I am currently reading Alvarez, Lucas, Weber (2001) where the authors argue that changes in money supply is more important for affecting inflation, than changes in the interest rate. However, I am ...
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1answer
139 views

How does inflation affect the value of savings?

Well, I got basically a question about economics of our world, I hope I'm wrong in my assumptions, because it's pretty ugly and I'm really hope it's more about me being wrong than it's actually the ...
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539 views

What happens if money supply grows more slowly than inflation?

I'm thinking the case of Argentina. In 2016, prices raised about 40% but according to the central bank of Argentina, money supply grew only 30%. Is this going to have an effect in 2017? What could we ...
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151 views

Did a similar property boom take place in another country or throughout history like we have seen in London? If so how did it effect the economy?

The London property market has seen a sharp increase in the average house price. If we go back to the 70's the average UK and average London price were almost the same, however since than the gap has ...
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1answer
401 views

What caused the stagflation in the early 1970s USA?

I am aware of the conventional reasons: demand push inflation due to much higher oil prices, and a continuation of a mild recession. Looking for a clearer explanation than I have been able to find, ...
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55 views

Printing money to put into a Superannuation or UBI fund

It is fiscal policy to keep inflation at between 1-2% (in New Zealand at least) Various tools are used to keep inflation in this range. Let's say the average inflation rate is 1.25% What would ...
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Does the FDIC's insurance of your money in your bank account cause inflation of the bank were to go under?

If the fdic insures money in each account for a bank, and that bank goes under. Won't that mean the fdic will have to borrow more money from the fed and thus lead to substantial inflation?
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Explain inflation to an economic novice

I'm trying to get a grasp on how exactly inflation works. What I've read so far seems to be contradictory. In some articles I've read that government spending is always(?) inflationary, and in ...
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145 views

Impact of hedge funds on economy

I'm still kind of new to these things and some countries seem to be forbiding sharing more about hedge funds to casual people (at least what I understood from it), but anyway: What is/was the largest ...
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68 views

Does the inflation rate reflect only the change in quantity of money?

Does inflation rate during the years comes from the the proportional difference of current amount of currency and amount of currency 1 year ago. I mean lets suppose in 2000 there were 1 million ...
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Understanding Inflation in a video game

I don't understand where inflation occurs in a video games. Assuming "free market" ie unlimited new players can enter any universe at will. You will say that for an economy to form, both sides must be ...
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Will inflation rate be the same if we use different base year?

I saw this chart where CPI for 2003 is 1.84, for 2004, is 1.889. I dont know the base year because its not in the chart. But base year has to have CPI of 1. If we instead use 2003 as base year, is ...
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71 views

What's effect of introducing infinitely high denomination bank notes during hyperinflation?

Countries that suffer from hyperinflation often print banknotes with many zeroes. Recently I had a showerthought: Let's imagine a government suffering from hyperinflation go crazy and begin begin ...
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994 views

Wouldn't an unconditional basic income lead to an inflation that negates its effect? [duplicate]

There are several version and denomination for a basic income. In this question, I will call unconditional basic income the situation were all citizens of a country receive regularly a lump-sum of ...
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467 views

Can CPI and real GDP have high correlation?

I have historical data where the CPI and GDP are correlated. Does this make sense? If not, how do I test for it?
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Relationship between changes in Currency against basket of currencies and inflation

Sorry I'm not an economist, but I was wondering if there was a general country by country guide to how inflation there changes with response to a change in the currency's value against a basket of ...
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1answer
61 views

Adjusting a ratio variable to constant 2000 dollars using a deflator index

Using Deflation index to create constant 2000 dollars, if I am finding a variable that is a ratio of that variable to GDP (say, income tax revenues), how do I go about this? Should I first divide my ...
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How will the value of the pound affect the British economy?

Given the recent massive decrease in the value of the pound, does this not equally devalue the British economy by a similar amount? Why does that not lead to an immediate large crash in Britain as ...
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1answer
133 views

Would a Job Guarantee impact Cost of Living?

What effect would a job guarantee, a method of achieving full employment often suggested by modern monetary theorists, have on the cost of living? In the case of student loans offered by the ...
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1answer
488 views

In fisher equation, Should I use “expected inflation” not “actual inflation”?

In fisher equation, real interest rate = nominal interest rate - expected inflation rate During calculating real interest rate, I've question that whether I can use actual inflation rate instead of ...
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71 views

Could indexation of wages help Argentina?

In Argentina we experience one of the largest inflation rates of the world.(please click the top of the inflation rate column to order by inflation rate). This is a large problem that causes stress ...
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1answer
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Are BLS labor productivity measures in current dollars or constant dollars?

I am using BLS labor productivity measures to estimate the impact of automation in the US. Looking through the BLS handbook and online, I haven't been able to determine if the LPC measures are in ...
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2answers
128 views

Why can't goverments print money to fund their economies? [duplicate]

In previous questions I understood that printing money and injecting it in the economy generates inflation because there is a bigger demand for the same offer (please correct me if I'm wrong) so it's ...
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159 views

Why does an increase in money in circulation increases price levels? [closed]

I'm a physics student who likes economics very much. I'm trying to get a simple explanation for inflation. I hope that there is one that doesn't involve people willingly rising prices. Thank you very ...
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Can the central bank interest rate policy still control inflation?

Historically, central banks have been using interest rate policy to control inflation. In current times, most rates have been going ever lower, but it seems to be incapable of driving inflation up. ...
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Can a government or central bank work to reduce inflation without hiking interest rates and causing the currency to appreciate?

Since trying to lower inflation will have some undesirable consequences, such as currency appreciation, which hurts exports, should governments and central banks keep hands off on inflation? But ...
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British inflation up again, but crisis might come. What should the BoE do?

According to the latest ONS report, inflation is rising as a consequence of the (pre/post) Brexit devaluation. This graph about the Input PPI is pretty revealing (taken from here): Yet, with the risk ...
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113 views

Demand-pull inflation intuition

According to the theory, monetary growth increases inflation. But how do companies know that there is more money in the economy now than before?
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442 views

Difference between a fixed pricing system and a two tier system regarding inflation onset through illegal transactions

I hope this layman's question is not off topic. I was not able to find guide lines as to how professional questions have to be. I am trying to qualitatively understand the origins of the Tiananmen ...
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19k views

What is the relationship between inflation and imports/exports?

According to the aggregate demand curve, when the price level is higher, the real GDP demanded is lower. One of the explanations given is a consequence of the Mundell-Fleming model: "As the price ...
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325 views

because bitcoins do not generate earnings, then (it is a ponzi scheme)?

What does the author mean with: Since Bitcoins do not generate any actual earnings, they must appreciate in value to ensure that people are willing to hold them. Why must they appreciate in ...
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60 views

Macroeconomics and equilibrium

Preliminary note: I have nearly zero economical background, I am a physicist and my question is probably very naive, but I would like a clear and simple explanation. If I am not wrong, the global ...
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4answers
8k views

Why does the European Central Bank use the 5y5y rate to measure inflation

I cannot understand why the 5y5y swap rate measures inflation. I can see how the floating rate somewhat measures the rate of interest rates which are related to inflation. However I cannot understand ...
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774 views

Why is the Chilean economy so much better than the rest of the countries in South America?

Why does Chile have a better economy than all of the other countries in latin America? It is labeled as a high income country by the IMF, It is the only Latin American country that is part of the ...
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284 views

The Printing of Money for Paying Debt

I know that printing money causes inflation, but what if we print it to pay back our debts? For example, we have N dollars of debt to China. We can just print the N dollars and give it to China. ...
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49 views

Basic model where inflation occurs

Why does inflation occur? To an outsider, inflation appears somewhat mysterious. Is there an extremely simple mathematical model where inflation naturally occurs? I would like something that even ...
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126 views

Do heterogeneity in consumption baskets lead to very different inflation rates for different consumers?

CPI is measured against a single consumption basket. In reality, consumers each have their own set of consumption goods, so each face their own "individualized CPI" rates. But how different are ...
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144 views

Venezuelan black market exchange

EDIT: for future reference, I found out that many businesses price accordingly to the black market rate. Trading at the official Venezuelan exchange rate is, at time of writing, about 1:10 USD:VEF. ...
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Why is the current WDI missing CPI data for some countries (including the UK and China)?

I'm downloading data on inflation in different countries, and using the World Bank's World Development Indicators (WDI). Specifically, the Consumer Price Index series (CPI). (http://data.worldbank.org/...
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331 views

How much inflation will changes to official wage benchmarks cause?

For example, right now Livable Wage hovers around \$20 an hour. That's around \$40,000 a year. Let's say the US somehow will give \$50,000 a year as a "Guaranteed basic income". How high will the "...
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1answer
2k views

How do I adjust for inflation?

I will begin by saying that I have very little knowledge about economics, so don't make any presumptions. My problem is that I want to calculate the actual value of gold in Swedish Krona(SEK) for the ...
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1answer
46 views

Ln differenced price level times 400, why 400?

I am replicating a 2001 Journal of Economic Perspectives methodology paper on Vector Autoregression by James H. Stock and Adam Watson. The paper can be found here: http://faculty.washington.edu/ezivot/...
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Why did the Fed raise interest rates between 2004 and 2006?

Between June 2004 and August 2006, the Fed raised interest rates again and again, because they were "...growing more uncomfortable about inflation". Looking at the graph below, inflation did increase,...
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1answer
389 views

Why is deflation not considered the opposite of inflation?

In this article from 2013 on bitcoin, the author casually states the importance of knowing that "deflation is not the opposite of inflation", without expanding or elaborating. I'm sure that there are ...
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179 views

Monetary Policy - How can increasing interest rates cause higher inflation in the short term?

My understanding of the interest rates part of monetary policy is the follows: Borrower's point of view: An increase in interest rates, increases the cost of borrowing, which may reduce disposable ...
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81 views

Is inflation good? [duplicate]

I was reading that the Spanish received so much gold from their occupation of the Americas, that they had a steep rise in inflation. This caused a rapid increase in investment, as the rich felt that ...
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48 views

Why do Latin American countries fare among the worst at managing inflation

Does it have to do with cultural factors? Ex: they were colonies of Spain and Portugal who themselves are not that great at managing their economies relative to other western European countries.

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