Cracking the Stubborn Inflation Puzzle:Insights and Solution

  Oct 11, 2023

Stubborn Inflation - Meaning

Stubborn inflation refers to a prolonged period of high inflation that remains unresponsive to standard economic interventions.

Causes of Stubborn Inflation:

Cost-Push Inflation: Rising costs of production, like wages and raw materials, lead to increased prices for consumers.

Demand-Pull Inflation: When demand for goods and services exceeds their supply.

Built-In Inflation: Resulting from a wage-price spiral where workers demand higher wages and, if they get those wages, businesses then raise their prices to cover the higher wage costs.

Government Policies: Large government debt or excessive money printing can also be a cause.

Global Factors: Such as increased global demand for commodities or geopolitical instabilities affecting supply chains.

Remedies for Stubborn Inflation:

Monetary Policy: Central banks can raise interest rates to reduce borrowing and spending.

Fiscal Policy: Governments can reduce their spending or increase taxes to reduce demand.

Wage and Price Controls: Temporary measures can be put in place, although they might have long-term adverse effects.

Supply Chain Enhancement: Streamlining and diversifying supply chains can help in mitigating supply-related inflation.

Trade Policies: Reducing tariffs and import barriers can increase the supply of goods, potentially stabilizing prices.
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