Main types of inflation, consequences and causes

Inflation is the process that characterizes most modern economies. But in some states its rates are modest, in others - very noticeable. With what it can be connected? What are the reasons for the economic phenomenon under consideration ?

The essence of inflation

Inflation is understood as an increase in the average level of prices for the most popular goods and services that are supplied by state enterprises. With the continued volume of disposable income of the population, inflation can reduce their purchasing power.

The economic phenomenon under consideration is the norm for most modern national economies. The fact that there is inflation in the country testifies, as a rule, about the stable demand for goods and services. If it is absent or insufficient intensity, the opposite phenomenon may occur-deflation. It is also considered the norm in modern market economies.

It is worth noting that in both cases, when inflation and deflation are seen as natural phenomena for economic systems, it is about expressing corresponding indicators in relatively small amounts - on the order of a few percent. If inflation or deflation is several tens of percent, then there are likely to be significant problems in the country's economy. In this case, both parameters are indicators of crisis trends in the economy of the state.

Let us now consider the types, causes and consequences of inflation.

Classification of varieties of inflation: the rate of price growth

There is a rather large number of approaches to the classification of the economic phenomenon under consideration. So, the criterion by which the types of inflation (the consequences and causes - relative to them) are determined based on its rates. So, there is inflation:

- low;

- Moderate;

- galloping;

- Hyperinflation.

Low inflation is understood as an increase in prices for popular goods and services, expressed in several percents. The reasons for this economic phenomenon are stable incomes of the population, forming demand, which slightly exceeds supply. The consequences of this inflation for the economy, rather, are positive: with stable demand, active suppliers of goods and services are deployed, new businesses are opening, the economy of the state is developing successfully.

With moderate inflation, prices rise by about 5-10% per year. As in the case of the first variety of the economic phenomenon under consideration, the corresponding indicators practically do not negatively affect the economy of the state and, again, reflect the excess of demand over the supply due to the country's stable income.

With galloping inflation, prices rise by several tens of percent per year. The reasons for this economic phenomenon are a decrease in supply in the market due to a decline in the production of goods and services, a decrease in the level of capitalization in the economy, a redistribution of capital from the real sector to financial or even their withdrawal beyond the jurisdiction of the state.

The consequences of galloping inflation are, as a rule, a devaluation of the incomes of the population (due to the fact that salaries do not have time to be indexed after rising prices), a decrease in the number of jobs due to the withdrawal of various enterprises from the market. The state is obliged to react to this state of affairs in the economy, to carry out the necessary reforms. Otherwise, galloping inflation can develop into an uncontrolled price increase - hyperinflation, expressed in hundreds of percent per year. In this situation, a large-scale social and political crisis may arise in the state.

Open and closed inflation

There is one more criterion that allows to distinguish different kinds of inflation (the consequences and causes are the same): the degree of openness. So, experts identify inflation open and hidden.

An economic phenomenon of the first type is observed only if the state operates a market system characterized by a free mechanism of pricing for basic goods and services. The authorities, therefore, do not interfere in how suppliers determine the value of goods and services sold to citizens. In this case, the main subjects of economic relations will be obvious the essence of the factors that affect inflation. In addition, the state will be easier to manage the economy.

Hidden inflation, in turn, appears in those cases when prices for a significant part of goods and services supplied by enterprises are established administratively, by economic authorities. In this case, there may be a shortage of demanded types of products and services, so that prices for them can grow unofficially, in fact. Shadow market is formed, from which taxes are not paid, which is not taken into account when determining the key macroeconomic indicators of the state, such as GDP. Hence - underfunding of the national market, low capitalization of the most important sectors, as a result - low rates of economic development.

Inflation of demand and costs

Another criterion that allows you to determine individual types of inflation (the consequences and causes, of course, too) are factors of production. In accordance with it, the rise in prices can be caused by the inflation of demand or costs.

The essence of the first economic process is that demand exceeds supply. This may be due to rising incomes of the population of the state with insufficient dynamics of opening new enterprises, ways to satisfy demand. As a result, the respective types of businesses are opened, the country's economy is growing.

Inflation of demand can also be provoked by increased budget injections of capital into various spheres of the economy. For example - in education, public service, the provision of social services, medicine, the army. State institutions that receive budgetary funds also form demand, which can not always be satisfied with the existing fixed assets of enterprises operating in the country.

Inflation of costs is caused by an increase in prices for products or services, which arises from a rise in the cost of enterprises supplying the corresponding goods and services to customers. Factors for price increases in this case can be very different. Among the possible reasons is a rise in the cost of imported raw materials and components. Enterprises that are forced to raise prices may face a lack of demand for goods sold, since buyers may not be willing to pay for goods with increased costs. As a consequence, firms have to curtail production due to lack of sufficient turnover.

Thus, demand inflation affects the economy of the state mainly positively, costs - negatively. Again, the dynamics of price growth is important. As we noted above, low or moderate inflation, as a rule, indicates positive processes in the economy, galloping - about negative.

Different criteria for classifying the economic phenomenon under consideration, therefore, are useful to compare. The criteria we consider that allow us to determine the various types of inflation, the consequences and the causes of each of them, are closely related: the increase in prices for goods in the economy of the state may be due to various factors simultaneously, which, however, predetermine different criteria for classifying inflation. In addition, the one in question involves the allocation of very dissimilar economic trends. Still, the reasons for the inflation of demand and costs are quite different. As well as their consequences.

Inflation in terms of price dispersion

The following criterion, allowing to classify the types (types) of inflation, the consequences and causes of it - the degree of dispersion of price indicators.

So, experts distinguish balanced inflation, in which the cost of the most popular categories of goods grows relatively evenly. For example, if apples rise in price by 3.7%, then pears - by 4%. If the prices for rice grow, for example, by 8.4%, then the increase in the rates for Hercules may amount to about 9%. There is inflation unbalanced, in which there is, in turn, a noticeable disproportion in the growth of prices for goods.

The reasons for the first economic phenomenon reflect a natural decline in the purchasing power of national capital in the economy as a whole. The second type of inflation is due to the fact that sellers have difficulty in accessing one or another supplier. As a consequence - there is a deficit, prices are rising. Another possible reason for unbalanced inflation is the appreciation of imports as a result of changes in the exchange rate of the national currency. This trend can have tangible social consequences in the event that the share of goods imported into the country in demand is significant. Their increased cost in the event that the salaries of citizens do not increase proportionally, will significantly increase the payment load on the consumer.

In turn, balanced inflation usually does not imply social consequences. As a rule, uniform growth of prices, firstly, is compensated by an increase in the wages of citizens, and secondly - the consumer is easier to control his expenses, as he can be sure that there will be no sharp price hikes on popular goods.

Inflation by the degree of expectation

The following criterion, which allows to distinguish the types, causes and consequences of inflation - the degree of its expectation. So, the increase in prices in the economy can be sharp, unpredictable. As a rule, this is due to a shortage of supply in the commodity market, speculative reasons, or the acquisition of monopoly positions by its suppliers in its segment. If such factors are not available, inflation can be formed at a more moderate pace, which can be predicted.

Inflation factors

So, we have studied the main types, causes and consequences of inflation. The plan of our article can be supplemented with a block that more fully reveals the factors that predetermine inflation. Experts identify the following groups:

- Monetary;

- structural;

- external.

To monetary factors of inflation it is customary to refer:

- an imbalance between supply and demand (or commodity mass);

- a significant excess of income of citizens over consumer spending;

- imbalance in the state budget;

- the expressed priority of military expenditures;

- Inefficient investment in key sectors of the economy;

- excessively high dynamics of cash turnover;

- wage growth that does not correlate with labor productivity.

The structural factors of inflation include:

- imbalance in the structure of the economy (for example, too strong bias in the commodity sector and a lack of supply in the consumer sector);

- unreasonable restraint of strengthening the dynamics of consumption;

- the presence of a large number of monopolies in the state economy.

External factors of inflation include:

- Volatility of world prices for key commodities, raw materials, fuel;

- a significant excess of imports over exports;

- supply shortage in the market for external credit borrowing.

Factors of inflation can also be political instability, errors in the tax and social policies of the state. Their influence is enhanced if they affect economic processes simultaneously.

In more detail, we can examine the specifics of such a phenomenon as inflation, essence, types, causes and consequences of it by considering the effect of price increases on the socio-economic development of the state.

The Influence of Inflation on the Socio-Economic Development of the State

Inflation, as we noted above, can be characterized as relatively small indicators - a few percent, and very impressive figures.

In the first case, its influence reflects, rather, positive economic processes: the excess of demand over supply due to rising incomes of citizens, the balance of the economy, good indicators of the ratio of exports and imports. But excessively high inflation can affect the socio-economic processes negatively.

If prices in the state grow, then established business ties can break down (because consumers are constantly searching for cheaper suppliers), investment is reduced (because investments can not pay for itself due to rising prices), There is social tension (the population may not have enough income to purchase basic goods that have increased in price).

High inflation predetermines:

- depreciation of bank savings of citizens;

- worsening of the social and economic situation of socially unprotected citizens;

- Decrease in entrepreneurial activity in the country;

- a decrease in the quality of many goods due to the need to produce them in larger quantities;

- a decrease in lending in the banking system of the state, the appearance of shadow sectors in the economy.

Having considered the essence of such a phenomenon as inflation, concept, types, causes and consequences of it, let us consider the specifics of methods for measuring price growth in the state economy.

How is inflation measured?

In general, inflation indicators are expressed in price indices, which assume the correlation of the value of goods in the current year with respect to the previous one. In this case, indices can be used:

- industrial prices;

- consumer prices;

- GDP deflator.

In fact, the state's economic system can be characterized by several indicators of inflation. The most significant for citizens will obviously be the consumer price index. The most informative macroeconomic indicator will in turn be the GDP deflator.

Models of inflation formation

Having studied the essence, causes, types, consequences of inflation, we can consider the basic models of its formation.

Thus, many economists explain the emergence of hyperinflation by the principles proposed by Keigan. In accordance with them, this economic phenomenon is predetermined by the dependence of demand on inflation expectations of various market participants. If the adaptation of these expectations is characterized by low speed, while the elasticity of the demand for capital is low, then inflation will correspond to an increase in the volume of the money supply. But if the parameters making up this model reach a high level, then the economy may experience hyperinflation, the counteraction of which, as a rule, requires state intervention.

There is a model of Friedman, according to which the real demand for national capital, corresponds to the dynamics of the population's income, as well as the expected inflation. At the same time, the growth in prices in the economy is minimal with a high rate of growth in the national economy. A situation is possible in which additional money emission is required - if the inflation rate is lower than what is considered optimal.

There is a model of Bruno-Fisher, according to which the rise in prices can be predetermined not only by the expectations of market participants, but also by the dynamics of GDP. It can be noted that this concept also involves considering as a significant parameter indicators of the budget deficit, as well as mechanisms for overcoming it, which are used by the state. As such, for example, emissions and loans can be used. This model, as many economists believe, makes it possible to analyze in detail the factors that predetermine a phenomenon such as inflation, the nature, types, causes and consequences of it, in relation to a variety of classification criteria.

There is a Sargent-Wallace model. In accordance with it, inflation is predetermined by imbalance in the state's monetary policy regarding financing of the national budget deficit. At some point, the economic authorities have to increase the money supply, so that prices in the economy grow. It can be noted that, in accordance with the concept under consideration, the state's restraining policy in the field of finance leads to an increase in the rate of inflation. This is due to the expectations of market participants that the government will begin to compensate for the budget deficit mainly through issuance, rather than loans. The best scenario for the economic authorities in this case is to reduce the budget deficit.

Having considered the widespread models that explain the mechanism of formation of such an economic phenomenon as inflation, measurement, types, causes and consequences of it, we can study in more detail the main methods of the state's anti-inflationary policy.

Anti-inflationary policy of the authorities

The authorities of the country can react to the rise in prices in the economy in different ways. But if we talk about universal methods - regardless of what kinds are taken into account, the causes, consequences of inflation - anti-inflationary measures can be presented in the following list:

- credit regulation;

- financial incentives;

- deflationary policy;

- Currency regulation.

Depending on the economic situation, one or more of them is selected.

After the authorities determined the factors that predetermined the specifics of the characteristics of such a phenomenon, inflation (causes, types, consequences), the anti-inflationary policy is fixed at the level of regulatory regulation. As a rule, the Central Bank of the State is responsible for conducting it. Specialists of this department analyze the main components of such a process as inflation (essence, causes, types, consequences). Anti-inflation policy should be balanced, take into account all the main factors of price growth in the state economy.

Summary

So, we investigated the specifics of inflation - an economic phenomenon that reflects the rise in prices in the national economy. We investigated the main characteristics of such a process as inflation (nature, causes, species, socio-economic consequences). We found out that the state is the most important subject of management of the corresponding trends in the economy. The task of the authorities of the country is to understand the reasons for such a phenomenon as inflation. The reasons, types, consequences and ways of overcoming it are in the competence of experts of leading financial institutions of the state, first of all, the Central Bank.

An important role in the Russian education system is being given to the study of the economic phenomenon under consideration. Many disciplines, not even directly related to the financial sphere, study the types, causes and consequences of inflation - social science, for example. This is due to the fact that this economic process affects many areas of life of modern man. Ordinary philistine, perhaps even not involved in the development of the economy, should be aware of what inflation is. The reasons, types, social economic consequences of it, even from the point of view of the basic aspects, the modern educated citizen should know. The government is also interested in this, in order to build a constructive dialogue with civil society on the regulation of the country's economy.