Will Inflation Return? An Assessment Of The Current Global Situation

Definition of Inflation
2.2. Factors that Cause Inflation
Demand Shock, Supply Shock and Monetary and Fiscal Policies
2.3. Inflation Today
Inflation Rates and Inflation Targeting Policies
3. Examining factors that can lead to inflation
3.1. Demand Side Factors
3.1.1. Unemployment Stats (Phillips curve here) Technology stats here, labour
can be easily distributed? How can technology absorb unemployment
shock
3.1.2. Increased household savings during the lockdown
3.1.3. Central Bank Monetary Policy – Pegged vs floating | affects price of
imports/exports (Exchange rate evolution) Depreciation of local currencies
> stimulates exports and boosts production > employment
3.2. Supply Side Factors
3.2.1. Deglobalization – Trade Wars
Trade War > Trump Tariffs (Us/China imports) (EU and Canada)
3.2.1.1. China – national currency low for stimulating their exports
3.2.1.2. Depreciation of $ generated increase in commodity prices, fed
policies affects us globally
3.2.1.3. ECB is dependent on Fed movements | Bank of China
3.2.2. Oil prices – before and during the pandemic and the recovery
3.2.2.1. Saudi arabia kept oil prices low to exploit the market by making
Shale oil not profitable | Significant drop in prices during early of
pandemic March 2020
3.2.3. Innovation affects cost
1
3.2.4. Profit Margin, Cost Component, Raw materials, taxes, Global price of
agriculture compared to 2016
3.2.5. Possibility of a price-wage spiral
3.3. Governmental & Central Bank Policies
Govt Policies- social security social security, revenue policie (minimum wage)
3.3.1. Effects of increased Government spending during the pandemic
(Fiscal Policy)
3.3.2. Central Bank Policies – Loose Monetary Policy (liquidity in the
system)
3.3.2.1. Central Bank also ensure Financial Stability – prevent collapse
of financial system to prevent drop in confidence in finance
system (prevent liquidity crisis)
4. Assess the risk of future inflation, will inflation increase and will be harmful. Long
to stay?
Inflation expectations, math models, expert judgements, monetary policies, how fast CB
decisions impact financial markets and real economy, real economy is impacted by CB
with a lag between 3 and 9 months however certain components are not controlled by
CB, social unrest