Stagflation - what is it? Signs and characteristics of stagflation

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So, consider the concept of "stagflation." What it is? This is the name of the state of the economy, when the fall and stagnation of production are accompanied by rising unemployment and a constant rise in prices - inflation. That is, this term defines inflationary processes against the backdrop of economic stagnation. In other words, stagflation is the sluggish form of the economic crisis. The main reasons for this process are the anti-crisis measures carried out by the state and the policy of monopolies, thanks to which a high price level remains during crises.

This term is often used today inmodern macroeconomics. This new phenomenon appeared not so long ago as a result of the cyclical development of the national economy and the formation of new types of capital reproduction.

Stagflation, what is it?

Definition of term

The concept of stagflation was first known in 1965year, in the UK. Until then, the economic decline was necessarily accompanied by a decline in prices, but since 1960, in different countries, the reverse process was observed, which was called stagflation. What this is and what are the reasons for the emergence of such processes, many scientists explain in different ways. Possible reasons include the following:

  1. Energy crises.
  2. The high cost of goods monopolies in the crisis period.
  3. State measures to improve the economic situation in the country.
  4. The globalization of the economy and the abolition of protectionism.
    Stagflation in Russia

Examples of stagflation

In 1960-1980, stagflation was observed inmany developed countries of the West. There are many examples, but the most memorable example for Russia was 1991-1996. It was during this period that the country experienced high inflation and an inexorable decline in GDP. For example, we can cite the economic fall in the USA in 1970. At that time, the inflation rate in this country was 5.5-6%, which, in principle, indicated stagflation.

The concept of stagflation

Signs of stagflation

The stagflation of the economic system can be judgedon the following grounds: the growth of unemployment, the depressed state of the economy, inflationary processes in the country and the devaluation of the national currency in the international market. This is a new form of economic crisis, in which there are no free funds for the population, purchasing power is low, but prices are steadily growing.

Stagflation is characterized by all thesesigns, and all of them are perfectly superimposed on the economic situation in Russia - the ruble rate is falling, the level of employment is also at a low level, there is a general decline in the economy. It is for this reason that economists speak of the likelihood of stagflation in Russia. True, analysts believe that such processes are now present in the economy of many quite developed countries, but this can hardly be a consolation. Such a phenomenon as stagflation, what it is, or rather, has not yet been fully studied by economists. It is believed that this state of the economy tends to disappear as rapidly as it does to arise. But in one analysis analysts agree: stagflation entails only negative consequences.

Stagflation and the Phillips curve

What are the effects of stagflation?

Stagflation, as already mentioned, is characterized bynegative impact on the economy. Its consequences are a decline in the development of the economy and the emergence of acute crisis phenomena, such as a decline in the level of people's security, unemployment, social insecurity of certain segments of the population, a decline in GDP and a decline in the financial and credit system.

Phillips Curve

As the simplest Keynesian model shows, inthe economy may experience either inflation or unemployment. Simultaneously, these two processes can not arise, but based on empirical research conducted in the 50-60's, economists confirmed that such a relationship exists. Stagflation and the Phillips curve indicate a stable and predictable feedback between the level of inflation and unemployment.

Relationship between these two indicators backproportional, so we can assume that there is an alternative relationship between them. If the Phillips curve is fixed in one position, then people who determine the economic situation will have to decide what is better to use to improve the situation-a stimulating or restrictive fiscal policy.

Stagflation is characterized by

How to avoid stagflation

Traditionally, to stabilize the situation in the economymeasures were applied, limited only to the redistribution of total demand, which, in fact, did not affect the disparities of the labor market and the system of domination in the market. In this case, the inflation rate began to rise earlier than the full-time employment was achieved. For example, manipulation of aggregate demand through the use of monetary and fiscal measures led only to the movement of the economy along a given Phillips curve.

Will there be stagflation in Russia?

In connection with the sharp devaluation of the ruble, the expertthe community is increasingly making unreliable predictions. Experts argue that such a fall was not even in times of global financial crisis. Hence the assumption arose that Russia is threatened with stagflation. What this is and what can turn out for the economy of the country, we have already dismantled. It will not turn out to be good for the economic situation in Russia, since stagflation combines the simultaneous decline of the economy and the growth of inflation.

Stagflation is called

Opinion of analysts

Will there be stagflation in Russia? What is it, do Russians learn? Or are they just assumptions about the domestic economy that have not been confirmed and are not justified in any way? So, according to the statements of economists of the Center for Development of the Higher School of Economics, Russia will face this unpleasant problem in the near future. Analysts explain their disappointing forecasts as follows. As you know, stagflation is a multilateral process, in which one of the parties determines the decline in production activity.

Are there any signs of such a fall? If you recall the results of last year, then Russia closed it with an economic growth rate of 1.3%. At the last meeting of the Economic Council, Russian President Vladimir Putin noted that few countries in the world show such growth rates of GDP. And for some, there is a fall in this indicator. For comparison, we can cite changes in GDP in Italy: there it declined by 1.9%, while in France it grew by only 0.2%. Therefore, it can be concluded that the forecasts of experts are groundless, and the Russian economy is not so bad as they are trying to show. But do not forget that in the previous year, 2012, Russia's economic growth reached 3.4%.

The other side of stagflation indicates rapid growthprices in the country. And in fact, according to statistics, in Russia, consumer prices over the past year increased by 6.5%. For comparison: in the countries of the European Union they have risen only by 1%. In particular, a strong increase in prices is noted for the food group of goods - by 6.2%. If we again compare this indicator with the data for the European Union, then there they grew only by 1.4%.

Signs of stagflation

How the performance in 2014 changed

Prices for food products continued to growand this year. According to experts, their growth will become much more noticeable, especially if the price of vegetables, fruits, dairy and fish products, alcoholic beverages and services to the population grows. According to such unfortunate forecasts, it is likely that inflation in the country may rise to 6% by the end of the year, that is, it will be 1.5% higher than the indicator that the Central Bank has appointed.

Most likely, the ruble will gradually subsideeven for a long time. This is due to many factors such as the reduction of imports, stagnation in the manufacturing sector, the lack of currency in the country. In addition, geopolitical instability was added. The HSE notes that in order to change this situation, it is necessary to ensure a deeper devaluation of the national currency.

It is worth paying attention to another important aspectstagflation, namely, the unemployment rate in the country. Most recently, the government proudly announced that in the last ten years the unemployment rate in Russia was the lowest. And this is actually so. In 2013, the unemployment rate in the country was about 5.5%. But the economy in Russia is slowing its growth, therefore, it is quite expected that there will be more unemployed people. According to forecasts, by the end of 2014 the unemployment rate can be more than 6%. Nevertheless, a rapid increase in this indicator is not expected.

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