Stagflation - what is it? Signs and characteristics of stagflation

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 in modern 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.

Definition of term

The concept of stagflation was first known in 1965, in Great Britain. 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.

Examples of stagflation

In 1960-1980, stagflation was observed in many 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 decline in the USA in 1970. At that time, the inflation rate in this country was 5.5-6%, which, in principle, indicated stagflation.

Signs of stagflation

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

Stagflation is characterized by all these signs, and all of them are perfectly superimposed on the economic situation in Russia - the ruble rate is falling, the employment rate 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 emerging. But one analysts agree: stagflation entails only negative consequences.

What are the effects of stagflation

Stagflation, as already mentioned, is characterized by a negative 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 the provision of citizens, 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, either inflation or unemployment can arise in the economy. Simultaneously, these two processes can not arise, but based on empirical studies 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.

The relationship between these two indicators is inversely proportional, 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.

How to avoid stagflation

Traditionally, to stabilize the situation in the economy, measures 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 employment status 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 expert community increasingly makes unreliable forecasts. 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 country's economy, we have already dismantled. It will not turn out to be good for the economic situation in Russia, since stagflation combines a simultaneous decline in the economy and an increase in inflation.

Opinion of analysts

Will there be stagflation in Russia? What is it, do the Russians know? Or is it just another assumption on the domestic economy that has not been confirmed and is not grounded? 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 shortest possible time. 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 V. V. noted the fact 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 fell by 1.9%, while in France it grew by only 0.2%. Therefore, we can conclude that the experts' forecasts 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 a rapid increase in prices 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%.

How the performance in 2014 changed

Prices for food products continued to grow 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 index that the Central Bank has appointed.

Most likely, the ruble will gradually weaken 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 aspect of stagflation, namely, the unemployment rate in the country. Most recently, the government proudly stated that in the past 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.