Inflation (of lat.: "the itself blowing up; the Aufschwellen ") designates a continuous in the political economy, "significant "rise of the price level. Thus the exchange ratio from money changes to all other goods debited to the money. Therefore one can understand a monetary depreciation by inflation also. In order to make "all other goods understandable ", indices or goods baskets are defined. It can in principle be said from the experience over the centuries that there was a inflation-free currency never and will give - if necessary periods of smaller price rise. Even the gold standard could absorb the inflation at the most. Visible expression of the inflation is e.g. the depreciation of the Pfennig, which was around 1200 a high-quality silver and 2000 represented only a fractional coin with nearly no more purchasing power. In many countries even the smallest disappeared, e.g. to Farthing (1/4 D) in Great Britain since 1957.

Demarcation inflation against other features

Generally and political linguistic usage different features are brought or equated with inflation in connection, which are possibly no inflation.

Cash attitude inflation

Designates a condition, in that the restaurant subjects higher cash on hand strongholds, than they want actually. According to economic theory this situation in free markets does not arise, since the higher cash on hand must lead to inflation. If the prices are administered however (nationally), and take place the measurement of the price level on the basis the administered prices, then no inflation is present. Auxiliary way can be measured inflation however on non-administered markets. Whether inflation is present, is thus a question of the acknowledgment of a definition authority. To this thesis it is to be objected that hoarded cash on hand does not represent a money offer by SE. Only the part of the cash on hand, that the restaurant subjects plan to exchange in the regarded period against goods and services, represents a money offer.

External price shocks

This term was strained in the course of the so-called oil crisis. But the rise of the price of a property is not the rise of the price level. If in response different goods in the price sink, the price level can remain constant; then no inflation is present. If the issuing bank feels however destined, the price increases as allimentieren, an effect can be released similar to the so-called rising costs inflation.

Felt inflation

With the introduction of the euro it came in some countries of the European community to gaping between the inflation rates, how they were noticed by the population according to inquiries, and in the FRG the Federal Statistical Office, determined those, like it the statistic offices. "The felt inflation "lay clearly more highly than the official inflation rate. That was because of it that the small everyday life goods had such as food a higher inflation than larger consumer goods such as computers, to cars, television, etc. both however with the Warenkorb is considered.

Measurement of the inflation

Most frequently for the measurement of the inflation the price index of the cost of living is consulted, the inflation rate in such a way specified. The index is computed with the help of a Warenkorbs, which is representative in a certain year (base year) for an average household (in Germany 2.3 persons). Contained were in it approximately in earlier years:

Consequences of the Warenkorbs on the inflation measurement

On basis of this Warenkorbs and the base year specified thereby for each year the cost of living and from this the proportional increase are determined to the comparison or previous year. For each month the Federal Statistical Office, in Austria statistics Austria the price increases in Germany, determines whatever are regularly published. On average these inflation rates amount to at present between 0,5 and 2,5%. Problems with the measurement of these numbers result above all from the fact that with increasing distance to the base year the Warenkorb is less and less representative, since the consumer behavior changes permanently.

The value is aggregated also over all income brackets, states thus nothing to what extent individual income brackets are concerned.

In addition important economic sectors are not considered like the financial goods and property markets. So one can determine a clear growth of the money supply at present in the dollar area and in the euro area, what would have to lead after the quantity equation to price increases. These price increases one finds within ranges, which are not seized by the index of the cost of living, for instance to the financial goods such as Hedge funds as well as in the property markets. Thus for instance an increase of the real estate prices does not enter index of the cost of living. If no appropriate increase that of material goods offer faces this expansion of the money supply, then the price level rises, without this fact in the index of the cost of living becomes clear.

In some countries, as the USA and Great Britain the inflation computed according to the hedonischen method. This qualitative procedure leads to lower inflation numbers.

Core rate of the inflation

The core rate of the inflation excludes the prices for food and the energy sector from the computation, since these are subjected in stronger measure of fluctuations, whose causes are not to be found within the regarded national economy.

Causes/reasons

One proceeds from the simple "market cross ", according to which the price of a commodity is determined by the intersection of the offer curve - the offer rises with rising price - and to the demand curve - the demand sinks with rising price - then the inflation can be attributed first simply to demand and offer-supply causes. Demand-lateral causes for rising prices can be understood then as causes, which the demand curve ever further to the right to shift, while offer-lateral causes continue to shift the offer curve to the left ever.

A further explanation for inflation offers the quantity equation.

H \ cdot P = M \ cdot U

Is

• H the Handelsvolumen of the national economy, measured in market values
• P the price level
• M the money supply
• U the peripheral speed of the money, thus how often a monetary unit was used for a transaction

By this equation one can recognize that the price level rises whenever

• the money supply increases
• the peripheral speed of the money increases
• the Handelsvolumen sinks

Those inquire-laterally or offer-laterally justified price increases can be interspersed thus only in these three cases. Empirically the quantity equation is very well occupied. Also it turned out that inflations are durable only if they are also paid alimony by an expansion of the money supply. That means that a durable inflation can be prevented by restrictive monetary policy reliably. See also quantity theory.

Demand-laterally

In principle between a demand suction inflation and a selling pressure inflation one differentiates. If it comes to the demand suction inflation, the causes are to be inferred as from the word on the demand side to search.

In this case the demand for goods rises in such a manner fast the fact that the offer side cannot react by raising of the quantitative offer and instead after the market laws raises the prices. Concerns this all goods, is however ceteris paribus aggregates a price rise not possible. If a monetary alimony takes place, inflation develops. At short notice this alimony can take place via an increase of the peripheral speed of the money. At longer term inflation can exist however only if it is paid alimony by an appropriate expansion of the money supply. One differentiates additionally between "more house-made" and "more imported" demand suction inflation, depending upon that whether the demand comes from in or foreign country.

Articles in category "Inflation"

We found here 3 articles.