What is stagflation? Let us turn to economic processes

What is "stagflation" in the economy? Under this term, within the framework of the macroeconomic system is meant information processes in the form of economic stagnation. Stagflation combines the features of destructive processes and is, in fact, a sluggish form of any economic crisis. And this despite the fact that moderate inflation is a definite stimulator in the economic activities of the subjects, and in critical terms - the cause of the collapse of entire states.

History of stagflation

The term originally appeared in the UK, when stagflation processes were first noted. Prior to this, the cyclical development of the economy was characterized by a drop in prices with a decline in production and economic depression. Approximately in the late 60s of the XX century, a slightly different (opposite) picture began to appear clearly, which became known as stagflation. Quite clearly, it found its definition in the US during the period of production decline, when the rate of price growth due to rising inflation was about 1%. The economy fluctuates cyclically, its changes occur between stagnation, characterized by falling prices, high unemployment and a low level of economic growth, and inflation, which is accompanied by completely opposite processes.

Summing up what has been said, it can be said that stagflation means processes that are characterized by rising prices and a high level of unemployment with a simultaneous lack of economic growth.

The main signs of stagflation

So, what is stagflation and what factors indicate its onset? This, first, the state of the economy, which can be defined as depressive. Secondly, the rapid growth of unemployment. Thirdly, the rapid inflationary processes in the state, as well as the devaluation of the currency in the international market.

What is stagflation, it became known back in the 70s of the twentieth century. During this period, the depression in the economy was accompanied by a certain decrease in prices (this process is called "deflation"). It can be confidently asserted that the notion of "stagflation" appeared quite recently, the definition of which can be formulated as follows. This is a completely new type of economic crisis, accompanied by a lack of money from the population and low purchasing power. But at the same time, prices are skyrocketing.

These signs are very closely related to the Russian economy of the 21st century: the depreciation of the national currency (ruble), the decline in employment in the presence of a general economic downturn. Proceeding from these factors, economists make conclusions about the danger of stagflation in the Russian Federation. However, international analysts believe that such stagflation is known to virtually all countries with developing economies.

The reasons for stagflation

Among the reasons that can cause stagflation, scientists are the following:

- High monopolization in the economy (monopolists can maintain prices artificially under adverse market conditions, entrepreneurs often in a pure competition are forced to reduce the price in a depressed economy);

- various anti-crisis measures that are implemented by the state in the form of public procurement, artificially increasing demand, as well as the regulation of certain prices in order to protect the Russian producer;

- globalization in the economy (as an example, we can cite the hypothesis explaining the increase in the level of inflation with unemployment in the world economy in the twentieth century, since the entry of certain states into the world community can often cause turmoil in the Russian economy);

- the existence of inflation expectations from producers;

- energy crises.

Thus, one can see that in this economic phenomenon outstanding economists and scientists have not figured out yet to the end.

Wavy phenomena in stagflation

This phenomenon is characterized by the tendency of both rapid occurrence and rapid disappearance. The only point in which all experts adhere to one point of view - stagflation has only negative consequences.

Stagflation and its consequences

As already indicated, this economic phenomenon is characterized mainly by a negative impact on the economic activities of the subjects.
It can stop any economic development, it can also provoke the emergence of acute crisis phenomena in the economic life of society. The main consequences are:

- reduction of the well-being of citizens;

- the existence of a crisis in the labor market;

- social insecurity for some categories: disabled people, civil servants and pensioners;

- Decrease in positive results of the functioning of the financial and credit system;

- a decline in GDP.