Stall inflation

Synonym Stagnation Generally refers to Stagnation Inflation


Economist provides two main causes caused by lagging:

economic production capacity is negatively supplied and reduced . For example, the oil crisis causes oil prices, increased production costs and reduced profits, and leads to the rise in commodity prices.

Another reason is an inappropriate economic policy. For example, the central bank allows money to increase excessive growth, and the government has made excessive control in commodity markets and labor markets.

provides two solutions when analyzing the lagma of the 1970s: First, the oil prices have skyrocketed, and the central bank uses excessive stimulating monetary policy against the economic recession, forming Price / Wage Spiral.

Monetary school view


In 1960, many Keynesian ignored the possibility of lagging, because historical experience has been accompanied by low unemployment rate The inflation rate is vice versa (which is called the Phillips curve). Its idea is that the high demand for goods is rising, and the company encourages enterprises to increase labor; the same employment increases increase demand. However, in the 1970s and 1980s, when the lagma appeared, the relationship between inflation and employment level was not smooth, that is, the Phillips relationship can be displaced. Macroeconomic scholars hugged the Cairnsian, and Cairns repeatedly considering the idea of ​​finding the interpretation of lagging.

The interpretation of the Phillips relationship offset is proposed by Milton Friedman, and Edmund Felps. They believe that when workers and businesses are expected to rise, the Phillips curve moves up (in any unemployment inflation). Especially in inflation last for many years, workers and companies consider inflation in salary negotiations, so that workers' compensation and enterprise costs have accelerated, which leads to inflation. This idea is seriously criticized in the early Cairns, but gradually accepted by most Keynesists and introduced the economic model of the emerging Kanes school.

New Cairns school

Contemporary Cairns believes that lacking factors that can distinguish between general demand and affect the factors affecting total supply. Although monetary policy and fiscal policies can have a stable effect on fluctuations in total demand, but the fluctuation results of total supply are not large. Especially when there is a total supply oscillate, such as oil prices, can be bothering.

New Cairns learned to distinguish between two different inflation: demand pulling type (consolidation of total demand curve displacement) and cost push type (total supply curve displacement). In this view, the lack is caused by cost pushing inflation. Cost push inflation in a certain pressure or condition is caused by cost; and the factor can be a government policy (such as taxable) or simple external factors such as natural resources shortage or war behavior.

Surficiency Effects

For short - term influence

Continued rising prices in the lague can cause serious inflation, economic production declines lead to labor services provided by enterprises And the decrease in items, leading to the rise in unemployment, and the enterprise will even face bankruptcy, the entire economy presents a decline. High inflation rate affects wealth distribution and distort the price, and high unemployment rates have fallen.

For long-term influence

In the long run, the output of items and services is still at a lower level during a period of time, but with the salary, price and feel The production cost is adjusted, and the final recession will disappear. For example, low-yield and low employment will increase the pressure of the workers' salary, and lower wages have increased supply. Over time, when the short-term total supply curve is moved back to the original position, the price level is lowered, the output is close to its natural rate, and the economic return to the total demand curve intersect the long-term total supply curve, this process is Economic self-correction.

Phillips curve

In the short term, lague reduces economic output, rising price, causing high unemployment and high inflation, inflation and unemployment short term Weighing is moved to the right, that is, the Phillips curve moves right.

Because there is no trade-off between inflation and unemployment for a long time, unemployment rates tend to have its natural rate, so lack will not cause the Phillips curve movement.


Dealing with the lagma, the central bank is difficult to rely on a single monetary policy to eliminate stagnation, because use a tightening monetary policy, an increase in interest rates, business costs, economic It is possible to be more depressed, even inverted, if you use a loose monetary policy (ie, the silver paper but at the same time is not mortgage), reduce interest rates, although stimulating economic growth, but will cause malignant inflation.

Therefore, the government should expand public financial expenditures, while tax cuts, plus moderate increase interest rates to suppress inflation, and the lack can be gradually eliminated over time. But this method may increase the burden of government bonds.

Containment investment strategy

The lagma stage is best combined with commodities, short-term bonds and cash; followed by shares such as public utilities, pharmaceuticals such as elasticity; again for some industrial shares; Finally, it is financial, real estate and non-essential consumer stocks.

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