Friday, February 7, 2014
inflation in other country's and its effects
http://www.economist.com/news/finance-and-economics/21595485-developing-economies-struggle-cope-new-world-locus-extremity
This article is talking about the inflation rates of country's like Turkey and Argentina and how the devaluing of there currency is causing problems with the people trusting in its value so people are obtaining bonds and using U.S Dollars to store value. it also relates some of the problems with there inflation comes from the Federal Reserves quantitative easing. this is because the Fed is buying bond causing some crowding out in the international market.
Additionally in my comparative politics class we talked about how in Argentina if you ask how much a car cost the salesman will say 5000 Dollars but the price will be listed in Pesos this is is a cultural effect of the inflation that these country are experiencing this also has reduces the use of there national currency making it much less valuable because it is seen as unstable.
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Devaluation of currency tends to lead in a decline in the value of currency because it makes exports inexpensive or more competitive and imports more expensive. Inflation is an increase price level. Devaluation of currency contributes to inflationary because of higher import prices and increase in demand for exports. I think the result of Turkey and Argentina devaluing their currency is causing aggregate demand to increase as a result there is more exports sold which is causing the quantity of imports to fall. Lastly, I don’t blame the people not trusting their currency value because of increase in inflation. Increase in inflation result in higher interest rate and everyone loses.
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