Types of inflation. Forms of manifestation

In the process of transition to a market economy, the value of money has significantly increased. Today, questions concerning their treatment in the country are becoming actual in practical measures aimed at the reconstruction of the national economic complex, and in the theoretical aspect. As the world experience shows, the transition to a market system is accompanied by an intensive increase in prices and an increase in the influence of inflationary factors. In such a situation it is extremely important to give a correct assessment of what is happening. For this it is necessary to understand what inflation is. Forms of manifestation, causes, socio-economic consequences of this phenomenon are discussed by different specialists at different levels. This is necessary to develop the most effective and rational market mechanisms in order to maintain the financial and economic balance. Let us consider what inflation is: reasons, forms of manifestation, consequences.

Relevance of the issue

When moving to a market economy, it is important to understand whether the process itself is the cause of increased inflation, or within the framework of new relations, the potential accumulated in the previous period has been expressed. Under such conditions, the possibilities of artificial deterrence are significantly reduced. Together with this inconsistency in decision-making, ill-conceived steps considerably aggravate the arising difficulties, intensifying the effects of inflation. The forms of manifestation of this phenomenon can be very different. Meanwhile, it is the inevitable companion for the long-term development of the economic system with flexible pricing. Wrong methods of dealing with it are the result of a superficial view of inflation factors. The forms of manifestation of the phenomenon must be studied comprehensively for the development of all possible options for action to eliminate it. The government of the country should conduct an in-depth analysis of the situation, comparing it with the one that took place earlier, to study the dynamics of events, to predict the forthcoming problems.

Essence, causes and forms of manifestation of inflation

It is believed that the phenomenon in question appeared almost at the same time as the appearance of money, since it is directly related to the process of their circulation. The concept of inflation and the form of its manifestation first began to be studied during the civil war in North America in 1861-1865. The term was used to refer to the "swelling" of money circulation. Definition was also used in France and England. In the 20th century, the essence and forms of manifestations of inflation, types of inflation began to be actively explored after the First World War. In Soviet science, the phenomenon began to be studied from the mid-20's. In domestic literature, the essence, causes and forms of manifestations of inflation, as a rule, are identified with the formation of a new equilibrium between supply and demand in accordance with changing conditions. Often, when considering the phenomenon, it is placed in dependence on well-known categories. Inflation, in particular, considers the excess of the volume of money in circulation, relative to the cost of services and goods, leading to a depreciation of funds. In the literature there are other interpretations of the definition. So, inflation is considered:

1. Depreciation of a unit of money, a decrease in its purchasing power.
2. The socio-economic phenomenon is the result of disproportion in reproduction.
3. Increase in the general level of prices in the state. It arises from prolonged disequilibrium in most of the markets towards demand.

It must be said that, regardless of the number of interpretations of the definition of inflation, the manifestations of the phenomenon in them are always reflected only in part. No definition can cover all of its content.

Specificity of inflation

Forms of manifestation of the phenomenon can be expressed:

1. Infringements of actions of the laws regulating a monetary turn. This provokes the destruction of the state credit and financial system.
2. A hidden or obvious increase in prices.
3. The naturalization of the exchange processes.
4. Decreased quality of life of citizens.

The essence and forms of manifestation of inflation today have a number of peculiarities. The previously existing local character of the phenomenon was transformed into an all-encompassing and ubiquitous one. The periodicity of its emergence has become chronic, and as factors of influence currently appear not only monetary, but also other circumstances. Today, such processes as price increases caused by different, unrelated conditions, can not proceed separately. However, within the framework of a normal market system, the forms of manifestation of inflation are reduced primarily to an increase in the cost of goods and services. Here it is necessary to immediately make a reservation that when considering price increases one should keep in mind the products of the same quality. The rise in the cost of goods due to the improvement of its consumer properties is of a different nature. Prices are only one of the factors affecting the essence and forms of manifestation of inflation.

External influence

There are 2 main categories of factors that determine inflation. The causes and forms of manifestation of a phenomenon depend, in particular, on external influences. It, in turn, is caused by an increase in the cost of imported and exported products, the exchange of foreign currency into national, as well as world crisis situations. The latter, in particular, include environmental, energy and raw materials problems. They are accompanied by a multiple increase in the cost of materials, oil, whose imports caused a sharp increase in prices by monopolists, whose products, in turn, are exported. When exchanging national currency for foreign banks, there is a need for additional issue of banknotes. This, in turn, replenishes the channels of circulation of finance and leads to inflation.

Internal factors

The forms of manifestation of inflation are influenced by:

1. Excessive military costs. This contributes to the loss of part of the national wealth, forms an additional financial demand associated with defense allocations without the receipt of production in circulation, an increase in public debt and a budget deficit.
2. Excessive investment.
3. Crisis of state finances.
4. Unreasonable increase in wages and prices.
5. Credit expansion. It is an extension of the volume of the provision of bank loans in excess of the available economic needs. This leads to non-cash money issue, speeding up the circulation of funds.

Situation in the Russian Federation

In the domestic economic system, the phenomenon in question has a number of specific features. The forms of inflation in Russia depend on:

1. Efficiency of investment. Their ineffectiveness affects the economic growth.
2. The state of the national economic structure. In the country there is a significant lag in the development of some industries from others.
3. The nature of the economic mechanism. In a centralized economy, there are no effective levers designed to regulate the ratio of commodity and money supply.
4. The state of the consumer market. With its imbalance, total deficit, the financial crisis deepens, shortcomings of the planning system, the mechanism of financial turnover are revealed.

These factors are internal. Meanwhile, the level of inflation in Russia was influenced by external circumstances:

• Reduction of tax revenues from foreign trade activities.
• Fluctuations in prices for energy carriers and raw materials on the international market.
• Unfavorable conditions on individual trading floors of the world, etc.

Classification

Considering the essence, forms of manifestation, types, causes of inflation, it is necessary to separately study the types of phenomena. Classification is carried out for different reasons. So, depending on the economic system of the country, there are:

1. Open inflation. With the relative mobility and flexibility of the price signal, the increase in aggregate demand over supply is expressed in an increase in the total value of goods.
2. Suppressed (hidden) inflation. It is characteristic of economic systems with regulated prices. Forms of manifestation of suppressed inflation:

• Deterioration in the quality of goods;
• Shortage of products;
• Forced accumulation of funds;
• Development of the shadow economic sector;
• Activation of barter transactions.

There is also a classification depending on the pace of formation. On this criterion distinguish:

1. Creeping (moderate) inflation. Its rate is up to 10% per year. It is considered low. At this rate, the depreciation of funds is quite low, and transactions are made at nominal prices.
2. Galloping inflation. Its rate is limited to 10-100%. In this case, the depreciation of money occurs quickly enough. In this regard, the prices for transactions are stable currencies, or in values take into account the anticipated rates at the time of payments.
3. Hyperinflation. Its rates exceed 100% in countries with a developed economic system. In countries with an unstable economy, the figure is much higher. As the working size of hyperinflation, many economists take a value of 1000%.

Next, consider the main types and forms of manifestations of inflation.

Demand crisis

It is a situation where consumers are trying to acquire more products than businesses can produce. The form of manifestation of inflation is in this case an excess of money supply relative to the volume of goods. As a result, prices are rising. A number of factors lead to this situation:

1. Low unemployment.
2. Monetary over-emission.
3. Stimulating policy of the Central Bank.
4. The depreciation of the national currency.

Low unemployment

If its level is high, then the increase in the production volume corresponds to an increase in aggregate demand. At the same time, inactive material and labor resources are attracted in accordance with current prices. In the course of the subsequent increase in demand, the economy is approaching full employment and overcomes this level. In some industries, production capacities are used in full. In this regard, they can no longer respond to the continued increase in demand for their products by expanding output. This causes the price increase.

Monetary over-emission

Increasing solvency may be caused by excessive additional issue of banknotes. Such actions are mainly related to the budget deficit and ways to eliminate it:

1. The growth of inflation is led by the expansion of the public sector, which is accompanied by an increase in wages to attract government employees.
2. Funds for payment of military orders contribute to an increase in the money supply that is not backed by commodity volume, since the products of the military-industrial complex do not act as an object of consumer demand. As a result, prices are going upward.
3. Excessive increase in transfer payments. They include, in particular, subsidies, allowances, pensions, etc.

Stimulating policy of the Central Bank

It is held when selling bonds in open markets. The interest rate is reduced by increasing the money supply. In this case, the implementation of investment projects is carried out through a certain time lag. During this period, inflation may spike.

The depreciation of the national currency

It occurs in relation to a stable foreign currency. This situation occurs if the share of foreign money in the M2 financial aggregate is quite high. When the rate of the national currency falls, this factor works like an additional issue. Accordingly, it can provoke demand inflation.

The crisis of supply

Such inflation is caused by an increase in production costs by 1 unit. Products. The main reasons for the situation are:

1. Increase of salaries.
2. Imported inflation.
3. Monopoly of companies.
4. Administrative regulation of the economic system.

Salary increase

In the constantly changing conditions, there is a periodic pressure from strong trade unions on entrepreneurs demanding an increase in pay. As a result, the costs of enterprises for the related services are increased. The rise in the cost of production makes its expansion unprofitable. As a result, there is a reduction in the aggregate supply, while maintaining or even increasing demand.

Impact of imported resources

In the event that foreign technologies, materials, raw materials, etc. are widely used in production, their appreciation will lead to a sharp increase in costs in the country. With a simultaneous increase in prices in such cases, there will be a reduction in aggregate production. Accordingly, the supply will decrease.

Monopolization of enterprises

All oligopolies and monopolies keep prices at the expense of under-output of goods in comparison with the competitive production volume. As a result, there is an overestimation of available resources relative to their marginal productivity. In addition, the prices for goods are too high. When spread across all sectors of the economy, distorted cost signals on each production cycle tend to increase pricing in comparison with how it should be in accordance with the existing level of technological development.

Administrative regulation

With private changes in regulations, vagueness of legislation, complication and adjustment of reporting procedures and registration of companies, strengthening of regulation of business areas, fragmentation and reduction in the period of validity of licenses and other measures, costs increase. The increase relates to both administrative costs in particular, and transaction costs in general. This, in turn, can increase prices in the state and reduce legal production.

Nuances

In practice, it is quite difficult to distinguish between these types of inflation. For example, if we assume that the health care costs in the country have increased dramatically. Consequently, aggregate costs also increased, provoking demand inflation. In cases where incentives arise in resource and product markets caused by an increase in the solvent demand, some enterprises discover an increase in their costs for fuel, materials and wages. To save production, they are forced to increase the cost of their products. In this case, there is a demand inflation, but for many enterprises it is represented as a supply crisis.

conclusions

It is extremely important for economic entities not only to correctly and comprehensively measure inflation, but also to assess its consequences. In this plane, the structural indicators of price dynamics are of primary importance. With a balanced inflation, prices for goods grow, but at the same time, the former ratio remains the same. At the same time, special attention is paid to balancing their overall increase with the cost of labor market services. In this case, the real incomes of the population do not decrease, in spite of the fact that the savings saved earlier depreciate. With unbalanced inflation, profits are redistributed, structural changes in the production of services and goods. This is due to constant fluctuations in prices for different products relative to each other. In this case, the proportions can be different. Especially the prices for everyday products are rising intensively. Usually, the gap in value growth is noted in the labor market. This causes a deterioration in the quality of life and an increase in social tension. Some economists believe that insignificant rates of price increase (at 3-4% / year) can stimulate the release of goods with simultaneous growth in the money supply. The expansion of enterprises in this case will be the more significant, the more manufacturing factors available. Increasing monetary circulation will help accelerate the payment turnover. This, in turn, will lead to the activation of investment activities. The increase in production will ensure the restoration of the balance between the mass of money and goods against a background of a higher price level.

Negative results

Despite some positive effects at first glance, inflation, even at an insignificant rate, has a whole complex of extremely negative influences on socio-economic development. First of all, it narrows the motivation to work, as it undermines the possibility for the normal realization of price earnings. In the conditions of inflation, the social stratification of the population increases. Another negative result is expressed in the fact that citizens have less opportunity to accumulate. Liquid savings are reduced and partly become natural. In addition, the positions of power are significantly weakened. The desire of state bodies to obtain additional financing due to excessive emission provokes an increase in pressure from social groups that advocate raising salaries, granting subsidies and benefits.