Discussion on inflation
Abstract
The discussion’s central aspect is on the relationship between inflation and employment and ways of engaging the two through a comparison of earlier and present time data. This is done by establishing and examining the flow of money in business cycles, wages and labor markets, and economic activities. Hence, this is followed by an analysis of drivers of inflation compensation, done by focusing on the evidence from inflated swaps in advanced economies. The typical relation is usually on oil prices, which indicate medium to long-term inflation compensation measures. In addition to this, it is significant to evaluate the effects of a universal imbalance on inflation and its indication for money; hence, the focus is on globalization’s impact on inflation.
Introduction
Inflation, in general, is used to measure the worth of the rising costs of goods and services in an economy. Wage inflation, which is closely connected to the labor market, is slacking and shows minimal signs of increasing as reports on the Federal Open Market Committee’s (FOMC) choose measuring of inflation showing a 12-month change basis increasing to near FOMC’S objectives. Kohn (2006) focused on two theories from monetary economics: the quantity equation, inflation is directly related to the money supply; and the Fisher equation, the nominal interest rate moves one-for-one with inflation.
On examining some of the driers of inflation, information has been derived that shows concrete information reading how the U.S inflation compensation practices have become less subtle to economic news and shifts in regards to the rate at which the dollar changes the value in the economy. This was predominantly when the Federal Reserve incorporated an inflation mark in the year 2012. In addition, it was also after the global financial crisis in its role in inflation risks that increased in terms of both medium as well as long-term inflation compensation measures (Rodriguez and Emre, 2016). A significant part of elaborating the impact that globalization has on inflation involves using an equation that relates core consumer price inflation by using the index for core personal consumption expenditures (PCE) or the core consumer price index to straggled inflation; resources use, changes in food prices, and a difference in import charges here we focus on influences controlled directly by the model and then look for proof of globalization.
Results
The information presented by the data showed a low indication of an inflation outbreak. This brings a certain sense of confusion regarding why inflation might appear to be slowing regardless of the fact that there is confirmed forecast information that shows that the economy is almost full employment. Other findings show that inflation premium risks have increased compensation. In the end, it made the investors insure more, against low inflation results.
Conclusions
A better understanding of the drivers and impacts of inflation will help to understand inflation dynamics and guide investors, business owners, and laborers in planning. The studies also indicate that inflation measures the value of the rising costs of goods and services in an economy.
References
Brainard, L. (2017), Navigating the Different Signals from Inflation and Unemployment. Retrieved From: https://www.federalreserve.gov/newsevents/speech/brainard20170530a.htm
Kohn, D., (2006). The Effects of Globalization on Inflation and Their Implications for Monetary Policy: Retrieved From: https://www.federalreserve.gov/newsevents/speech/kohn20060616a.htm
Rodriguez, Marius, and Emre Yoldas (2016). “Drivers of Inflation Compensation Evidence from Inflation Swaps in Advanced Economies,” IFDP Notes. Washington: Board of Governors of the Federal Reserve System, December 30, 2016. https://doi.org/10.17016/2573- 2129.28