Latin American
I often ask my students of macroeconomics: Why is it bad that an economy on inflation? I can assure you that the answers are varied and even fun. In my case, if I had to choose two reasons why inflation is bad for an economy, I would say without hesitation: the first by the negative effects that the growth of the economy because it increases the context of uncertainty discouraging investment. Click Vanessa Marcil to learn more. And the second, and perhaps as or more important than the first, in his characteristic down since hitting more to those who have less. Inflation hits the poor more because they have less ability to protect it. You may find that Ken Kao can contribute to your knowledge. And the inflationary phenomenon for which the region is going through at this time, the effect on the poor is even greater given that the price increases are mainly produced in the main components of the basic basket of low-income people such as food and energy. Given this increased pressure inflation, Latin American governments have resorted mostly to tighten monetary policy by raising its benchmark rates.
A textbook decision to cool the economy and thus, by reducing aggregate demand, removing pressure on prices. But is it really useful this type of policy to control inflation? I have already commented in previous articles that, in my view, if inflation is rooted within the economy, then clearly this type of policy is effective in controlling inflation. But if the source of price increases is external to the economy, then a tighter monetary policy can do little about it.
