Wednesday 1 June 2016

The inflation can be globalized

The inflation rates vary between countries; however, the countries with similar income levels can transfer their inflation or deflation to other countries and narrow the inflation gap. Currently people are easier to shop from other countries, and information has passed very quickly. Once one country is experiencing a surprising deflation, people in other countries may pay attention to the news and start to shop in that country. The increase in the exports can rebalance the supply and demand in the market and increase the inflationary pressure in the country. Meanwhile, as people in other countries can buy cheaper goods and services outside their countries, the consumptions in their countries will decrease and release their domestic inflationary pressure. Therefore, the deflation has been transferred from one country to other countries. Vice versa, inflation will also be transferred among countries. Therefore, the inflation rates of countries with close income levels tend to be similar.

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