Globalisation of inflation

Inflation can also be globalised just like many other things via the forex market as well as the international trading network. Inflation is a phenomenon of price changing, and the price is determined by supply and demand in the market.

Different countries have different inflation rates because the demand related to the element measuring the inflation is domestic demand. Each country has its unique demand, so when the demands for goods are different in different countries, the price levels in these countries will also be different; therefore, the inflation rates in different countries are different. However, many countries have similar inflation trends, this is because the supply for all countries is relatively similar.

Nowadays, we have an international trading network so all goods and services can be supplied by the entire world. In addition, the international trading network tends to make prices of the same goods and services have similar prices everywhere around the world. When some places have got higher prices for some goods and (or) services, more such goods and (or) services will be supplied into these places and lower the local prices. However, due to our different trading policies, supply is not exactly the same everywhere, some countries have higher transport costs or higher tariffs, the supply will be lowered than somewhere with cheaper transport costs or lower tariffs.

Overall, under the current circumstance, globalisation tends to distribute the inflation pressure across the world, and all countries which have access to the global market have similar inflation trends.