Another look at Inflation

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Another look at Inflation

Octubre 2005

The economy is now reaching a point where high growth could be seen as a mixed blessing.

What used to be good news it is now becoming a boomerang as it is increasing the inflationary pressures. And this is happening when inflation is running at 12% per year, without showing any signs of receding and with a large chance of reaching new highs in the next few months.

There is much confusion about the inflation process in Argentina. Is it the result of an undervalued currency, low interest rates and rapid growth of the monetary aggregates? Is it a transitory phenomenon linked to an adjustment in relative prices following the large devaluation or it is a longer term issue? Are the recent increases in wages part of the problem? What is the role of fiscal policy in the inflation process?