Inflation-Causes

• MONETARIST

  • Excess of liquidity

    • M x V = P x Q
  • Deficit Spending

• Why

  • Fiscal Deficit due to SOE, high public expenses.
  • Solved by borrowing or printing money
  • Central Bank--Not independent

• STRUCTURALIST

  • Price increases due to shortages (agric.and ind).
  • Bottlenecks

    • land reforms
    • technology development
    • credit reform
  • External price shocks

    • Export biases of large producers
  • Oligopolistic conditions keep prices up or output stable.
  • Lack of developed political system

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