2024-03-12 19:26:29
Despite a sharp slowdown from monetary issue and the existence of a fiscal surpluswe Argentines, currently, are going through a situation of very high inflation. As established in the last measurement of the Consumer Price Index carried out by the INDEC, in the first month of the year an inflation of 20.6% was verified. This is where the question arises: What are the real causes of the current inflation? As usually happens in most inflationary processes, there are several.
The main cause of the current inflation originates in the change of relative prices that the new Government has promoted since its inauguration. First of all, the devaluation which, as we all already know, was destined to produce a change in the relative prices between the tradable goods –those capable of being traded internationally– and non-tradable goods, with the purpose of increasing the prices of tradable goods over those of non-tradable goods.
The expected result is an increase in exports and a contraction of imports, thus improving the trade balance.
Another element that was felt more significantly starting in March is the increase in public service rates. The objective is to reduce energy and transport subsidies and, consequently, the fiscal deficit, but it will have an impact on the costs and prices of a large part of the products.
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Because nominal prices are inflexible to the baja, the only way to change relative prices is through an increase in those that are intended to be ahead of the rest. In this case, those of tradable goods and public services. This is the so-called non-monetary inflation, whose theory is due to Latin American economists, particularly the Argentine Julio Olivera.
A second component of price increases is the inertial inflation. In countries with a long inflationary experience, inflation expectations depend on past inflation. Even when the original elements of the inflationary process are removed, it will persist because businessmen will continue to mark prices and unions will continue to demand salary increases based on previous inflation. Past inflation determines future inflation. The inflationary inertia It thus becomes an autonomous cause of inflation.
Finally, residual monetary inflation remains because the Banco Central go on emitting, although at a slower pace. Indeed, in January the monetary base grew by one trillion pesos, equivalent to an increase of 11.1%, or half the monthly inflation.
The government explains that this situation will continue until the relative prices of the economy are finished adjusting and reach the new balance that economic policy wants to achieve… Now, what does society say?
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