Inflation and Its Effects on Investment

Inflation and its impact on investment Inflation is a fairly new experience for the global economic market. This is due to the absence of rising pressure on prices by gold and other metal standards during most of the 20th century. These supported currencies limit the government's ability to create new funding. Therefore, at the end of the gold standard the strong political pressure will cause the government to issue more money, increase the supply of money, thereby raising the price level. Inflation reflects the demand for goods and services that exceeds its economic supply (Hall, 1982).

Barro (1995) analyzed the impact of inflation on growth and investment as a significant negative long-term inflation to reduce the value of growth and investment. In the analysis, the influence of inflation on economic growth is a large negative correlation, and I think that the influence of inflation on investment is also a big negative correlation. The inflation rates of Barro (1995) between the three periods (ie 1965-75, 1975-85 and 1985-90) are not very different from each other. If different inflation factor tests are run for each period, the resulting value will not be significant for each period. When the inflation rate rises by 10% every year, the actual growth rate of GDP per capita may increase by 0.2% from 0.3% per year.

Inflation affects the economy in a variety of positive and negative aspects. An adverse effect of inflation is an increase in opportunity cost of holding funds, and investment and savings may be hindered by uncertainty of future inflation. It is the future. The positive influence includes a decrease in unemployment due to rigidity of nominal wages. Economists generally think that high inflation and hyperinflation rates are caused by excessive money supply growth. The idea of ​​determining low to moderate inflation rates is more diverse. Low or moderate inflation could be due to fluctuations in actual demand for goods or services, or changes in available supplies during shortages. But consensus is that long-term sustained inflation is caused by the rapid growth of money supply rather than economic growth.