The Researches About The Causes Of Inflation Essay

2.3 The researches about the causes of inflation 2.3.1 The theoretical explains of inflation causes The triangular Phillips Curve which was proposed by Gordon (1996) states that the factors cause inflation can be summarized as demand pull, cost push and inflation inertia. Similarly, Gal and Gertler (1999) construct the a kind of hybrid New Keynesian Phillips Curve model and claim that the main factors that affect inflation are the excess aggregate demand, inflation expectation and inflation inertia. In reality, the determinants of inflation are very complex, and the most common four mechanisms of production are stated as follows: 1) Demand pull type. Excessive growth in aggregate demand leads to too much money chasing too few goods. 2) Cost push type. The inflation is caused by the increase in the cost of production and the general level of the price rise. 3)Inflation inertia, that is, once the inflation formed, it will continue for a period of time. 4) Expectation of inflation. Economic activity participants can make a judgment and estimate on the future trend of inflation to get the formation of inflation expectations, which lead to the current increase in the price level. In the paper of Batini et.al. (2005), the theoretical and empirical relationship between the share of labour and inflation in the U.K. was explored, which based on the theory of Cobb–Douglas the New Keynesian Phillips Curve (NKPC). The labour share was examined to be as a useful indicator on measuringShow MoreRelated5.1 Introduction Final chapter of the study represents the conclusion of the study based on the900 Words   |  4 Pagesconclusion of the study based on the analysis done for the obtained data and the overall summary of the study. Other than that chapter contains the recommendations based on the obtained results and also develops ideas and suggestions for the future researches regarding the relationship between economic growth and commercial bank lending. 5.2 Summary The study focused on to identified the relationship between economic growth and commercial bank lending in Sri Lankan context. That is the main objectiveRead MoreThe Functions of The Central Bank Essay1381 Words   |  6 PagesFederal Reserve System in the United State. In this paper we would discuss about three crucial characteristics that lead to the success of an independent central bank. Conservative There is an increasing agreement that a low and stable inflation rate referred to price stability is good for the economy. Some researches indicate that a low and stable inflation rate could help enhance the rate of economic growth. 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