Impact of Inflation in World Economics Dissertation

Impact of Inflation in World Economics - Dissertation Example Placing in the most generic term, inflation within an economy diminishes the value of money as a result of which the common people find it difficult to survive. Inflation and growth are such two terms of the economy that are comprehensively incompatible and can never be anticipated to meet (Economy Watch, 2011). The present research paper has been designed to critically evaluate the impact of inflation upon the Asian economies. The reason for selecting the Asian economies for study is the excessively elevating rate of inflation as compared to the rest of the world during the past a few years. The following demonstration of the inflation rate has led to the undertaking of present research. The rates of inflation depicted in the figure are those of the recent period. Source: (Trading Economics, 2011). The figure is a clear representation of the rate of inflation in various countries of the world inclusive of the western countries, European countries, Australia and the major Asian count ries in terms of economic growth and also population. It is evident from the figure that rate of inflation in India and China is the highest in the entire world in recent times. This is the basis of the present research that will be concerned with finding the causes of inflation along with its effects and most importantly finding an effective way of managing inflation. 2.0 Causes of Inflation in Asian Economies According to a special report from the Asian Development Bank (2008a), during the period from the year 2007 to 2008, both structural as well as cyclical factors have contributed towards the escalating prices of food products in Asia. Before that period, major cereal stocks in the global market were reducing radically. The harsh rate of failing stock was a clear indication that the world economy had been becoming incapable of meeting up the rate of consumption (ESCAP, 2011). As a result of this, the ratio of stock-to-use had been falling massively, before it reached one of its lowest rates during the same period of 2007-2008 as shown in the figure below: Source: (Asian Development Bank, 2011). The percentage figures in the above figure had been shown with respect to three important cereals: corn, wheat and rice. Various structural factors that have been influencing the increasing rate of food prices during the period 2007-2008 are observed to be continuing their impacts upon the present episode of ever increasing food prices within the Asian economies. The factors relevant on the demand-side of the economies are inclusive of huge rate of growth in population figures, sturdy rate of growth in people’s income within the emerging economies and varying diet habits of the people from staple items of food towards meat and several other processed foods. Increased consumption of processed food items requires huge amount of feedstock and raw materials. The factors in the supply side that contributes towards increased rate of inflation are the enhanced util isation of food grains, primarily rapeseed oil and corns for the purpose of producing biofuel; alteration of the agricultural lands in order to be utilised for business purposes; enhanced shortage of resources for irrigation; lower production of crops; increasing costs of raw materials; and