TYPES OF INFLATION:
Creeping Inflation:
- When the rise in prices is very slow (less than 3% per annum) like that of a snail or creeper, it is called creeping inflation.
- Such an increase in prices is regarded safe and essential for economic growth.
Walking or Trotting Inflation:
- When prices rise moderately and the annual inflation rate is a single digit (3% - 10%), it is called walking or trotting inflation.
- Inflation at this rate is a warning signal for the government to control it before it turns into running inflation.
Running Inflation:
- When prices rise rapidly like the running of a horse at a rate of speed of 10% - 20% per annum.
- Its control requires strong monetary and fiscal measures, otherwise it leads to hyperinflation.
Galloping or Hyperinflation:
- When prices rises between 20% to 100% per annum or even more, it is called galloping or hyperinflation.
- Such a situation brings a total collapse of the monetary system because of the continuous fall in the purchasing power of money.
- One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923.
- During that period, the average price level increased by a factor of 20 billion, doubling every 28 hours.
Case of Zimbabwe:
- Hyperinflation issue started in late 1990's. In early 90's, President Mugabe started a series of land reforms in the form of Redistribution of land, taking land from ethnically European farmers and giving it to ethnic Zimbabweans.
- This transfer of land damaged the country's capacity of food production resulting in dropping of supply far below demand and raising prices of the food.
- During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics.
- Peak month of inflation was estimated at 79.6 billion percent in mid-November 2008, inflation doubling every 24 hrs.
- In mid-2015, Zimbabwe adopted Dollarisation of the economy.
SKEWFLATION:
- When Inflation is there in one sector and prices are stable in other sectors.
- Ex. Inflation in Indian scenario many times is skewflation as inflation is centered around food inflation in India .
Transitory inflation:
- Increase in the inflation rate is a temporary or short-lived phenomenon and the inflation rate are expected to drop back again.
- The situation can be on account of any economic event like sudden slowdown in the supply or increase in demand of any item in the economy.
STRUCTURAL /BOTTLENECK INFLATION:
- Inflation is because of structural problems in the economy.
- It is prevalent in most of developing countries.
- It is on account of weak institutions and imperfect working of market like food inflation in India.
Shrinkflation : (SHRINK+INFLATION )
- Practice of reducing product’s size without any change in its sticker price.
- This strategy is employed by companies, mainly in the food and beverage industries, to maintain their profit margins in a clandestine manner.
- It appears to be hidden inflation.
- Post Covid, this s the most prevalent phenomenon.
- Ex . The strategy of Parle -G is the best example to understand this phenomenon.
Greedflation:(GREED +INFLATION)
- Corporate greed fuels this type of inflation.
- Profit-Price spiral drives inflation instead of the traditional wage-price spiral.
- The companies exploits the situation of increasing inflation faced by the people in the economy.
- Companies increased their prices even more than their increased input costs.
- In developed countries like Europe and the US, there is a growing consensus that greedflation is a significant factor contributing to inflation.
STAGFLATION:(STAGNATION +INFLATION)
- The situation is marked by stagnation and inflationary situation.
- Stagnant economy is marked by slow growth in the economy, decline in GDP and high unemployment rates.
- Example :This happened in the United States during the 1970s when world oil prices rose dramatically, increasing the costs of goods and contributing to a increase in unemployment. Europe faces stagflation during 2008 recession. India faces stagflation during 1990’s.
REFLATION:
- It is recovery phase of the economy coming out of recession.
- Inflation starts increasing but still remains in the negative regime.
- This phase is characterized by stimulating the economy in the form of reducing taxation rates or by giving huge stimulus to the economy.
- This stimulus leads to the economic expansion.
DISINFLATION: (DIS+INFLATION)
- Disinflation is slowdown in the rate of increase of inflation.
- Inflation is still there but there is slowdown in the rate of change of inflation.
- Ex. If inflationary rate is 5% then,2% will be disinflationary.
DEFLATION: (DE+INFLATION)
- Deflation is general decline in the prices.
- Inflation is in negative regime.
- Ex. if inflation rate is -2%, then it is deflation.
- During Great depression, it was double digit deflation.
