Inflation Uncertainty and Output Growth †Free Samples to Students

Question: Discuss about the Inflation Uncertainty and Output Growth. Answer: Introduction The performance of the economies across the world, in the contemporary periods depend on a variety of endogenous as well as exogenous factors. While the endogenous factors comprise of the dynamics in the different aspects within the economy affecting the economic variables working in the economy, the exogenous factors generally indicate towards the different international phenomena and incidents happening outside the geographical boundaries of the countries but having considerable impacts on the economic activities and the dynamics of the same in the concerned countries (Mankiw, 2014). The macroeconomic traits and the overall performance of the economy of a country can be primarily observed with the help of the working of the primary economic indicators like the GDP growth rate, rate of inflation, rate of unemployment, import export dynamics, balance of payments and other economic variables. Keeping this into consideration, the concerned report tries to analyse the current economic situations of one of the highly developing and one of the newly emerging dominant economies in the global scenario, Malaysia, with the help of the concerned article. As can be seen from the concerned article as well as from the other empirical evidences, in the last few months, the country has been experiencing considerably high rate of inflation rates, as compared to the general trends of price level and inflation in the country. Taking this particular macroeconomic problem of the concerned country into consideration, the concerned report tries to analyse the trends in the inflation rates of the country and the report also tries to interpret and analyse the factors affecting the rates management with the help of the statistical data collected for this purpose. Inflation in Malaysia Inflation in a particular country reflects the overall level of prices of the goods and services prevailing in the country and any change in the same indicates towards the dynamics of the price levels in the country. In this context, the level of inflation in the concerned country, Malaysia, for the last few months, is seen to be considerably high than the regular standard levels of the same, usually prevailing in the country (Thestar.com.my, 2018). this can be shown with the help of the following figure, formed with the help of the data on rate of inflation in Malaysia, collected for the past few months (2017), which is as follows: As is evident from the above figure, the rate of inflation, which decreased considerably in the first half of 2017, in Malaysia, started increasing steadily post June and the same increased considerably in August and September. In September, 2017, the rate of inflation was as high as 4.3%, which has been six-months highest for the country (Elhadary Samat, 2012). The inflation which has been occurring in the concerned period in Malaysia, can be termed mainly as a cost push inflation as the primary contributors in the high rates of inflation in the country are the increase in the cost of transport as well as the prices of the basic consumption goods like food as well as non-alcoholic beverages. The increase in the prices of the above-mentioned commodities and services of daily necessities has been large enough to even offset the decline in the prices of other substances like that of footwear and clothing. The dynamics in the price levels of the essential commodities and services in Malaysia, over the years can be seen from the following figure: The Consumer Price Index of a country tends to show the dynamics in the price levels of the usual basket of goods and services which are purchased by the consumers of a country in general. As is evident from the above figure, over the last few years, the CPI of the country has increased considerably and particularly the price levels of food and non-alcoholic beverages have gone up steadily and considerably. On the other hand, the cost of transport in the country has experienced considerable fluctuations with noticeably high peaks and low troughs. However, in the last year the same has gone up considerably. The primary reason attributed to the increase in the costs of transport in the country is the substantial increase in the price of fuel in the concerned period, with the average price of one litre of petrol (RON95) increasing from nearly RM1.70 in 2016 to as high as RM2.19 in the month of September (2017). The price of RON97 petrol also went up visibly (from RM2.05 in 2016 to RM2.48 in September, 2017). The main reason behind the increase in the price of the fuels in Malaysia can be taken to be the overall increase in the price of oil in the global framework, as can be seen from the following figure, showing the dynamics in the global price levels of crude oil in the last few months: As is evident from the above figure, the prices of the crude oil, in general, which remained consistently high in March and April, fell drastically post May (2017) (Ibrahim, 2015). However, this decline in the price of oil was not sustainable as the prices of the same started rising considerably post June and the increase sustained till September, thereby explaining the increase in the average price of oil in Malaysia, which in turn has resulted in rising the cost of transport, thereby contributing in the higher inflationary pressure in the country. The food and non-alcoholic beverages prices also went up owing to the increase in the price of oils and fats. These commodities comprising nearly 30% of the CPI weights of the country, the increase in price of them has made inflationary pressure in the country inevitable (Zubaidi Baharumshah Soon, 2014). Conclusion From the above discussion it can be concluded that inflationary situation arising in Malaysia in the concerned period (September, 2017) can be primarily attributed to the increase in the cost of transport and prices of food and non-alcoholic beverages, which is itself an outcome of the increase in the price of oil and fat. The increase in the price of petrol in Malaysia can be attributed to an increase in the overall price level of the crude oil in the international scenario in the same period when the inflation in the concerned country is observed to be hitting high rates. References Data.worldbank.org. (2018).Inflation, consumer prices (annual %) | Data.Data.worldbank.org. Retrieved 6 April 2018, from https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=MY Dosm.gov.my. (2018).Department of Statistics Malaysia Official Portal.Dosm.gov.my. Retrieved 6 April 2018, from https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCatcat=106bul_id=UUh1RkRiSk9naVVSVXhab0djbUp5dz09menu_id=bThzTHQxN1ZqMVF6a2I4RkZoNDFkQT09 Elhadary, Y. A. E., Samat, N. (2012). Political economy and urban poverty in the developing countries: Lessons learned from Sudan and Malaysia.Journal of geography and Geology,4(1), 212. Ibrahim, M.H., 2015. Oil and food prices in Malaysia: a nonlinear ARDL analysis.Agricultural and Food Economics,3(1), p.2. Indexmundi.com. (2018).Crude Oil (petroleum) - Monthly Price - Commodity Prices - Price Charts, Data, and News - IndexMundi.Indexmundi.com. Retrieved 6 April 2018, from https://www.indexmundi.com/commodities/?commodity=crude-oilmonths=12 Mankiw, N. G. (2014).Principles of macroeconomics. Cengage Learning. Thestar.com.my. (2018).Malaysia's Sept inflation at six month high - Business News | The Star Online.Thestar.com.my. Retrieved 6 April 2018, from https://www.thestar.com.my/business/business-news/2017/10/20/malaysia-sept-inflation-at-six-month-high/ Zubaidi Baharumshah, A., Soon, S. V. (2014). Inflation, inflation uncertainty and output growth: what does the data say for Malaysia?.Journal of Economic Studies,41(3), 370-386.