ICMAP Pakistan Report on Causes & Effects of Inflation
1. Institute of Cost and Management Accountants of Pakistan
INFLATION
Prepared For : Ministry of Economic Affairs
Prepared By : Talha Arfi
Registration# : 20090498
Date : Dec 08, 2010
2. 2
STRUCTURE
What is inflation?
Inflation and our monetary system.
Causes of inflation.
Impact of inflation on our lives and society.
Role of government to eliminate/ enhance inflation.
Decline of our standard of lives due to inflation.
Conclusion.
Recommendations.
Questions and answers.
3. What is inflation? 3
Rise in the prices of goods and services.
Decline in the real value of money.
Loss of purchasing power.
4. 4
Inflation and our monetary system
Discount rate
Consumer Price Index (CPI)
5. Causes of inflation 5
Excessive growth in the supply of money.
Rise in production costs.
International lending & National debts.
Federal taxes on consumer products.
Black money.
Population growth.
Deficit financing.
Political Instability.
Natural calamites.
Food Inflation.
6. 6
Impact of inflation on our lives and society
Impact of inflation on our lives :
Hoarding.
Distortion of relative prices.
Cost of living.
Fixed income recipients will feel the heat.
Impact of inflation on society :
Lowers national saving.
Currency debasement.
Unemployment.
Poverty.
Economic uncertainty.
7. 7
Role of govt. to eliminate/enhance inflation
Monetary policies.
Subsidies.
Price system.
Lift certain import controls.
Increased interest rate.
Inflation targeting.
Regulate transfer of foreign currency reserves.
8. 8
Decline of our standard of lives due to inflation
High prices.
Financial problems.
Less consumption.
9. Conclusion 9
Strategic planning to control inflation.
Encourage domestic production.
Investments in consumer goods.
Subsidies for agriculture sector.
Attract foreign investments.
Monitoring system to evaluate the process.
10. Recommendations 10
Low steady rate of inflation.
Money supply must grow faster than Real GDP.
Reduce imports and increase exports.
Price support programs.
Provision of subsidies.
Increase production.
Controlled circulation of currency.
Controlled foreign exchange policy
Avoid use of luxuries.