INFLATION, DEFLATION AND MANAGEMENT OF THE ECONOMY


Author: Prof. Dr. Boyan Durankev, Assist. Dr. Mitko Hitov (UNWE)

Keywords: Inflation, Deflation, Prices, Management of the economy, Monetary policy

Inflation and deflation are two states of the economic system, which are caused by various exogenous and endogenous factors of the economic system. In general, prices tend to reduce under the influence of objective economic and extra-economic factors. It is proved that these two conditions require the state to use two different tools for intervention and control (similar to high and low blood pressure in humans). It concluded that the management of inflation or deflation can not be management goals but means to solve other economic and social problems. Is proposed the balance of the input-output tables to be used as a basic tool for analyzing price changes and the reasons which lie behind them. Strongly emphasizes that scientific and technological progress is a major factor in reducing the cost of both intermediate and the final production. Predicted that the policy of „easy money“ of the ECB may reduce deflation, but not to generate economic growth. Conversely, clear development objectives of the economic system can achieve one or other limits of inflation or deflation.

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