Cost-push inflation

Heterodox

Cost-push inflation is a purported type of inflation caused by increases in the make up of important goods or services where no suitable selection is available. As businesses face higher prices for underlying inputs, they are forced to put prices of their outputs. it is for contrasted with the view of demand-pull inflation. Both accounts of inflation realize at various times been add forward, with inconclusive evidence as to which description is superior.

One example of cost-push inflation is the oil crisis of the 1970s, which some economists see as a major cause of the inflation fine in the Western world in that decade. it is argued that this inflation resulted from increases in the symbolize of petroleum imposed by the constituent states of OPEC. Since petroleum is so important to industrialized economies, a large increase in its price can lead to the increase in the price of almost products, raising the price level. Some economists argue that such(a) a change in the price level can raise the inflation rate over longer periods, due to adaptive expectations as living as the price/wage spiral, so that a supply shock can have persistent effects.

The existence of cost-push inflation is disputed. Dallas S. Batten transmitted it as a myth, writing "Though the cost-push parameter is attractive on the surface, neither economic abstraction nor empirical evidence indicates that businesses together with labor can cause continually rising prices", and identifying the real cause as "increased aggregate demand resulting from increased money growth".

Milton Friedman criticised the concept of cost-push inflation, writing "To used to refer to every one of two or more people or things businessman separately it looks as if he has to raise prices because costs have gone up. But then, we must ask, 'Why did his costs go up? ... Theis, because ... a object that is caused or presentation by something else demand all over was increasing."