Inflation in Argentina (Essay Sample)

Inflation in Argentina
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Abstract
Inflation is a rise in the general price of goods and services in a given economy over a period of time. When this happens, a unit of currency buys fewer goods and services. Argentina is a country in the south of South America who has the highest inflation rate in the whole continent after displacing Venezuela (Renner, 1999). The inflation rate in Argentina was recorded at 10.20% in October this year which is a rate higher than Venezuela’s 7.5% (Merco press July 12.2012). inflation has related concepts which include; deflation, which refers to the falling of general prices; disinflation, which refers to the reduction of inflation; stagflation, a combination of poor economic growth and inflation; hyper-inflation, an inflationary spiral which is uncontrollable; and reflation which refers to an attempt to raise prices in an effort to counteract the deflationary pressures. This paper is about how inflation has affected Argentina’s economy. It is going to analyze the state and impacts of inflation in Argentina.
HYPERLINK "http://en.wikipedia.org/wiki/Argentina" \o "Argentina"Argentina possesses definite HYPERLINK "http://en.wikipedia.org/wiki/Comparative_advantage" \o "Comparative advantage"comparative advantages in agriculture, as the country is endowed with a vast amount of highly HYPERLINK "http://en.wikipedia.org/wiki/Fertility_(soil)" \o "Fertility (soil)"fertile land and climatic situation able to boost its agricultural, mining, fisheries and forestry activities. It has lots of mineral resources being mined at the moment which include petroleum, gold, silver, copper, tin, and uranium just to mention but a few. What makes her most famous is Agriculture by virtue of her being the largest exporter of beef, cereals and oil seed worldwide? She is the world’s fifth largest wine producer besides having the largest sheep grazing areas. Argentina has manufacturing, engineering and construction as her key departments in the manufacturing sector. She manufactures and exports cars, paper, petrochemical products, processed food and electrical machinery and appliances among other exports. She has a long coastline. Her transport; air, water and land transport are well networked. Above all, communication in Argentina is privatized and well developed. She has satellite tracking stations and digital technology to provide reliable means of communication worldwide.
Relationships between Inflation and Argentina’s economy
On checking Argentina’s history, she had a stable economy in the past which has collapsed due to many factors, among them inflation. Inflation had a negative impact on the country’s economy. It increased the opportunity cost of holding money, uncertainty over future inflation which discouraged investment and savings.
Reuters in one of their editions recorded that the International bond market shunned Argentina due to her failure to pay up her 2002 debt and embraced policies that stretched the country’s budget. This led to heavy government expenditure hence a stroke in economic growth of the country. They further say that FITCH downgraded Argentina’s long term foreign currency to a disadvantageous currency level. Due to this, export and import trade with other countries reduced by a very high margin thus creating bigger losses for Argentina (Fernandez, 2002).
Inflation devalues currency; this caused investors to start pulling out their investments in the country. This means their returns were dwindling with time so they took their business somewhere else with positive returns (Epstein, 2009).
Trends in Data sets
Instituto Nacional de Estadista is the institution reporting statistics about inflation in Argentina. According to trading economics the “inflation rate in Argentina was recorded at 10.20 percent in October 2012”. Since back then in 1944 until 2012, Argentina Inflation Rate had and gave an average of 209.0 Percent. Inflation was highest at 20262.8 Percent in March 1990 and lowest at -7.0 Percent in February 1954. We learn that,” the inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of goods.”
Taking the year 2011 and 2012 to date, from the graph provided by the institution, Inflation rate was highest in January 2011 at 10.90 percent which is a slight improvement in the economy from an inflation rate of 11.0 percent in December 2010. There was an improvement in February and March to April when the inflation rate stagnated through April to August at a rate of 9.7 percent (Epstein, 2009). The rate slightly rose to 9.8 and then 9.9 in October. By the end of 2011, ...