Eli5: What type of inflation do developing countries like Argentina and Venezuela have? Is it demand-pull inflation?
In: Economics
I don’t know about Argentina, but in Venezuela it’s definitely not demand-pull. They are in an economic crisis and the supply of goods crashed as their economy is entirely dependant on exporting oil and importing other goods. Since the oil price is comparably low they simply get less supply of goods with a demand that can’t decrease arbitrarily (because people need food)
So there it’s clearly a cost-push Inflation. The government also ignored the problem and didn’t really try to stabilize it in the Chavez era.
Argentina and Venezuela have very export-centric economies. For the most part, people only get their currency to buy their specific exports. When people stop buying those exports, then Argentina and Venezuela run short on foreign currency. This means that the value of their currencies relative to foreign currencies goes down.
Latest Answers