What Is Stagflation And What Causes It? – Analysis

The occurrence of stagflation is associated with a situation of general strengthening in the momentum of prices while at the same time the pace of economic activity is declining. A famous stagflation episode occurred during the 1974û75 period, as year-on-year industrial production fell by nearly 13 percent in March 1975 while the yearly growth rate of the Consumer Price Index (CPI) jumped to around 12 percent. Likewise, a large fall in economic activity and galloping price inflation was observed during 1979. By December of that year, the yearly growth rate of industrial production stood close to nil while the yearly growth rate of the CPI closed at over 13 percent.