Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Get in touch with us nowWhat drives stagflation?
There are different theories trying to unravel the causes of stagflation. Some point to poor monetary and fiscal policies, with excess money supply being the key factor. Others depict a supply shock as the main reason. It seems that both the 1970s and current times have one thing in common – already weakened economies, suffering from elevated unemployment and economic recession, are additionally hit by another shock (the oil supply crisis in the 1970s and the Russian invasion of Ukraine causing electricity prices to rise in 2022 and 2023), pushing the inflation forward.Stagflation in 2022?
The coronavirus (COVID-19) pandemic took a big toll on economies all over the world. Many industries suffered greatly, and most affected businesses were forced to reduce employment or even shut down completely in the past years. While economies and companies still were recovering, the Russian invasion of Ukraine in February 2022 led to skyrocketing prices around the world, especially the price of electricity, gas, and other fuels increasing sharply. Many households, already struggling to cope with the effects of inflation, worry about further increases of prices. Businesses are struggling with increasing production and transport costs as well as customers having less to spend. Some countries such as Germany have already entered periods of recession. On the positive side, unemployment rates continue to remain relatively low around the world, and are expected to continue to do be so.
