What Is Stagflation?
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24 May 2024
Stagflation is an economic cycle with slow growth, high unemployment, and rising inflation
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Policymakers find stagflation difficult as fixing one factor can worsen another
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Stagflation was considered impossible by economists but occurred during the 1970s oil crisis
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In mid-2022, the US faced potential stagflation, with policymakers prioritising unemployment over inflation
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The term stagflation was coined by British politician Iain Macleod in 1965
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The 1970s US oil crisis revived the term stagflation, highlighting its economic impact
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Stagflation challenges the Phillips Curve, which depicted a trade-off between unemployment and inflation
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Real-world stagflation contradicted Keynesian economics, showing persistent inflation during slow or negative growth
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Economists lack consensus on stagflation causes, proposing various explanations for its occurrence
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The 2008 financial crisis partially contradicted stagflation trends, with energy prices temporarily declining
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