The inflation rates of Myanmar, Malaysia and Laos

The inflation rates of Myanmar from 1990 to 2008 were not steady and were happening increasing and decreasing rapidly.

Between these years, there were three significant points of changes in inflation rate. In 1998 – 1999, the rate of inflation has fallen down from 51.48755 to 18.40104. Nearly 33% were fallen down at those years. This is because the interest rates and deposit rates are half of the 40% or higher the actual inflation rate because of the similar quality of the price of rice was one half of that in Myanmar as a result of the restrictions on the rice inputs. [] 

In 2001- 2002, the rate of inflation has risen up from 21.10131 to 57.07451. Nearly 30 % are increased rapidly .In 2003 – 2004, the inflation rate has fallen down nearly 30% from 36.58972 to 4.534214. The reasons for 2003-2004 are that major banking crises that the 20 private banks were shuttered and that was disrupted the economy. So that in2003-2004, the inflation rates are higher than the other years. [] 

Inflation rate of Malaysia from 1990-2010

The inflation rates of Malaysia were that the most significant point of Malaysia is 2008-2009 years. In 2008-2009 years, the inflation rate has fallen down from 5.4 to -0.1. Nearly 50% falls down because of subsidizing the government expenditures of 22 per cent in 2009. Moreover during shortage time, there were cooking oil crises in the January 2008 Moreover, the government eliminated the price controls on construction materials for example steel bars and cements as the banning exports to ensure steady supply. Therefore, the inflation has rapidly fallen down in 2008-2009.

And other significant points of inflation rate in Malaysia were found that 1997-1998 and 1998-1999 years. According to the graph, the inflation rates of Malaysia were not steady round about 1998 to 1999. Because in 1997-1998, the inflation rate has risen from 2.655 to 5.293, nearly 30% were risen because in 1997- 1998, in Malaysia, there were extreme changes. Therefore, the direct investment from foreign cut down on the alarming rate and as the capital flowed out, the Ringgit depreciated significantly as of MYR 4.8 per USD toward a large amount lower level. But in 1998 to 1999, the rate of inflation has fallen down rapidly from 5.293 to 2.731 and nearly 30% were fallen down because in 1998, a sharp 7.5% contraction was suffered by GDP but it was rebounded in order to grow by 5.6% in 1999. [] 

Inflation rate of Laos from 1990-2009

The world poorest country in economy is the Laos. In Laos, the inflation rates were steady in most years. Although inflation rates were seen as increase and decrease, it was happening slightly. According to the graph, there are these six significant years although the inflation rates of most years are steady and the changes are not significant. These years are 1997-1998, 1998-1999 and 1999-2000. In Laos, the inflation rates are increasing and decreasing rapidly round about these four years. In 1997-1998, the inflation rate has risen from 19.544 to 90.141 rapidly. Nearly 70% of inflation rate were risen. This is because in 1997 the Asian Financial Crises were happened and also it is related to mismanagement of the economy of the government of the Laos. And another point was that in 1998, the foreign debts of the country was estimated at $1.9 billion in Laos. That’s why the inflation rate has risen up at those years.

In 1998-1999, the inflation rate was keep on rising from 90.141 to 128.409, nearly 30% of inflation rates are raised than before. Because of the 1997 Asian Financial Crises that led to until 1999. Therefore, the inflation was keeping on rising up in 1998-1999.

Moreover, the most significant point is that the falling off inflation rate from 1999 to 2000 in the diagram. It has fallen down from 128.409 to 23.294. It falls down rapidly because in those years the economy of Laos. The reason is that in FY 2000, the greater microeconomic immovability was brought by the stronger monetary policies. Therefore, the monthly inflation rate dropped from 10% (FY 1999) to 1% (FY 2000). [] 

Task-2

Inflation

Begg (year) explained that

Inflation is the arising of general levels of prices of goods and services in economics. Therefore, demands are decreased and purchasing powers of people are falling. And also, the value of the dollar is decreased because most people cannot able to purchase as much dollar as before. Many problems will be occurred as a result of increasing inflation. [] 

Explanation of two different causes of inflation showing knowledge of Keynesian and Monetarist views on inflation

Two different causes of inflations are demand-pull inflation and cost-push inflation.

Demand-pull Inflation

It causes as the economy is approaching full-employment, an excessive increase in aggregate demand will pull up prices. An increased in demand will put a pressure on supply and hence, create a rise in demand will pull up prices. And it is the increasing of prices that result from an excess of demand over supply. This will also force the price of factor input to increase and cause an inflationary spiral. Monetary view on inflation is that how relative prices work with increase of demand and supply. They believe that inflation depends on money supply. Unless the money supply were not finite, then a rise of spending on good C that increases the price of good C will lead to a decrease amount of spending on good D because it is a finite amount of money. Therefore, the more you spend on one thing, the less you can spend on another if you have a finite amount of something because it can only be increases in the money supply that cause inflation otherwise price increased in one good would be offset by price decreases in another. [] 

Cost-push Inflation

It is caused by an increase of the production cost that exceeds productivity increase and also cause rising wage rates or prices of raw materials that lead firms to decrease the quality of labor employed and to cut production.

Keynesian view on cost -push inflation is that the cause of inflation to supply side factors that is rising production costs will lead to inflation. As being primarily wage inflation, cost-push inflation is usually regarded because salaries are mostly contribution the larger part of whole costs. Increasing of the price of oil, coal, further essential inputs even manufactured materials as higher consumer prices. In many counties, the experience of severe cost-push inflation in many countries is resulted by the crises of oil (1973-1974 and 1978-80). To maintain the profits, firms push up the prices of their products when they are faced the higher wage costs. Therefore they may seize the opportunity to increase their profit margins. The more prices inelastic the demand for their goods, the less likely such behavior will lead to a fall in demand for their products. Cost-push inflation is inevitable when there is a struggle between workers and firms. Moreover, it can cause an increase level of not direct taxes that tax on services and goods.

Task-3

If an individual who keeps all his money in his bed while inflation is increasing every year, there will have effects of inflation on it.

Inflation is the arising of general levels of price of goods and services. Therefore, the value of money falls and most people cannot purchase money than before because the inflation reduces the purchasing power of income. People will have less consumption than before an increase in inflation. Income is fixed, and the price of goods and services is variable when inflation is happening. At that time, he is keep on saving his money in his bed; the value of his money will be decreasing and decreasing. Later, his money will become like papers and it will be unvalued. If not if he save his money at bank or do business, he will get some interests from bank and he will get some benefits from his business than before. Or not he will not get benefits from his money and he will face many losses.

The effects of inflation on that someone who is borrowing money at the current rate of inflation but who does not have to pay this back for a number of years are that he will get profits because raising inflation rate in every year. When he borrowed that money, the inflation rate is smaller than now. But inflation rate sustainably increases over time. For example, he borrowed 5 lakh from someone and then he bought and got a piece of 2 grams of gold at that time. When he returned the money 5 lakh back, it can buy o.5 gram of gold because of arising of inflation rate in every year. Inflation is the increasing of the levels of price of goods and services. Therefore, the price of gold is increased than when he returned back. So, he needs to pay the amount of money for 0.5 gram of gold only and he get the profits than before because of rising inflation rate in every year.

The effects of inflation on that someone who has lent money out at the current rate of inflation but will not be repaid for a number of years are that he will face the loss. When he lent his money, the amount of money can buy a big two-storied house in the current inflation rate. But we he get his money, he can only buy a small one-storied house because of increasing of inflation rate. Therefore, the value of his money is decreased because of rising of the price of goods and services so that everybody cannot purchase as much money as before. As the more increasing rate of inflation, the more decreasing of the value of money. As a result, he will be loss when he received his money.

Task-4

The government may want to tackle inflation because of the following reasons.

Generally, inflation is the rising levels of prices of goods and services. Moreover, there are many disadvantages of inflation.

They are-

When inflation is occurring, the prices of food are rising first. For example, the oil seeds price and other basic food prices for human. For instant, in India, the oil seed prices are 20 percent higher than a year ago. Higher costs of inputs like diesel, seeds, fertilizers and others would likely to keep prices while suppliers are expected to increase over 6-8 months.

The second point is that the cost of commodity prices is rising like oil, steel and iron and edibles etc. Therefore, most people cannot spend a lot of money on that. So that the value of money is decreasing and money problems are happening because of inflation.

People that are fixed earners reduce their expenditures because of inflation that increases the prices of goods and services. Therefore, less purchasing power is occurring and the consequences are that it can lead to lower living standards and it can be lead to higher wage demands because of rising inflation and they can not sufficient with their normal wages.

And also it can cause weaker dollars because of increasing the price rapidly; we need more dollars for the same amount of imports to make imported products or those with high import content such as edible oils, costlier.

Money shock is one of the disadvantages of inflation because the impact of high inflation rate will be pressure on household budgets and lower savings. There will also be effect on lenders because they will lose from arbitrary inflation and also interest rates will be pressure. Inflationary growth tends to be unsustainable leading to a damaging period of boom and bust economic cycles. It tends to discourage investment and long term economic growth.

Because of the above disadvantages and effects of inflation, government may want to tackle inflation. [] 

(b) The remedy for demand- pulls Inflation

When demand – pull inflation is occurred, we must consider the treatments to reduce that. There are many kinds of treatments. Firstly, we should reduce aggregate demand. Central bank should to increase interest rates. Therefore, higher interest rates can make borrowing more expensive and saving more attractive. In consumer spending and investment, this can lead to lower growth. Higher income rates should lead to higher exchange rate by making imports cheaper, increasing incentive for exporters to cut costs and reducing demand for exports. Moreover, we will use fiscal policies like government should increase taxes. So that they can cut spending and can reduce demand-pull inflation. [] 

The remedy for cost-push inflation

When we reduce the cost-push inflation, we should consider the following facts. Cost-push inflation is related with the unemployment. Therefore, we must reduce unemployment rate. We also should reduce the production of cost like oils, coals and other basic inputs as higher consumers. Moreover we should reduce the direct taxes and indirect taxes from government.

Task-5

The Supply-side economics is also known as trickle-down economics. It is an economic theory which states that the economy by an increase consumer spending will be stimulated by the reduction in taxes. A large income tax base that will earn the loss of revenue from the cutting of tax will be generated by the increased economic growth. [] And it is also an economic theory that holds that reducing tax rates, mainly for wealthy individuals and businesses, savings and investment for the benefits of everyone. [] It is also described how changes in marginal tax rates influence economic activity. The high marginal income tax rates powerfully depress the output; the efficiency of resource use and income are believed by supply-side economists. Moreover it is used in two different related ways. Some use to refer to the fact that consumption and living standard are underlined by production (supply). Our ability to produce goods and services that people value are reflected by our income levels in the long run. There cannot be achieved the living standards and higher income levels without expansion in input. [] 

America

America is a developed country and wealthy country in the world. And the world largest economy is the United States. It is almost three times to the size of Japan’s economy because in 2009, the nominal GDP rate of American was expected to be $14.3 trillion. Moreover, it is also larger than the economy of the people’s republic of China in purchasing power parity terms. The United State’s economy has maintained the low unemployment, a steady GDP growth rate and taxation and others because it is decreased by saving rates and increasingly by foreign investors.

The low unemployment of United State is that in May 2009, the unemployment rate was 9.4%. The measurement of joblessness rate was 15.9%. To recover the problem of jobless, they allow them to find the job longer than 6 months in 2010, January for long- term unemployment over 6 million workers. By doing that they reduced the unemployment rate.

Taxation in United State

In United States, taxation system is complex that includes the payment for four different levels of governments and lots of methods of taxations. The taxes are divided by central government, the state government & local government that include countries, townships, and school and special-purpose districts. The National Bureau of Economic Research has completed so as to the combined national, state and local governments’ normal marginal tax rate for most workers to be about 40% of income. And in April 15, also they made tax day which taxes are returned day by day Moreover , government attempts to use both of the monetary policy that include control of the money supply for instant changes in interest rates and fiscal policy that include taxes and spending to maintain the low inflation rate , high economic growth and low employment.

They also used supply-side economics. And they can be successful reduce inflation by using supply-side economics. [] 

Australia

The Australia’s economy is a developed. It is a new market economy with a $1 trillion USD of a GDP. And also the 13th largest national economy in the world by GDP is Australia. And it was the 18th largest measured by PPP adjusted GDP, representing about 1.7% of the World economy in 2009. Moreover, the ranking of 21st largest importer and 23rd largest exporters is Australia. Australia’s service sector dominates its economy, representing 68% of Australian GDP. And its per capita GDP is slightly higher than the France, Germany and UK in terms of purchasing power parity. In the United Nations 2009 Human Development Index and sixth in the Economist worldwide quality of life index 2005, Australia is ranked second.

In taxation, the taxation of Australia is divided by the central, state and local government levels. The taxes are varying according to different state to state because there are different populations, needs, budgetary positions and economics. Common taxes rise as of business and personal earnings taxes and business taxes. And further taxes consist of goods and services tax (GST) and customs duty. For state government, the most and the main source of income is from commonwealth. The States and territories have their own taxes to get them to support the services they provide. And the types and tax rates vary from state, territory to state. State taxes include payroll tax and a poker machine tax divided on businesses who offer gambling services, land tax divided on people and businesses who own land and most significantly, stamp duty levied sales of land and other items. During the Second World War, the states effectively lost the ability to raise income tax. These Acts sought to raise the funds necessary to meet burgeoning wartime. They can reduce successfully the inflation by using supply-side economics. [] 

Appendix 1

Inflation rates of Myanmar from 1990 to 2008

Year

Inflation rate

1990

17.62678

1991

32.27204

1992

21.91321

1993

31.83161

1994

24.09879

1995

25.19471

1996

16.2754

1997

29.69723

1998

51.48755

1999

18.40104

2000

-0.10917

2001

21.10131

2002

57.07451

2003

36.58972

2004

4.534214

2005

9.368618

2006

19.99649

2007

35.0246

2008

26.79954

Appendix 1.1

Inflation rate of Myanmar 1990-2008

Appendix 2

Inflation rate of Malaysia from 1990 to 2009

Year

Inflation, average consumer prices

1990

3.043

1991

4.358

1992

4.767

1993

3.561

1994

3.701

1995

3.202

1996

3.479

1997

2.655

1998

5.293

1999

2.731

2000

1.551

2001

1.427

2002

1.793

2003

1.074

2004

1.42

2005

3.049

2006

3.609

2007

2.027

2008

5.4

2009

-0.1

Appendix 2.2

Inflation rate of Malaysia from 1990-2009

Appendix 3

Inflation rate of Laos

Year

Inflation, average consumer prices

1990

-26.317

1991

13.439

1992

9.847

1993

5.65

1994

7.67

1995

19.075

1996

19.147

1997

19.544

1998

90.141

1999

128.409

2000

23.249

2001

7.813

2002

10.645

2003

15.476

2004

10.456

2005

7.169

2006

6.801

2007

4.524

2008

7.628

2009

0.234