By provoking a military confrontation with that country, he would trigger a stagflationary
geopolitical shock not unlike the oil-price spikes of 1973, 1979, and 1990.
As explained in the section 'Macroeconomy policy', controls prevented a sudden depletion of FX reserves but aggravated the disequilibrium and put the economy in a stagflationary
spiral, in which it remains while this article goes to press.
The RBI is already making inflation a priority, having raised interest rates twice since September, but that is raising concerns about an economy growing at a decade-low pace and stuck in what some analysts call a stagflationary
However, economists see a stagflationary
Inflation is above-target and economic growth is lacklustre - which together put the central bank in a stagflationary
bind wherein neither a rate hike nor a rate cut is a palatable option.
However, if inflation turns again countercyclical as it was in the stagflationary
period of late 1970's and 1980's, nominal bonds will become risky assets positively correlated with stock returns and poor substitutes of inflation-indexed bonds.
"But the stagflationary
shock from the rupee depreciation over the last three months and high interest rates are expected to be the key drag on growth and stress on unhedged corporate balance sheets."
effects of monetary stabilization policies, Journal of Development Economics 10(2): 133-169.
As a result, in targeting "good inflation" (namely, higher asset prices that, in turn, lead to greater investment and consumption and, accordingly, better economic outcomes), central banks have been accused of contributing to "bad inflation" (including stagflationary
headwinds caused by higher commodity prices) and, ultimately, greater challenges to consumption, investment, growth, and job creation.
251)--saw themselves as addressing stagflationary
problems that had arisen in the early 1970s and recurred during the second oil shock of the early 1980s.
economic environment and a high government budget deficit ensured easy pickings for the banks.
That was the steepest decline since the stagflationary
days of 1980.
He says: "Given the high-quality focus of this portfolio, this could be an excellent investment as the high-quality companies that they invest in are more likely to fare better than weaker ones in a stagflationary
(rising prices, minimal growth) environment."