Causes of demand-pull inflation in Poland
2008
Jedruchniewicz, A.,Szkola Glowna Gospodarstwa Wiejskiego, Warszawa (Poland). Katedra Ekonomii i Polityki Gospodarczej
Inflation is one of main factors influencing economy development. This is the reason why monetary policy is aimed at holding down inflation at low level. In Poland in the years 2001-2007 the influence of nominal interest rates on the level of inflation was unmistakable but on the low level. Inflation reacted changes of interest rates the most strongly after 6-7 quarters. The most important demand factor in inflation analysis is domestic demand, especially demand gap. Demand gap was computed by subtracting proportional increase of domestic production from proportional increase of domestic demand. The impact of demand gap on the price level changes was significant, excluding data from the year 2001. Monetary authorities ought to observe demand gap intently, because it can become in future main threat for assumed level of inflation. An increase of final demand combined with the low growth GDP rate and increase of production costs will cause intense rise of price's level
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