Inflation in Argentina was 54 percent in 2019, before falling to 42 percent in 2020. Despite Argentina's fluctuating economic instability over the twentieth century, the largest factor in its current economic status is the legacy of poor fiscal discipline left by the economic depression from 1998 to 2002. Although data is not available from 2014 to 2016, Argentina's inflation rate has been among the highest in the world for the past five years.

What causes inflation?

Inflation is a rise in price levels for all goods. Major causes of inflation include an increase in money supply, low central bank interest rates, and expectation of inflation. In a country such as Argentina, the expectation can be one of the biggest obstacles. People expect inflation to be high and demand increasing wages, and firms continue raising prices because they expect the costs of inputs to increase. Banks follow suit, charging high interest rates on fixed deposits.

Effects of inflation

Inflation negatively affects savers. 100 Argentinian pesos in 2018 was worth just under 75 pesos in 2019, after adjusting for the 34 percent inflation rate. Similarly, frequently changing prices has its own inherent cost, called “menu cost” after the price of printing new menus. Inflation will also have a positive effect on national debt when that debt is denominated in Argentinian pesos, because the pesos will be cheaper when the loan matures. However, the majority of Argentina’s debts are in foreign currency, which means that inflation will make these debts larger in peso terms.

Geneva, Switzerland, was the most expensive city to buy an apartment in Europe in the first quarter of 2024. The square meter price in Geneva was nearly 15,650 euros in that quarter, about 2,000 euros higher than the second city in the ranking, Zurich. Cost of rent Rents across the major cities in Europe increased significantly in 2023. One of the main factors driving high rents across European cities is the same as any other consumer-driven business. If demand outweighs supply, prices will inflate. The drive for high paid professionals to be located centrally in prime locations, mixed with the low levels of available space, high land, and construction costs, all help keep rental prices increasing. Mortgage rates The average mortgage interest rates across Europe in 2023 were all under five percent, except in Czechia, Romania, Hungary, and Poland. On an individual level, a difference of one percent would most likely mean thousands of euros in interest on the mortgage a person is paying, making timing key in house purchasing. Mortgage interest rates tend to be lower in Nordic countries due to the financial stability and reliability of its borrowers. Other factors that influence the mortgage interest rates include inflation, economic growth, monetary policies, the bond market and the overall conditions of the housing market. More stable markets also tend to have higher average prices.

The Consumer Price Index gauges the price changes in a basket of goods and services in a defined time period. During August 2024, the product category with the highest Consumer Price Index (CPI) increase compared with the previous month in Argentina was household, water, electricity, gas and other fuels with a seven percent increase. Followed by education with a 6.6 percent increase. Nonetheless, when compared with the previous year, communications registered the highest price increase with over 320 percent year-over-year. The expectation of inflation Despite Argentina’s efforts to reduce inflation, the country ranks in the top three Latin American countries with the highest rate, only with a lower figure than Venezuela and Suriname. The situation is not a recent one, the inflation rate has been reaching double digits every year since 2012, reaching over 50 percent in 2019, making the constant rising prices nothing out of the ordinary for Argentinian families. The expectation of inflation is one of the main causes of inflation with low central bank interest-rates and increases in the money supply, which helps to explain the chronic inflation of the country. Both firms and people expect inflation in their lives, workers demand increasing wages to coop with inflation, while companies increase prices of goods and services because they expect production costs to grow, creating a vicious circle in the economy. Inflation and poverty Inflation negatively affects consumers and savers alike. For the latter, 100 Argentinian pesos in 2020 was worth just under 52 pesos in 2021, after adjusting for the 48.41 percent inflation rate. For the consumers, rising prices of the basic products increase the vulnerability of the population. In January 2023, the value of the basic food basket, which establishes the extreme poverty line, stood at 23,315 pesos, more than ten times higher than during the same month in 2018. Between the first half of 2018 and the first half of 2022, the share of households under the poverty line increased by over 8 percentage points reaching 27.7 percent.

In economics, the inflation rate is a measure of the change in price of a basket of goods. The most common measure being the consumer price index. It is the percentage rate of change in price level over time, and also indicates the rate of decrease in the purchasing power of money. The annual rate of inflation for 2023, was 4.1 percent higher in the United States when compared to the previous year. More information on inflation and the consumer price index can be found on our dedicated topic page. Additionally, the monthly rate of inflation in the United States can be accessed here. Inflation and purchasing power Inflation is a key economic indicator, and gives economists and consumers alike a look at changes in prices in the wider economy. For example, if an average pair of socks costs 100 dollars one year and 105 dollars the following year, the inflation rate is five percent. This means the amount of goods an individual can purchase with a unit of currency has decreased. This concept is often referred to as purchasing power. The data presents the average rate of inflation in a year, whereas the monthly measure of inflation measures the change in prices compared with prices one year ago. For example, monthly inflation in the U.S. reached a peak in June 2022 at 9.1 percent. This means that prices were 9.1 percent higher than they were in June of 2021. The purchasing power is the extent to which a person has available funds to make purchases. The Big Mac Index has been published by The Economist since 1986 and exemplifies purchasing power on a global scale, allowing us to see note the differences between different countries currencies. Switzerland for example, has the most expensive Big Mac in the world, costing consumers 6.71 U.S. dollars as of July 2022, whereas a Big Mac cost 5.15 dollars in the United States, and 4.77 dollars in the Euro area. One of the most important tools in influencing the rate of inflation is interest rates. The Federal Reserve of the United States has the capacity to make changes to the federal interest rate . Changes to the rate of inflation are thought to be an imbalance between supply and demand. After COVID-19 related lockdowns came to an end there was a sudden increase in demand for goods and services with consumers having more funds than usual thanks to reduced spending during lockdown and government funded economic support. Additionally, supply-chain related bottlenecks also due to lockdowns around the world and the Russian invasion of Ukraine meant that there was a decrease in the supply of goods and services. By increasing the interest rate, the Federal Reserve aims to reduce spending, and thus bring demand back into balance with supply.

The study’s subject

The author’s aim is to describe the functional changes of German capital markets and stock exchanges. First he describes characteristics of German capital markets as a place of balancing supply and demand. Then, further submarkets are analyzed in their function (for example the meaning of credit transactions and interest rates for investment activities of the economy, or by means of fixed interest securities and equity securities documented capital procurement).

Starting point of the investigation is the period until 1924, a period without regulation activities of the state on the capital trade. This period was followed by increased requirements on capital due to the first World War and the inflation. The description closed with the consequences of political influence on processes of capital markets. The author tries to show the rise of the German capital market, it’s functionality and the restriction as an effect of the first World War (the state’s extremely high need for money), and the following hyperinflation using long time series data.

The data deals with following subjects:

Datatables in HISTAT (Topic: Money and Currency = Geld):

A.01 Average Price Level of Fixed Rated Bond Issues (Durchschnittlicher Kursstand festverzinslicher Anleihen)

A.02 German Financial Assets from 1893 to 1913 (Das deutsche Geldvermögen zwischen 1893 und 1913)

A.03 Foundation of Stock Corporations between 1870 and 1928 (Gründung von Aktiengesellschaften zwischen 1870 und 1928)

A.04 Branches of German Major Banks between 1900 and 1918 (Niederlassungen der deutschen Großbanken in Deutschland zwischen 1900 und 1918)

A.05 Deposits stock of German Banks in Mill. Mark between 1872 and 1910 (Depositenbestand der D-Banken in Mill. Mark zwischen 1872 und 1910)

A.06 Importance of the Banks for financing investments: by capital issue raised capital sum between 1889 and 1904 (Bedeutung der Banken für die Investitionsfinanzierung: durch Emissionen aufgebrachte Kapitalsummen von 1889 bis 1904)

A.07 Bank rate of the German Reichsbank between 1924 and 1930 (Der Diskontsatz der Deutschen Reichsbank (Jahresdurchschnitt) zwischen 1924 und 1930)

A.08 Capital Market Interest for Fixed Rate Issues in Germany, United States, Switzerland and The Netherlands in 1925 and between 1928 and 1930 (Der Kapitalmarktzins für festverzinsliche Wertpapiere in Deutschland, USA, Schweiz und Holland für 1925, 1928 und 1930)

A.09 Development of Savings and Deposits of German Savings Banks in Mill. Mark between 1924 and 1933 (Entwicklung der Spar- und Geldeinlagen der deutschen Sparkassen in Mill. Mark zwischen 1924 und 1933)

A.10 Development of Savings and Deposits in German Savings Banks between 1933 and 1937 (Entwicklung der Spareinlagen bei den deutschen Sparkassen zwischen 1933 bis 1937)

A.11 Depts of Communities and associations of local authorities, 1928 – 1930 (Die Schulden der Gemeinden und der Gemeinde-Verbände, 1928-1930)

A.12 Capital Assets of Insurances in Mill. Reichsmark between 1932 and 1936 (Die Kapitalanlage der Versicherungen in Mill. Reichsmark zwischen 1932 und 1936)

A.13 Number of dealt Papers on the Berlin Stock Market and the Papers‘ Prices between 1931 and 1935 (Zahl der an der Berliner Börse gehandelten Papiere, Kurse und Dividenden der gehandelten Papiere zwischen 1931 und 1935)

At the end of 2023, Zimbabwe had the highest inflation rate in the world, at 667.36 percent change compared to the previous year. Inflation in industrialized and in emerging countries Higher inflation rates are more present in less developed economies, as they often lack a sufficient central banking system, which in turn results in the manipulation of currency to achieve short term economic goals. Thus, interest rates increase while the general economic situation remains constant. In more developed economies and in the prime emerging markets, the inflation rate does not fluctuate as sporadically. Additionally, the majority of countries that maintained the lowest inflation rate compared to previous years are primarily oil producers or small island independent states. These countries experienced deflation, which occurs when the inflation rate falls below zero; this may happen for a variety of factors, such as a shift in supply or demand of goods and services, or an outflow of capital.