What Has Caused the Inflation Rate to Change in the Past?
Whilst it is beyond this piece to analyse the historical causes of inflation, it is clear that apart from government policy, the major changes in the inflation rate have been due to supply shocks. Positive supply shocks have curtailed inflationary pressures and include technological changes that have reduced costs and increased productivity as seen in the industrial revolution in the late 18th and during the 19th century. In the modern day, the development of the Internet is also argued to have helped earlier on in lowering inflation by reducing costs and increasing price transparency, whilst the abundance of cheap labour has enabled China to produce and flood global markets with inexpensive consumer goods. Negative supply shocks have fundamentally been rooted in conflicts and wars that have restricted stocks and in turn seen prices of these goods surge as seen in the modern day by the oil shocks of 1973 and 1981. Globally, the supply side shocks led to inflation rising above 10 per ce
