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A period of slow economic growth and high unemployment with rising prices (inflation).


High inflation in a period of low GDP growth. Many economists thought that this was impossible, but the oil embargo of the 1970s contributed to a staggering increase in oil and food prices, which fueled inflation and hindered economic growth. Stagflation is difficult to control, as focusing on controlling inflation could hurt growth even further, while trying to ease credit to encourage growth could intensify inflation. The term is a portmanteau of stagnation and inflation.


An economic condition that is characterized by slow growth, rapidly rising consumer prices, and relatively high unemployment.


Stagflation results when inflation increases significantly despite a slowdown in the economy and shrinking demand for products and services that results from rising unemployment and low consumer confidence.

This combination of stagnation and inflation has a crippling effect on economic and political stability. As the central bank strives to stimulate the economy by increasing liquidity and cutting interest rates, it risks fueling inflation, which acts as a drag growth.

At the same time, focusing on controlling inflation rather than easing credit may increase the risk of sending the economy into an extended recession.

A vivid example in recent US history began during the OPEC crisis of 1973 and 1974 when oil and food prices soared, and unemployment grew, while the economy contracted and the stock market lost value. In 1980, the inflation rate was 13.9% rather than the long-term average of 3%, and the prime rate reached 21.5%.


a situation of depressed levels of real output combined with increases in prices (INFLATION). Stagflation is caused by the dual forces of:
  2. rising FACTOR INPUT costs (see COST-PUSH INFLATION).

Stagflation was a particular problem in many countries during the 1970s and early 1980s as a result of the combined effect of cost-push inflationary pressures emanating from the oil price increases of 1973 and 1979 and the deflationary consequences of reduced real purchasing power in the oil-consuming countries that accompanied these increases. This was exacerbated by the development of higher inflationary expectations.

Orthodox FISCAL POLICY and MONETARY POLICY, accustomed to an apparent trade-off between inflation and employment/output (see the PHILLIPS CURVE), were found wanting in the new situation, and many countries turned to alternative approaches, for example, MONETARISM and SUPPLY-SIDE ECONOMICS.


A slang expression for a period of stagnation and inflation.

References in periodicals archive ?
Whereas, critics argue that devaluation is stagflationary, reducing real output and increasing domestic rate of inflation and fails to improve the current account of the BOPs [Bird (1983)].
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Gerhard Schroeder leads Germany with a stagflationary combination of socialist economics and old-school America baiting.
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GENE SMITH tp = eightsmen GENE SMITH td1 = meetings, seething, sheeting GENE SMITH ta1 = metheglins LAMAR tp = alarm, malar, ramal FIKE tp = kief LAMAR FIKE ta4 = craftsmanlike ESPOSITO tp = isotopes ESPOSITO ta1= opposites, snoopiest, spookiest FORTAS ta1 = factors, formats FORTAS ta2 = software, surfboat ALAN FORTAS ta4 = stagflationary BITSY MOTT ta5 = biosystematist RAY SITTON tp = antistory RED WEST tp = strewed, wrested RED WEST ta1 = iewdster, weirdest, wrestled
The effects of an oil price shock without intervention of the governments are therefore clearly stagflationary.
The fact remains that today's Federal tax burden is higher than in the stagflationary Carter years.
a consensus started to emerge among the ruling classes of the major western states that without the discipline of redundancy and mass unemployment on the workforce there was no possibility of overcoming the stagflationary crisis of the period and carrying out the economic restructuring necessary to meet the challenge from Japan and the Far East.
13) Neostructuralist critics have gone on from this to claim that IMF conditionality not only is irrelevant to the real problem but also has a negative effect via its stagflationary consequences.
The deleterious effects of the 1990 shock were expected to be less marked than during the previous stagflationary episodes because: