Stagflation is an economic term referring to an anomalous and perplexing phenomenon in which an economy experiences both stagnant economic growth and high inflation rates at once. Policymakers and economists find themselves confronting an existential struggle attempting to combat inflation or promote economic expansion - as traditional tools designed to do either may either backfire on them, have adverse side-effects or simply prove ineffective altogether. We will examine its causes, effects and possible solutions here in this article.
Stagflation typically arises as a result of several interdependent factors which converge to negatively influence an economy, typically through supply shocks (like sudden energy price spikes or disruptions to supply chain systems), leading to higher production costs, reduced output, and economic stagnation. Other contributing factors could include fiscal mismanagement, excessive government spending or imbalanced monetary policies which contribute towards this phenomenon.