Amazon as a Possible Cause of Disinflation

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Amazon as a Possible Cause of Disinflation

The phenomenon of inflation is typically perceived as harmful for understandable reasons. Implying a sharp and consistent rise in prices due to production costs, affects the state economy significantly. Disinflation, in turn, suggests a temporary and gradual slowdown in the price levels, implying that the harmful effects of inflation are contained for a small amount of time. Although inflation dynamics is a very intricate subject that is affected by a vast range of factors, there is a possibility of a single cause, such as the efforts of a powerful organization, to spur disinflation, as the article by Dunsmuir (2016) shows. Since Amazon functions in the digital market, which involved higher competition and does not require physical outlets, the rise in its efficacy and its extended collaboration with brick-and-mortar organizations may be contributing to disinflation.

The phenomenon of disinflation, while having an admittedly ameliorating effect on the U.S. economy, needs to be controlled tighter by corresponding authorities so that it could produce better effects on the American market and its organizations. Therefore, control tools such as the development of monetary policies that would allow containing the disinflation process are overdue (Dholakia & Virinchi, 2017). The Fed also needs to address other factors that define inflation and disinflation, such as the levels of employment and property values (Dholakia & Virinchi, 2017). By altering the value of the specific variables, the Fed will be able to handle the changes in the levels and pace of price change, helping companies to adjust to the changing economic setting accordingly (Dholakia & Virinchi, 2017). As a result, the alterations in prices will not result in the shock experienced by companies and especially SMEs, allowing entrepreneurship to evolve.

References

Dholakia, R. H., & Virinchi, K. S. (2017). How costly is deliberate disinflation in India? Estimating the sacrifice ratio. Journal of Quantitative Economics, 15(1), pp. 27-44.

Dunsmuir, L. (2016). Amazon effect could have an impact on inflation dynamics: paper. Web.

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