Inflation in Developing Countries
Erickson, John Scott
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W1th serious inflation there are many forces acting which seem to retard growth. First of all sav1ngs decline In most developing countries because one loses purchasing power by not accumulating physical assets or non-interest bearing financial assets. Next, there is capital flight abroad and a decline of foreign investments. Thus, strong inflation seems to lessen, not increase, the amount of capital available for economic developments. Investments also tend to be directed into less productive ventures. Inflation also disrupts planning and a feeling of uncertainly pervades the entire economy. This uncertainty often brings an attitude where people with money assets convert them to physical form and "sit tight". Thus inflation seems to disrupt production and slows development.