Risks of Stagflation in the European Economy in 2012 and 2013

2012 and 2013 will be very difficult years for the European economy, with a long list of
diverse risk factors threatening the region. We must expect that separate events are very likely
to exert a very strong influence over each other, and one can assume that these influences will
intensify, rather than set off, each other. This article aims to assess the possibility that the
cumulative effect of these risk factors may lead to “stagflation”, i.e. a combination of
relatively high inflation and recession, which will, in effect, result in unemployment rates that
may exceed, even substantially, the natural rate of unemployment.

Brno 2011 Fullpaper
[-- 9_brno-2012.pdf --]