Access to Credit and the Inflation Process in a Developing Economy

Abstract

A generic view of inflation as the result of income claims adding up to more than the value of output at current price has been proposed and successively refined by a number of authors; see, for example, Eichner and Kregel (1975), Rowthorn (1977), and Scitovsky (1978). In these models the inflationary process depends on three sets of considerations: (1) the ability of a group to set a price claim, (2) parameters and variables that determine the level of claims, and (3) the frequency of revising the claims. The purpose of this paper is to make two points, respectively, about (1) and (2) above. The first is that the ability to influence income share through an inflationary process need not necessarily show up in the ability to set prices directly. In flexprice markets, even though the price is market-determined, the influence of the producer on incomeshare manifests itself through a proxy item, namely, the ability to hold stocks. In developing economies flexprice agricultural markets have an important part in price and income determination, and in the domestic political economy. It seems necessary, therefore, to take account of strategic manipulation of stock by traders of primary commodities in these markets in order to extend the cited literature to the analysis of