INFLATION AND ECONOMIC POLICY
The paper focuses on problems which existed before global financial crisis and which will remain after the crisis is over. First, the causes of inflation and price equalisation are discussed. The author analyses differences in consumer prices in EU member states and concludes that two factors - climate zone and level of countries' economic development influence this difference. It is neither possible nor desirable to prevent price equalisation, but the key question remains: what should be done in order to minimise the negative impact of this process on social and demographic processes in the country. In other words, population income should be increased. In this regard, efficiency and competitiveness of Latvian economy, concept of priority branches, the problems of small- and medium-sized enterprises, corporate income tax and reinvestment of profits and social payments is analysed.
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