Currency and inflation management in PNG
By SOLOMON AWALI The following piece attempts to briefly shed some light on how the exchange rate and inflationary mechanisms work as some uninformed social media bloggers particularly in the Facebook are politicizing issues such as currency, international reserves and inflation management in PNG to further add "salt to the wound" when PNG is currently being wounded from the recent political turmoil: Low exchange rate is good for the agriculture sector as exports become cheaper. Imports will become expensive due to the effects of imported-inflation. However, if the domestic cost structure is low and flexible, it can absorb the imported inflation in the short-run. As most developing markets such as ours are considered inefficient due to the presence of market frictions such as high transaction, monitoring and information costs, inflation will always remain a huge developmental threat. Underlying inflation is usually compounded by large inflow of FDIs attracted largely by the