What is Deflation?
Author
Talks about
The definition
Of deflation &
When deflation,
And it is hard to
Tell when deflation
Actually poses a
Problem-or when
It is shown in price
Expecations- uses
Japan as example.
Author
Talks about
The definition
Of deflation &
When deflation,
And it is hard to
Tell when deflation
Actually poses a
Problem-or when
It is shown in price
Expecations- uses
Japan as example.
Deflation is a persistent fall in some generally followed aggregate indicator of price movements, such as the consumer price index or the GDP deflator. Generally, a one-time fall in the price level does not constitute a deflation. Instead, one has to see continuously falling prices for well over a year before concluding that the economy suffers from deflation. How long the fall has to continue before the public and policy makers conclude that the phenomenon is reflected in expectations of future price developments is open to question. For example, in Japan, which has the distinction of experiencing the longest post World War II period of deflation, it took several years for deflationary expectations to emerge.
One reason for
Why deflation
Can be bad for
The macroeconomy,
Although not necessarily linked.
One reason for
Why deflation
Can be bad for
The macroeconomy,
Although not necessarily linked.
Most observers tend to focus on changes in consumer or producer prices since, as far as monetary policy is concerned, central banks are responsible for ensuring some form of price stability (usually defined as inflation rates of +3% or less in much of the industrial world). However, sustained decreases in asset prices, such as for stock market shares or housing, can also pose serious economic problems since, other things equal, such outcomes imply lower wealth and, in turn, reduced consumption spending. While the connection