Deflation in Asia: Should the Dangers Be Dismissed?

33 Pages Posted: 19 Jul 2016

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Donghyun Park

Asian Development Bank - Economic Research

Kwanho Shin

Korea University

Date Written: July 2016

Abstract

Deflation has emerged as a new concern for Asian policy makers. The traditional view is that deflation can lead to a vicious cycle of falling demand and prices, and is thus a dangerous condition. However, another school of thought emphasizes the role of positive supply shocks and takes a more benign view of deflation. In a recent paper that examines the relationship between deflation and economic growth, using consumer prices time series, Borio et al. (2015) find some evidence that casts doubt on the traditional view. In this paper, we revisit the relationship and find some grounds for concern about the harmful effect of deflation on growth.

Keywords: deflation, growth, producer prices

JEL Classification: E31

Suggested Citation

Eichengreen, Barry and Park, Donghyun and Shin, Kwanho, Deflation in Asia: Should the Dangers Be Dismissed? (July 2016). Asian Development Bank Economics Working Paper Series No. 490, Available at SSRN: https://ssrn.com/abstract=2811563 or http://dx.doi.org/10.2139/ssrn.2811563

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Donghyun Park

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Kwanho Shin

Korea University ( email )

1 Anam-dong 5 ka
Sunbuk-Ku, Department of Economics
Seoul 136-701
Korea
82-2-3290-2220 (Phone)
82-2-3290-2719 (Fax)

HOME PAGE: econ.korea.ac.kr/~khshin

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