Fears of Deflation and Policy Responses then and Now
74 Pages Posted: 29 Jan 2003
Date Written: December 2002
Abstract
For the first time since the 1930s, deflation in both goods and asset prices poses as much, or more, of a threat than does inflation. In this paper we explore public and policy maker perceptions and reactions to deflation covering the period from the late 19th century until the present. We also consider the effectiveness of, and rationale for, policy initiatives aimed at combating deflation. We include an analysis of the views of economists and the financial press, primarily in North America and the United Kingdom, during the deflationary period prior to World War II. We also compare the experience of the Great Crash of 1929 with the recent cases of deflation in both asset prices and consumer prices in China and Japan.
Keywords: Deflation, goods prices, asset prices, expectations
JEL Classification: B1, B3, E32, E42, E52
Suggested Citation: Suggested Citation
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