Deflation: Determinants, Risks, and Policy Options

Author: Mr. Taimur Baig, Mr. Jörg Decressin, Mr. Tarhan Feyzioglu, Mr. Manmohan S. Kumar, and Mr. Chris Faulkner-MacDonagh

Volume/Issue: Volume 2003 Issue 003

Publication date: June 2003

ISBN: 9781589062276

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Topics covered in this book

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Business and Economics , Finance , Inflation , Economics- Macroeconomics , OP , deflation risk , monetary policy , economy , gold standard , deflation vulnerability , anti-deflation strategy , inflation target , price level target , persistent deflation , Deflation , Inflation , Output gap , Asset prices , Consumer prices , Global , Africa

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Summary

Deflation can be costly and difficult to anticipate, and concerns of a generalized decline in prices in both industrial and emerging market economies have increased recently. This paper investigates the causes and consequences of deflation, the risk of deflation globally and in individual countries, and policy options. The authors discuss issues related to the measurement, determinants, and costs of deflation and examine previous episodes of deflation. They compute an index of deflation vulnerability, which they apply to the 35 largest industrial and emerging market economies. Finally, the paper offers several policy options for protecting against deflation and for coping with it should it strike.