Understanding the Costs of Deflation in the Japanese Context
November 1, 2003
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Summary
This paper examines the cost of deflation in the context of Japan's ongoing deflationary episode. The impact of deflation owing to the zero interest rate bound on monetary policy, wage rigidity, redistribution of wealth from debtor to creditor, and inflexibilities in the financial sector are examined. It is seen that the generalized decline in the Japanese price level, however gradual or mild, has substantially exacerbated the economy's adjustment process under already difficult economic conditions.
Subject: Asset prices, Consumer price indexes, Deflation, Financial services, Inflation, Prices, Real interest rates
Keywords: aggregate demand, Asset prices, Consumer price indexes, Core CPI deflation, debt-deflation theory, Deflation, deflation pressure, Financial Sector, GDP deflator, Inflation, inflation expectation, monetary policy, monetary policy efficacy, price, Real interest rates, rising prices, unanticipated deflation, Wage Rigidity, WP
Pages:
27
Volume:
2003
DOI:
Issue:
215
Series:
Working Paper No. 2003/215
Stock No:
WPIEA2152003
ISBN:
9781451875065
ISSN:
1018-5941
