Deflation: Determinants, Risks, and Policy Options
Occasional Papers, June 30, 2003
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- Deflation: Determinants, Risks, and Policy Options
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Bibliographic details
- Authors: Taimur Baig, Jörg Decressin, Tarhan Feyzioglu, Manmohan S. Kumar, Chris Faulkner-MacDonagh
- Published: June 30, 2003
- Series: Occasional Papers
- DOI: https://doi.org/10.5089/9781589062276.084
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.
- The 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.
- The paper offers several policy options for protecting against deflation and for coping with it should it strike.
Research scope and methods
- Computation of an index of deflation vulnerability.
- Application of the deflation vulnerability index to the 35 largest industrial and emerging market economies.
- Examination of previous episodes of deflation.
- Discussion of measurement, determinants, and costs of deflation.
Key findings and emphases
- Focus on both industrial and emerging market economies with recent increased concerns about generalized price declines.
- Emphasis on the difficulty of anticipating deflation and its potential costs.
- Coverage includes asset prices, consumer prices, output gap, prices, production, and stock markets as relevant areas.
Policy implications and recommendations
- The paper offers several policy options aimed at:
- Protecting against deflation.
- Coping with deflation should it occur.
- Specific policy measures are discussed in the paper (see full text for details).