Determinants of Deflation in Hong Kong SAR
IMF Working Papers, December 1, 2003
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- Determinants of Deflation in Hong Kong SAR
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Bibliographic details
- Authors: Papa M N'Diaye
- Published: December 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451875911.001
Summary of analysis
- Presents a comprehensive econometric analysis of the determinants of deflation in Hong Kong SAR.
- The analysis determines the relative contributions of factors such as increased productivity, scarce money supply, and excess capacity in determining deflation.
- Main conclusion: the effects of permanent shocks have become more important in explaining deflation.
- Examples of permanent shocks identified: productivity shocks; shocks related to changes in the money supply; price convergence with trading partners.
- Temporary shifts in aggregate demand have been perpetuated by negative wealth and balance-sheet effects in the corporate and household sectors arising from asset-price declines over the past five years.
Key findings (explicit)
- Increased productivity is a contributing factor to deflation.
- Scarce money supply contributes to deflationary pressures.
- Excess capacity plays a role in determining deflation.
- Permanent shocks (productivity, money supply changes, price convergence with trading partners) have increased in importance as explanations for deflation.
- Temporary aggregate-demand shifts have been sustained by:
- negative wealth effects, and
- balance-sheet effects in corporate and household sectors,
- these arise from asset-price declines over the past five years.
Analytical approach
- Uses a comprehensive econometric framework to separate relative contributions of:
- productivity changes,
- money supply variations,
- excess capacity,
- demand shocks,
- price convergence with trading partners.
- Employs terminology and methods consistent with macroeconomic and structural VAR analysis referenced in the paper's keywords.
Topics and keywords covered
- Asset prices
- Consumer price indexes
- Deflation
- Monetary base
- Money
- Prices
- Production
- Productivity
- aggregate demand, aggregate demand demand shock, aggregate-demand perspective, Asset prices, convergence shock, cost-push shock, durable goods, price, price level, Productivity, productivity shock, Structural VAR, WP
The views expressed are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Determinants of Deflation in Hong Kong SAR, By Papa M N'Diaye, December 1, 2003.
Content in this bundle
- _wp03250 — Appendix Figures