Determinants of Deflation in Hong Kong SAR
December 1, 2003
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Summary
This paper presents a comprehensive econometric analysis of the determinants of deflation in Hong Kong SAR. The analysis helps to determine the relative contributions of factors such as increased productivity, scarce money supply, and excess capacity in determining deflation. The main conclusion is that the effects of permanent shocks, such as productivity shocks and shocks related to changes in the money supply and price convergence with trading partners, have become more important in explaining deflation. In addition, the effects of 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.
Subject: Asset prices, Consumer price indexes, Deflation, Monetary base, Money, Prices, Production, Productivity
Keywords: aggregate demand, aggregate demand demand shock, aggregate-demand perspective, Asset prices, Consumer price indexes, convergence shock, cost-push shock, Deflation, durable goods, Monetary base, price, price level, Productivity, productivity shock, Structural VAR, WP
Pages:
28
Volume:
2003
DOI:
Issue:
250
Series:
Working Paper No. 2003/250
Stock No:
WPIEA2502003
ISBN:
9781451875911
ISSN:
1018-5941
