Causes of Deflation

Philipp Bagus

Chapter Chapter 3 in In Defense of Deflation, 2015, pp 35-83 from Springer

Abstract: Abstract In this current chapter, I analyze the most important causes of a price deflation. I will look at price deflation caused by economic growth, by cash building, by bank credit contraction and by government fiat. As such, these “kinds” of deflation will be called growth deflation, cash building deflation, bank credit deflation, and fiat deflation. Growth deflation represent goods-induced changes in the purchasing power of money, while cash building deflation, bank credit deflation, and fiat deflation (with the exception of price decree deflation) represent cash-induced changes (Mises. Human action: a treatise on economics. Scholar’s edition. Ludwig von Mises Institute, Auburn, AL, 1998, p. 416). Growth deflation and cash building deflation reflect changes in the demand for money, while bank credit deflation and fiat deflation (with the exception of price decree deflation) reflect changes in the supply of money.

Keywords: Central Bank; Money Supply; Money Demand; Cash Holding; Cash Balance (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:fimchp:978-3-319-13428-4_3

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DOI: 10.1007/978-3-319-13428-4_3

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