Low Inflation: The Behavior of Financial Markets and Institutions

Anthony Saunders

Journal of Money, Credit and Banking, 2000, vol. 32, issue 4, 1058-87

Abstract: This paper provides a broad overview of the potential impact of low inflation (deflation) on US financial markets and institutions. It is argued that the contemporary experience of Japan and the historical experience of the U.S. in the 1920s and 30s offer only limited insights into the potential impact of low inflation (deflation) on today's US financial system. A number of potential implications are discussed including a decline in secondary market trading and a trend towards reintermediation. In addition, low inflation/deflation is likely to have a material effect on bank duration and convexity exposures.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:32:y:2000:i:4:p:1058-87

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