Is deflation costly after all? The perils of erroneous historical classifications

Daniel Kaufmann

Journal of Applied Econometrics, 2020, vol. 35, issue 5, 614-628

Abstract: I estimate average economic activity during periods of inflation and deflation while accounting for measurement errors in 19th century prices. These measurement errors lead to underestimation (overestimation) of economic activity during periods of inflation (deflation). By exploiting multiple deflation indicators, it is possible to recover the true relationship; the shortfall of US industrial production growth during periods of deflation ranges from −4.5 pp to −7.6 pp, instead of −2 pp. I also find a negative relationship between deflation and real activity in the UK. I then examine the cross‐country variation in the estimates for eleven countries. The patterns are consistent with stronger biases for countries with more serious measurement errors in prices.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.1002/jae.2762

Related works:
Working Paper: Is Deflation Costly After All? The Perils of Erroneous Historical Classifications (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:35:y:2020:i:5:p:614-628

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().