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Deflation Risks in Germany and the EMU: The Role of Wages and Wage Bargaining

Eckhard Hein, Thorsten Schulten and Achim Truger ()

Chapter 4 in Wages, Employment, Distribution and Growth, 2006, pp 67-92 from Palgrave Macmillan

Abstract: Abstract In late 2003 the deflationary dangers in Germany could hardly be denied. The GDP deflator for Germany rose by 1.0 per cent in 2003 and the forecast rise for 2004 was 0.8 per cent. Meanwhile, the consumer price index rose by 0.9 per cent in 2003 and was forecast to rise by 1.2 per cent in 2004 (Institute 2003). These figures mean that inflation in Germany has in principle already reached the level considered by the European Central Bank (ECB) to be the minimum safety margin against deflation in its reformulated monetary policy strategy for the whole of the European Monetary Union (EMU) (ECB 2003). A further fall in inflation would therefore significantly increase the danger of deflation and a cumulative deflationary spiral. In its April 2003 Task Force Report, the IMF named Germany alongside Japan, Taiwan and Hong Kong as one of the economies most at risk from deflation worldwide (IMF 2003).1

Keywords: Monetary Policy; Inflation Rate; European Central Bank; European Monetary Union; Nominal Wage (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1057/9780230371781_5

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