The Theory of Debt-Deflation: A Possibility of Incompatibility of Goals of Monetary Policy

Samy Metrah ()
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Samy Metrah: University of Economics, Prague

Chapter Chapter 4 in New Trends in Finance and Accounting, 2017, pp 41-48 from Springer

Abstract: Abstract This paper provides a detailed exposition of Irving Fisher’s debt-deflation theory as well as its proposed “remedies” against the “vicious cycle”. We argue, using F. A. Hayek’s hypothesis of “dichotomy of rates of interest”, that not only may be the main proposed tool of battling debt-deflation, i.e. preventing the price level from falling, considered self-defeating, in the long run at least, but also that goals of the macroprudential policy and the policy of inflation targeting are inherently incompatible if Fisher’s and Hayek’s theories are taken into account.

Keywords: Debt-deflation; Dichotomy of rates of interest; Macroprudential policy; Monetary policy goals (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-49559-0_4

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DOI: 10.1007/978-3-319-49559-0_4

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