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Classical deflation theory

Thomas M. Humphrey

No 03-13, Working Paper from Federal Reserve Bank of Richmond

Abstract: Classical economists David Hume, Pehr Niclas Christiernin, Henry Thornton, David Ricardo, Thomas Attwood, and Robert Torrens looked beyond the redistributive (creditor-debtor) effects of deflationary monetary contraction to its adverse effects on output and employment. They attributed these effects to price-wage stickiness; to rises in real debt, tax, and cost burdens; to cash hoarding in anticipation of future price falls; and to other determinants. Addressing deflation associated with post-war resumption of gold convertibility at the old mint par, they advocated policies ranging from gradualism, to devaluation, and even to outright abandonment of the gold standard in order to avoid or mitigate deflation?s harm.

Keywords: Monetary theory; Employment; Labor productivity (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-hpe and nep-mon
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Handle: RePEc:fip:fedrwp:03-13