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Deflation in Asia: Should the Dangers Be Dismissed?

Barry Eichengreen (), Donghyun Park () and Kwanho Shin ()

No 490, ADB Economics Working Paper Series from Asian Development Bank

Abstract: Deflation has emerged as a new concern for Asian policy makers. The traditional view is that deflation can lead to a vicious cycle of falling demand and prices, and is thus a dangerous condition. However, another school of thought emphasizes the role of positive supply shocks and takes a more benign view of deflation. In a recent paper that examines the relationship between deflation and economic growth, using consumer prices time series, Borio et al. (2015) find some evidence that casts doubt on the traditional view. In this paper, we revisit the relationship and find some grounds for concern about the harmful effect of deflation on growth.

Keywords: deflation; growth; producer prices (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-sea
Date: 2016-07-06
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