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Deflation in Asia: Should the Dangers Be Dismissed?

Author

Listed:
  • Eichengreen, Barry

    (UC Berkeley)

  • Park, Donghyun

    (Asian Development Bank)

  • Shin, Kwanho

    (Korea University)

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.

Suggested Citation

  • Eichengreen, Barry & Park, Donghyun & Shin, Kwanho, 2016. "Deflation in Asia: Should the Dangers Be Dismissed?," ADB Economics Working Paper Series 490, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0490
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    References listed on IDEAS

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    Cited by:

    1. Daniel Kaufmann, 2020. "Is deflation costly after all? The perils of erroneous historical classifications," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(5), pages 614-628, August.
    2. Daniel Kaufmann, 2016. "Is Deflation Costly After All? Evidence from Noisy Historical Data," KOF Working papers 16-421, KOF Swiss Economic Institute, ETH Zurich.
    3. Claudio Borio, 2017. "Secular stagnation or financial cycle drag?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(2), pages 87-98, April.

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    More about this item

    Keywords

    deflation; growth; producer prices;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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