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2008•RePEc: Research Papers in EconomicsRequires access

Aggregate Supply-Driven Deflation and Its Implications for Macroeconomic Stability

David Beckworth

Open publisher page 27 citations

Abstract

Deflation is generally considered to be inconsistent with macro-economic stability. Any sustained decline in the price level is widely believed to be associated with weak to negative economic growth, a lower bound of zero on the policy interest rate, and an increase in financial disintermediation. However, a number of recent studies examining both historical, cross-country experience with deflation and more recent developments find that these concerns are not nec-essarily associated with deflation (Selgin 1997, 1999; Cleveland

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Deflation is generally considered to be inconsistent with macro-economic stability. Any sustained decline in the price level is widely believed to be associated with weak to negative economic growth, a lower bound of zero on the policy interest rate, and an increase in financial disintermediation. However, a number of recent studies examining both historical, cross-country experience with deflation and more recent developments find that these concerns are not nec-essarily associated with deflation (Selgin 1997, 1999; Cleveland

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Available abstract

Deflation is generally considered to be inconsistent with macro-economic stability. Any sustained decline in the price level is widely believed to be associated with weak to negative economic growth, a lower bound of zero on the policy interest rate, and an increase in financial disintermediation. However, a number of recent studies examining both historical, cross-country experience with deflation and more recent developments find that these concerns are not nec-essarily associated with deflation (Selgin 1997, 1999; Cleveland

Key concepts: Deflation, Aggregate supply, Economics, Keynesian economics, Great Depression, Aggregate demand, Price of stability, Monetary economics

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