Jump to ContentJump to Main Navigation
Productivity and the Bonus Culture$
Users without a subscription are not able to see the full content.

Andrew Smithers

Print publication date: 2019

Print ISBN-13: 9780198836117

Published to Oxford Scholarship Online: May 2019

DOI: 10.1093/oso/9780198836117.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 28 March 2020

Deflation

Deflation

Chapter:
(p.102) 19 Deflation
Source:
Productivity and the Bonus Culture
Author(s):

Andrew Smithers

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198836117.003.0019

The demonization of deflation has drawn attention away from the key problem of productivity. It arises from the two errors that deflation causes recessions and that investment responds to real interest rates. Deflation can be a symptom of inadequate demand but it can also occur when demand is strong. The fallacy depends on ignoring history and the importance of inflationary expectations. These were low in the late nineteenth century, allowing output to grow strongly while prices declined. Low expectations today have allowed stable prices to be combined with falling unemployment. But such expectations are very volatile. Should they rise a sharp increase in interest rates will be needed to prevent stagflation. This will be more dangerous today that it was on the previous occasion in 1982, as asset prices are now overvalued and were then cheap and debt levels were low.

Keywords:   deflation, recessions, symptom, demand, expectations, unemployment, NAIRU, inflation, QE, funding

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .