Detail publikace

Deflation and Economic Growth in Long-Term Perspective

Autor: Mgr. Pavel Ryska MPhil,
Typ: IES Working Papers
Rok: 2014
Číslo: 18
Publikováno v: IES Working Papers 18/2014
Místo vydání: Prague
Klíčová slova: deflation; price level; economic growth; monetary systems; panel data; economic history
JEL kódy: E31, E42, C33, N10
Citace: Ryska P. (2014). “Deflation and Economic Growth in Long-Term Perspective” IES Working Paper 18/2014. IES FSV. Charles University.
Abstrakt: This paper deals with the relationship between deflation and economic growth.
Although there are numerous theories on the potential effects of deflation on real
output, empirical evidence in this field is still scarce and partial. In order to explore
the relationship between prices and output in a more comprehensive way, I use a
large panel data set of 19 countries over roughly 150 years, which contains frequent
deflationary episodes. I employ the fixed effects model to look at both
contemporaneous and lagged correlation between prices and output, and I include
control variables to remove potential bias.
There are several important results. First, there is no general relationship between
prices and output. The lagged negative effect of deflation on output growth, alleged
by some authors, disappears after adding a control variable. Second, monetary
regimes seem to affect the relationship. Deflation appears to become associated with
output slightly negatively with the advent of the fiat money system, while it was
benign under the classical gold standard. Third, well-known episodes of deflation
differ a lot. The Great Depression is the only period where deflation seems to be
strongly associated with recession. By contrast, Japan in the 1990s and 2000s bears
no resemblence to it. Here, both empirically and theoretically, deflation is highly
unlikely to have caused economic stagnation.
Ke stažení: WP_2014_18_Ryska


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