Sense and Nonsense About Deflation

Web exclusive CIGI Policy Brief #12

January 1, 2009

There is much talk about the global economy being driven into a deflationary spiral as a consequence of the ongoing financial crisis. There is also a considerable amount of misinformation about what deflation means and its economic implications. This web exclusive policy brief explores the origins and consequences of deflation with a view to putting into proper perspective the relevant economic issues for an economy that experiences a bout of falling prices. Historical illustrations are also used to distinguish between sense and nonsense concerning the economics of deflation.

About the Author

Pierre L. Siklos is a CIGI senior fellow who specializes in macroeconomics, with an emphasis on the study of inflation, central banks and financial markets.