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.

  • Pierre Siklos is a CIGI senior fellow. His research interests include applied time series analysis and monetary policy, with a focus on inflation and financial markets.